4 Reasons Companies are Surprised When Clients Leave — and What You Can Do About it
“What do you mean they churned?”
“You said their utilization was off the charts and NPS was a 9 out of 10?!”
Does the above sound all too familiar?
Every quarter, every year, CEOs, CROs and Heads of Customer Success face a painful and unpleasant reality – customers whom they thought were “happy” and “safe” decide not to renew. Thousands or millions of dollars out the door and a feeling of shock pervades the organization.
“Why us?”
“How could this happen?”
“Who is responsible?”
“How did we not see this coming?”
With all the massive investments in customer success teams, software, and surveys, this should be a rare occurrence but on the contrary, it is a regular and evergreen issue facing recurring revenue businesses daily.
So Why is This Happening?
1.Most CS Teams Are Not Focused on Broader Organizational Context Impacting The Relationship
Through no fault of their own most CS teams are overworked, understaffed and can barely keep up with the basics of day to day client management. As a result, they are heads down working on-boarding, engagement and tactics to drive adoption and customer happiness.
The background of most CS teams (as opposed to sales) also means they are unlikely to detect organization cues that could impact a relationship – a subtle organizational change, a new budgetary owner.
Unfortunately, changes in organizational context can lead to churn irrespective of product usage and perceived happiness. A new decision maker comes along who simply wants change for the sake of it.
When the news is presented, companies are surprised but in retrospect, many early warning signs have been missed that could have altered the outcome.
2. Customer Health is Measured by Lagging, Vanity Metrics Like NPS or Utilization
Most CS Teams use metrics like NPS or product utilization to measure customer health.
Customer success software also uses similar barometers of customers’ likelihood to renew
While these metrics are often necessary for customer health they are not sufficient.
How likely I am to recommend a product to a peer or how much I have used a product are often lagging indicators and do not tell us anything about future state and where a client may be headed?
All too often the answer is, “I would definitely recommend the product to a peer but I may be outgrowing it or need something different.”
3. Customers Will Never be Forthright with Vendors - There is An Inherent Misalignment of Incentives
There is an old saying – buyers are liars. While it may be extreme, for the most part, customers have zero incentive to be fully forthright with their vendors.
Until it's quite late in the renewal game, a client is likely to keep stringing the vendor along to ensure there is no interruption in service and quality.
4. Customer Success Teams Don’t Have The Skills or Incentive to Look for Bad News
Let’s face it. CS is one of the toughest roles in any recurring revenue business and most CS teams are simply trying to survive.
The job of CS is to make customers happy with minimal friction and drama – not to seek out bad news and problems that may not be solvable. As a result, most CS teams tend to focus on those clients who are happiest versus those who may not be engaged.
Second, CS teams often lack the skills to engage and challenge customers who may be at risk or to push customers for answers around potential organizational issues that could impact the partnership.
So What Can Be Done?
Companies must pay attention to their customers’ internal and external organizational dynamics that could adversely impact their relationship. Is there a major re-org, a new decision-maker?
Companies must focus on forward-looking metrics that are strong predictors of how necessary and sticky a product is for customers. “How badly do you need our product and what would happen if you did not have it?”
Companies should seek out independent third parties to serve as a filter and mediator with key clients and to understand real customer health and who is likely to be at risk.
At ChurnVision, we’ve developed an approach that combines all three actions to predict B2B SaaS clients at a high risk of churn and provide insights to prevent it. Want to learn more?
