To paraphrase the famous saying, there are only two things that are certain in business: churn and taxes.
While it is impossible to completely avoid either, there is much you can do to limit the impact of both. And, in the case of churn at least, by learning from what you cannot avoid you can prevent yourself from suffering any loss that will do real harm.
In fact, by becoming familiar with the causes of churn and using data to identify its warning signs, it is possible to predict and reduce customer churn.
What Causes Churn?
Every business suffers churn. Miscommunication, forces beyond your control, or differing expectations take their toll on even the most customer-centric of Customer Success teams, and eventually everyone encounters a customer they cannot please. However, that does not mean you cannot mitigate the effects of churn. That starts with understanding why it happens.
The following (not exhaustive) list gives some of the most common causes of customer churn:
- The service does not offer the customer value
- The customer needs to reduce expenses
- The customer business model/objectives changed
- The product was never successfully adopted or was not implemented correctly
- A product champion leaves the customer’s business
- A more attractive alternative becomes available, or there is a product or usage gap
No single incident of churn should have too detrimental an impact on your enterprise. Each example, however, carries the potential to be part of an overall trend. Being able to identify and stop the spread of systemic churn is vital to your enterprise growth.
Renewal Is a Product of the Customer Experience
The above list of common causes of churn should make it clear that churn is not a failure of customer success renewal efforts. What renewal and churn do have in common is that they occur outside of the calendars and anniversaries of our formal planning. Renewal decisions are made at any time during the customer journey and are the direct result of the customer experience.
Research by Deloitte shows that personalized customer experience is now just as important to customer decision-making as speed of service and ROI. Beating churn means delivering personalized value at every step of the customer relationship.
Ways to Predict Customer Churn
If the decision to renew is linked to the customer experience, then you can predict churn by accurately following and working to improve that experience. The following list of best practices can help you identify potential churn in time to do something about it.
- Apply Lessons Learned from Previous Churn Cases
- Pay Attention to NPS and Close the Loop
- Value Escalation and Support Information
- Closely Follow Product Usage
- Ensure Customers See Value
- Build Relationships with the Entire Organization
These initiatives begin with an honest assessment of past customer lapses.
1. Apply Lessons Learned From Previous Churn Cases
To paraphrase another saying, if you don’t learn from past customer churn, then you are doomed to repeat it. A churn analysis is most effective when considered across customer segments, where patterns can be established and avoided. Commonalities in product version, onboarding practice, industry, rates of escalation response, feature adoption, or expansion attempts can reveal areas for improvement in your customer success approach and give you telltale signs to look for—and seek to resolve—among existing customers.
2. Pay Attention to NPS and Close the Loop
Net promoter scores (NPS) can reveal a customer’s current opinion of your product. A simple ranking of a customer’s likelihood to recommend your product to their peers at that moment in time, this Voice of Customer information is unique in its source and a potential direct call for assistance from your customer. A net promoter score of less than 7 or 8 indicates the need for a solution that will change the customer’s attitude toward your product through means such as a winback campaign or value incentive.
3. Value Escalation and Support Information
Like NPS results, information gathered from customer escalations or support tickets offers an unambiguous message that your customer needs support and lets you know where exactly they need it. A large number of support tickets—or even a single high escalation issue, for that matter—indicates a need for swift intervention and a solution to the issues by your customer support or CS team. Even one high escalation issue is important to let the CSM know. Luckily, customers that receive satisfactory responses to escalations are highly likely to develop loyalty to their provider.
4. Closely Follow Product Usage
Of the many customer success metrics available to help you understand your customer’s day-to-day behavior, product and feature usage measurements are among the most indicative of renewal possibility. It is important to establish acceptable product usage rates for each stage of the customer journey and then act to provide additional growth whenever these rates are low. Predicting churn is also paramount to improving your chances of customer retention—to do this you need to track usage patterns of previously churned customers to identify common behavior and implement appropriate solutions.
5. Ensure Customers See Value
Customer success planning is as much about aligning your enterprise’s offerings with your customer’s business goals as it is about them achieving these goals. Unrealistic or overly ambitious targets are a forerunner to disappointment. Progress toward these goals will show your customer the value your product can provide, so it is vital they are achievable and logical.
Vigilantly looking for early warning signs of churn is just one part of the equation. To successfully build a lasting customer relationship that promotes mutual growth, you have to be ready to turn data that points to potential churn into effective action.
6. Build Relationships with the Entire Organization
It is important to build relationships with the entire organization you are working with, not just your direct point of contact (POC). Get to know members of your customer’s organization at all, from key champions to users to executive sponsors. Understanding your customer’s leadership structure and including them in meetings will ensure you are prepared should there be a POC or leadership change at the company.
What to Do About Churn
The first evidence of possible churn that emerges through the early-warning alerts you have set up based on customer success metrics or events should trigger immediate action. You should be ready to deploy a series of previously prepared, enterprise-wide next steps that reinvigorate product interest and incentivize engagement. Winback campaigns are a great way to do this, however, there might be a unique situation that requires a more personal customer offer. Setting tasks for your CSM to meet with their boss to strategize on next steps might be the most appropriate way to handle those specific situations.
There are several practices you can pursue to effectively win back customers and reduce churn:
- Offer upgrade/downgrade options that better align your product with customer use
- Consider financially repackaging your service to drive greater ROI
- Provide additional, free seminars and webinars that promote product features
- Acknowledge any issues and offer solutions
- Introduce product and service improvements
- Re-onboard customers or provide additional training on product use
- Build relationships within multiple levels of the organization
Depending on the cause of the potential churn, you may need to implement more than one of these solutions. The right customer success solution can not only help you predict customer churn, but also prompt your CS team to take practical and immediate action to prevent it.
Predict Customer Churn with Customer Success Software
Insight into the signs of potential churn and the ability to implement a fast, pre-planned response—or personal, guided next steps—are contingent on your Customer Success team having access to a comprehensive customer success platform. This solution must be robust enough to collect and synthesize a range of information, customizable enough to turn that data into meaningful customer behavior alerts, and then practical enough to suggest constructive action.
Churn is a fact of business life, and you will never avoid it. However, by being ready to act in the face of problems you’ll be able to predict customer churn and help prevent it from ever becoming an enterprise-defining problem.
In these challenging times, you can’t afford to buy before you try. Get started for free today. Totango’s unique platform gives you the data you need to predict churn before it happens as well as practical ways to take action.