This article was transcribed from Sylvia Yin’s presentation during March 2022’s Customer Success Festival APAC: Reloaded.
In this article, I'm going to walk you through how to decode customer churn.
Before I delve into the crux of the matter, allow me a moment to set the stage for our topic. Then, I'll give a quick background, so you understand where my experience comes from. Finally, I’ll share what I've learned about managing churn as it happens.
It’s not me, it’s you
Back in 2018, I received an email from a customer requesting to churn. You’ve probably received similar breakup emails from your customers – they’re pretty common. If you're lucky, your customer will take a moment to explain what they're thinking, but often, this may be all you get – a couple of lines.
Your customers are busy and they don't always have time to explain in detail why they decided to pause or stop the subscription. And if your customers are culturally Asian, you may find that the email is less direct and confrontational; in that situation, you may never get to understand your customer’s thinking and the real reason why they have decided to churn.
When you peel away all the layers of the onion, the majority of the time, the lack of value experienced is the root cause of churn. However, depending on what your customer is saying to you, there are tactical actions that you can take to deliver the value right now or to buy time so that you have the opportunity to deliver value before they’re gone for good.
This matters because churn compounds. We know that in the recurring revenue business model, churn gets worse as your customer base grows. It's much harder to patch a leaky bucket of churn with new sales than it is to retain customers, so it's important to pay attention when our customers leave.
We must remember that churn in itself is not a problem, but it's a signal. And when the signal is flashing, what do you do? You don't ignore it because it’s telling you that there's an action that you need to take. Focusing on actions that you can take when the signal is flashing red will help you move forward.
My background and experience in customer success
So, a quick background. I’ve spent my career at the intersection between retail and tech, and in 2018, I co-founded Omnilytics, a B2B SaaS retail insights platform. We work with anything from SMEs to mid-market to enterprise brands, such as Uniqlo, Lenzing, and Puma to help them understand the markets that they trade-in.
Through the experience of building analytics, I had the opportunity to spearhead the inception and scaling of our CS function, and today, we are about 12 people strong. Also, a shout-out to the team – G2 recently placed us at number two for retail intelligence software, and we came in 12th place for best commerce product in 2022.
If you were in the CS space back in 2018, you may recall that there were frustratingly few resources on customer success, let alone resources that were relevant to our geographical context. So last year, I decided to take the lead, and I put together and published the Southeast Asia Customer Success Survey 2021 as a way to spark conversation and accelerate the growth of our discipline in our region.
There's a lot that we, in the APAC region, can gain from sharing our experiences and thoughts because running a CS department here can be quite different than it is for our American counterparts.
Five common reasons for churn and what you can do about it
I'm going to share with you my experience of what to do after a customer has raised the decision to churn. It's not rocket science, but I hope it serves as a handy reminder of the tools you have in your arsenal. If you’re new to dealing with churn, I hope you’ll find these tips helpful next time you're faced with an urgent request. Let's dive into the reasons that customers give for churning.
Reason #1: Not enough time to use the product
The first reason a customer may give for wanting to churn is that they or their team have no time to utilize the product or service, so they find it increasingly hard to justify continuing the subscription. When they share that with you, what they're thinking is that they can't see how it is important enough for them to make time to use it.
In a situation like this, you should already know that they're not using the product because adoption behaviors are not trending the way you want. The intervention should have been done much earlier, so it shouldn't catch you by surprise.
But if you do find yourself in this situation, one of the things that you can do is start thinking about how you can very quickly get your customers off the ground. Do you have any pre-configurations that could help?
For example, can you cobble together a personalized training workshop to help them get up to speed? Are you able to record bite-sized videos on how to execute certain use cases of your services?
You need to think about what you can do to give your customers all the TLC they need to get through this period. And don't be afraid to do things that don't scale – you can even use the product on behalf of the customer. Your priority should be to continuously work with the customer to get them to feel comfortable with your product so you can retain the account and the MRR.
Reason #2: Didn’t meet expectations
The next reason you may hear is that your product or service didn't meet expectations. Maybe your customer was expecting to have reached a certain milestone already or to have seen certain results or ROI.
When they're saying those words, what they’re thinking is, “I'm really disappointed, and I feel frustrated at where we are.” That leaves a bad taste in the mouth.
Several factors might have led us here. It could be that expectations of the timeline needed to achieve these results were not laid out at the beginning of the sales process.
That said, I'm always of the opinion that CS has the power to reset expectations, and it's much more productive for us to focus our energy on what we can control rather than what happened at the start of the customer journey.
All along the way, right from the onboarding, we have multiple touchpoints with our customers, and opportunities to reset expectations, so this shouldn't be coming up in the contract renewal conversation.
However, if you find yourself in this situation, what can you do? First of all, before throwing everything out of the window, take a look at any documented expectations from earlier conversations. Sometimes you have met the expectations and the milestones that were agreed upon, but businesses change, priorities change, and your customer has a lot on their plate – maybe they've just forgotten that value was delivered and expectations were met.
It’s our responsibility to remind the customer of what they set out to do and how we have gotten them there. Perhaps we just need to realign now that the goals have changed, so before discarding everything and starting from scratch, look at what you already have.
However, sometimes it's better to let bygones be bygones because a conversation that focuses on the past doesn’t necessarily feel very positive. Or maybe you don't have any documented expectations, so the conversation is going nowhere.
In this situation, it’s helpful to start orienting your customer focus towards the future. What I mean by that is taking a step back, putting on a sales enablement or an Account Executive hat, and doing some discovery. Find out where the customer wants to go in the next six or 12 months. Learn about their key priorities and mission-critical projects.
If your product or service can still help your customer reach their milestones and goals, show them that!
Talk them through how you can help them move forward. Orienting your focus to the future can help make the conversation a lot more positive and a lot more productive because it's much more potential and opportunity-focused.
Reason #3: The product is too hard to use
The product is always a work in progress, right? It's never gonna be a finished job, so sometimes people will say that it’s too hard to use.
At one point, we were having customers coming to us and saying, “Oh, there are just too many steps to creating the report that we need on a day-to-day basis.” The insights are super helpful, and we always get really good feedback when we present them in our meetings, but there are just too many steps.
When your customer is telling you that, in their head, they're saying, “Your user experience sucks! Get your act together.”
And it can be challenging when the user experience of the product affects whether the client achieves value or not. As a CS professional, you may be thinking, “I’ve done everything in my power – I've already put in a product request, but the product team has a six-month roadmap that's already locked in.”
Remember our mantra: focus on what you can control. That doesn't mean that you should just sit back and watch that trend happen. Here's a perfect opportunity to get creative. Think about all the ways that you can make the product experience a lot easier to use without the product team.
Much like with the solution to our first problem, you can use personalized training or share an on-demand video library. You can create templates for your customers to use or have product chats with the end-users. And again, don't be afraid to do things that don't scale. At the risk of sounding like a broken record, patching churning MRR is a lot easier than finding new MRR, so you want to find ways to retain this account.
Reason #4: Lost budget
Sometimes a client will come to you with a cash flow issue. They may have made a mistake in the budgeting and now they need to tighten their belt. Maybe the pandemic has thrown the business cycle off so they’re trying to hunker down and save costs – we certainly got that kind of request from our customers at the start of the pandemic.
When a customer is saying that, what they're really thinking is: “I don't see how you’ll be critical in helping me achieve my goal, so you're not my priority at the moment.” However, I believe that if the pain is there, the budget will follow, and I can illustrate that with a very simple anecdote that I picked up from a book called Gap Selling (2018) by Keenan.
Imagine that you have a headache that can only be cured with a $10,000 pill. The headache is just a passing nuisance that happens every couple of months. You probably can’t justify spending that $10,000, right? Now imagine that the headache is actually due to a brain tumor. Suddenly, $10,000 doesn't look so expensive. If you don’t have the cash, you’ll probably knock on your friends and family's doors to fundraise. If the pain is there, the budget will follow.
Of course, you need to treat your client with respect and empathy. They’re going through a tough time in their business, and we don’t want to make them feel like their backs are against the wall. We want to listen to them, hear them out, and be a true business partner to them.
Again, in this situation, it's helpful to orient your customer's focus to the future. As you're listening to them, ask questions about their goals moving forward because I can almost guarantee you that, as bad as the cost of business might be, they still have milestones they want to achieve in the short-, medium-, and long-term as well.
If your product or service can help them reach their goal, orient their focus towards that and tell them, “You may not be aware, but we can do this to help.” Again, that conversation is a lot more positive and productive when it’s focused on the future and the opportunity to help your customer get to where they want to be.
Assuming that the customer fits your ICP and you see a long-term working relationship with them, but the cash flow issue is still there, you can also get creative with pricing plans. In this situation, I often work with my CSMs to think about things that we want to trade with the client.
For example, perhaps we can give them a discount or reduce the size of their contract if they give us a customer story. Perhaps they can make a guest appearance at our next webinar and share with our prospects how they’re gaining value from our product or services. Or perhaps they’re in a position to recommend you to new customers that can get value out of your product or your service. Think about what you want and work with your customer to make a deal.
Reason #5: Lost stakeholder
Sometimes, the person that’s a huge champion of your product – the super user – suddenly leaves the company. Hopefully, it's not totally out of the blue, and you’re close enough to have already had a conversation about their departure. In any case, they’re gone, someone else is supposed to take over, and the customer is saying that they won't renew the subscription until they find someone to replace the person that has been using the product or service.
When that's happening, the person sending the email is likely thinking this: “I have no idea what your product does or how it’ll benefit me and the company.” So, you want to step into the shoes of this person who has suddenly inherited the extra work of figuring out how your product fits into their process. They may not have the time to see you as a priority right now.
In this situation, you want to talk to the person and figure out their personal goals and KPIs. It's almost like reselling to the individual – pitching your product by first understanding their pain points and goals, then helping them to see how your product or service fits.
But let’s say you have talked to that person and it’s not a good fit. You can ask them if they know of anyone in the organization that could take over as the user of your product or services. The person you're talking to might really appreciate this because you may be lightening their workload. Also, don't be afraid to go back to your previous superuser and ask them who they think would be the best fit to take over. If you don't ask, you won't know.
Because you have lost the link to the organization, a lot of employees won't have any previous context as to why your product or service exists in the organization in the first place, so whoever you talk to, you want to, again, orient them to the future, find out what their goals are, and let them know how you can help.
In an ideal world, you won’t find yourself in this situation. You can prevent it from coming up at all by proactively networking yourself in the organization so you're not locked out when that one person leaves.
Keep calm and focus on what you can control
Despite our best efforts, churn happens to the best companies and CSMs. Sometimes change has to happen, and that's okay. We don't want to push so hard that the client feels like they have lost control of the situation or they have no choice but to stay because we're trying so hard to retain them.
However, churn is not the end of the story. Churn doesn't mean that all the relationships you've built and all the work you've done is lost. You now have a fresh opportunity to nurture your churned customer. You can still reach out to them every once in a while and find out if they are doing okay.
Remember: in business, priorities change and so do goals. Maybe right now is not the best time for your customer, but six down the line, you will have the perfect alignment of interest and they’ll be ready to come back on board.
Before I sign off, just a quick reminder that when a churn request is raised, the most important thing is to keep calm.
Keeping calm allows you to get creative and think of different plans and proposals to share with your customers. Remember that churn is a signal; there is still work to be done after that, and stressing out only blocks our ability to come up with creative solutions.
And again, focus on what you can control. There's no time machine that will allow you to go back and control the sales process, you may be unable to influence the product roadmap, but there's always something that you can control. It's a much more productive and pleasant experience if you focus on that.