You always remember the clients that got away
Some time ago, I worked as a consultant for a large information service company, providing analyses of press coverage to communications VP's at Fortune 500 companies. It was an expensive service, and while we had better data than anyone else, our software was showing its age. The result was that we were slowly losing clients to more modern solutions with a lower cost structure.
My real job was to keep clients from churning, and it was a struggle. Some of them simply weren't using the service, others were discovering that our competitors were easier to use, and a few had been sold a product they had no use for.
I was reminded of those days during the webinar that Chartio produced with Lincoln Murphy, Gainsight's customer success evangelist – "Five Hidden Metrics Market Leaders use to Drive Success". I'm not going to review the full webinar here. You should watch it yourself. But I want to discuss how Lincoln's themes resonated for me.
"Customer success is when your customers achieve their desired outcome through their interaction with your company."
That's Lincoln's definition of customer success. I love it because it focuses the customer's criteria for success, and not the vendor's.
By focusing on whether your customer is achieving their desired outcome, you have the best chance of keeping them from churning months in the future.
In my information service job, regular check-ins with clients were necessary, but not sufficient. I had a great relationship with my customers. But sometimes that meant they didn't want to tell me our product wasn't meeting their needs and they were starting to talk to our competitors.
Unfortunately, my early-warning system left a lot to be desired. Our product was built on top of some nineties-vintage mainframe code. So, to monitor customer activity, we had to download a customer's log files, dump them into Excel, and build a pivot table. I did this weekly, but the information we gleaned from those files was limited.
We never had good information on whether our customers were achieving their desired outcome.
"The seeds of churn are planted early"
Chartio's CEO, Dave Fowler, wrote a post last week about why churn matters and the best way to calculate it. Dave noted that stemming churn is one of the keys to success in all businesses, but it's particularly vital to subscription businesses, where it's the foundation of growth.
Lincoln notes that, although churn is ultimately the responsibility of the customer success team, churn is a lagging indicator of success. By the time a customer churns, it's too late to save them. When a customer churns, it's because of things that happened months (probably quarters) in the past.
"Although churn is ultimately the responsibility of the customer success team, churn is a lagging indicator of success."
In many cases, the failure may be at the moment the contract is signed – if the product isn't right for the customer's needs. I had one rep who was able to sell really expensive contracts for press tracking to customers who had no press coverage.
Lincoln reviewed the stages that customers go through before they churn. The sooner in the process that you catch them, the greater your chances of preventing them from churning.
- Disengagement - Not opening emails, declining adoption, sponsor leaves
- Frustration - Low NPS scores, long support time to response, won't recommend you
- Silence - No inquiry, late payments, no product usage
- Churn - It's too late to change the relationship
Customer success should be about creating growth, not avoiding churn
Strong customer success teams in successful companies should not be satisfied with reduced churn, they should be seeking increased sales. Lincoln looked at three kinds of growth and how customer success figures into each
- Increased revenue from customers from new usage and lower churn, leading to negative net revenue churn
- New customers from recommendations and champions bringing you with them to new jobs
- Increased price per earnings resulting from unusually strong revenue growth
Strong customer success teams, when they're representing a quality product that achieves their customers' desired outcomes should be contributing to growth and not merely looking for the holes in a leaky bucket.
What do you need to know to nurture growth and prevent churn?
Over the next few months, on this blog and elsewhere, we're going to be talking about building dashboards.
"They signed up for your product with the intention of being massively successful with your product."
But the underlying issue we're going to address is how the information on a dashboard fits together to give you a complete view of the customer lifecycle: from leads, to prospects, to customers, to users. How do customers become advocates, passive users, or former customers? How do the KPI's in different parts of your organization fit together, and what are the tradeoffs between them?
Business intelligence tools such as Chartio bring essential data to the people who build and manage your relationship with your customers.
Use data to drive conversations with your customers
Lincoln notes that "Your customers signed up for your product with the intention of being massively successful with it." If they're not using it, you need to find out why.
At Chartio, we track how many charts an organization creates, how many people in an organization view those charts, and how many are creating their own charts.
If you're following Key Performance Indicators, it's essential to track them over time so that you can spot trends as they're happening. A high percentage of active users in an organization is a good sign, but what if it declined 15% in the last quarter? Would you even notice if you weren't tracking the trend? Does it mean that a client is losing interest? Are they laying people off? Are they using other tools?
Ideally, you will learn indicators that your customers are going to churn. What are the odds that a customer will churn if they download all their information from your app? Your customer success dashboard should surface those indicators and alert their account manager when they happen.
If a customer isn't using a product they've bought from you, that can be a challenging conversation. But you should never be afraid to talk to your customers.
Those calls can be perilous. You may wind up reminding them it's time to churn, but the goal is to reduce future churn. Learn from those conversations with unhappy customers and avoid making the same mistake twice.