Whether it's an extra cup of coffee — or three — to offset your exhaustion, a donut tire to get you to the mechanic, or tape to repair your broken eyeglasses, short-term solutions provide us with instant relief to life's unforeseen roadblocks.
But, often the speed and ease of a quick-fix solution come at the cost of its durability. Short-term solutions treat the problem's symptoms rather than its cause. Take, for instance, downing that extra cup of coffee to fight your afternoon fatigue. This is only a temporary cure and eventually, you go right back to being as tired, if not more than you were before. If you never get to the root cause of your exhaustion, you'll always be one cup away from a caffeine crash – creating a cycle of dependency that becomes harder to break the longer it persists.
The same goes for customer churn. If you react to the symptoms of churn without identifying the cause, you're only putting a Band-Aid on your leaky bucket. While you can try to prevent churn with frivolous discounts and placating concessions, these responses only briefly curb dissatisfaction – buying you some time before the next issue emerges.
To solve customer churn, you need to attack it at its source. This article identifies the main causes of customer churn using first-hand examples so you can stop sprinting from one emergency to the next and implement a permanent retention solution for your business.
Customer Churn Examples
1. The customer stops using your product.
Now a year into the customer journey, a business owner who's subscribing to your software begins to show signs of adoption inertia. It's been four months since they've completed product training and their product usage is beginning to fatigue as the initial excitement of using new software wears off.
This laissez-faire approach leads to more regressive behavior. Despite having the professional courtesy to attend business reviews, it's clear the customer's mind and interest are locked in somewhere else – with passivity giving way to inaction and soon stagnation.
The momentum continues to slow as the customer becomes distracted by their latest business priority – thus, tempting them to retreat to the familiarity and comfort of their old work habits.
What to do:
Churn prevention begins by detecting decreases in product usage. Once a customer ceases all activity and communication, it becomes much harder to re-engage them with your brand. So, it's important to have systems in place to notify you as soon as your customers' activity starts to trend downward.
When you do reconnect, try to mention a goal-relevant product or feature that they haven't used before. Schedule a demo with them that same week to keep them accountable and engaged while your feature discussions are still top of mind. When on the call, you should also try to surface the reason for the withdrawal. Once identified, prepare a shortlist of small, achievable goals to inspire action, stimulate incremental progress, and rebuild the customer's confidence in your brand.
And remember, product adoption doesn't happen as the result of a few customer meetings or trainings – no matter how uplifting or productive a session may be. Habits develop through a sustained effort and consistent behavior over time. Your job is to lay the foundation for the customer so that they can achieve their goals easily by working with your business.
2. The customer doesn't respond.
After two weeks of trying to contact your new customer, you feel you've exhausted all of your options. With their onboarding nearly complete, their progress looked promising, but now they've suddenly stopped engaging with you.
You wonder if they're purposefully ignoring you, or if this is just a streak of bad luck with catching them at the wrong time. Without a way to directly ask them what's going on, you're not sure what you're up against or what the most effective course of action is to take.
What to do:
Before reaching out again, be sure that you're not sending an unintentional guilt trip for not returning your call. When you repeatedly remind customers of your varied efforts to contact them, it can come across as passive-aggressive and evoke feelings of shame – only reinforcing the evasive behavior.
When you find yourself stuck in a ghosting situation, Chief Listening Officers' Bob London recommends using the email subject line, "Just looking for a one-digit reply" to grab your customer's attention. In the email body, acknowledge that you know the customer is busy, so you're asking them to reply with a single-digit that indicate their status and desire to meet. For example:
Offering prompts unburdens the customer from crafting a response, as well as the onus to recognize the avoidance, which absolves them from any anxiety they may feel about their hiatus.
You can also try contacting them on a different day of the week or at a different time. It could just be that you're reaching out at the busiest part of the day or during a recurring meeting. If all else fails, turn to the lost art of the handwritten note. A thoughtful letter may be the gentle nudge needed to inspire a follow-up message.
3. The customer tightens their budget.
When faced with cost constraints, department leaders sometimes are pressured to slash budgets and scale back resources. In this example, this is the case with your customer, who was a stakeholder in the process to purchase your software but isn't the account's primary decision-maker. That role belongs to their boss, who's the Chief Operating Officer (COO) and budget owner for the customer's company.
Your customer reveals that due to financial losses, their business has undergone company-wide layoffs, and their department has been downsized. Feeling pressure to appease leadership, your customer decides to part ways with your product.
What to do:
Unfortunately, the decision to renew is outside of the customer's control. In which case, you need to make it easy and effortless for the customer to advocate on your brand's behalf. That way, their leadership team has a use case that justifies the renewal of their account.
To do so, reach out directly to the customer and review the goals and priorities laid out by their leadership team. In this example, let's say that Annual Recurring Revenue (ARR) is what this team is focused on, so we'll build our case around that.
The next step is to meet with the customer and their leadership team. Remind them why they purchased your product and take them back to their original pain points. Celebrate how far they've come and outline the progress and hard work that would be lost if they severed their partnership with you.
Finally, present pricing options – discounts and/or downgrades – that show you have taken their financial considerations to heart. Your willingness to be flexible on price is a clear sign of where the customer stands with your business.
Here are some ideas for reducing costs for your customers.
- Remove inactive licenses from their contract so they only pay for what they use. Offer to reserve a discounted rate for their returned licenses in the event they wish to repurchase in the future.
- Make payments more manageable by allowing for monthly or quarterly installments versus a hefty upfront annual payment.
- Share details about the lower edition of your product and outline feature differences and cost savings.
- Offer loyalty discounts for multi-year subscriptions contingent on the customer participating in a case study or testimonial.
4. The customer is a poor fit for your product or service.
Your customer success team is assigned a new client that sales recently closed a deal with. As you review the sales-to-CSM handoff notes, you quickly realize that there are a few noteworthy fields that are missing information. You reach out to the sales rep regarding these key details, but after talking with the rep, you realize there are structural constraints between your platform and the customer's current database that will hinder the product from working properly.
What to do:
First, you need to determine if you have a poor-fit customer on your hands. These are customers who can't attain value from your product and are a huge liability and flight risk to your business.
Before you categorize a customer as a lost cause, consider if their conditions and needs qualify them as a "stretch" customer – or one that has the potential to be an ideal fit in the future depending on your company's product roadmap. This business relationship is salvageable although interim goals and use cases will need to be set.
To find out where you stand, you should schedule a call with the customer. You should also invite the sales rep who closed the deal to demonstrate a unified front. On the call, be transparent with the customer about the situation. Know that withholding information or hedging around the matter not only undermines them as a partner but as a person. Plus, letting this issue fester will only compound the problem and your customer's frustration.
For the remainder of the call, you should identify all possible workarounds so they can make the most of your product until their contract expires. Additionally, be sure to make it easy for customers to cancel their subscriptions and provide assistance to those who request this service. Allowing customers to amicably walk away benefits both businesses as holding on to poor-fit customers only strains your company's growth, resources, and morale.
5. Customer's company undergoes an organizational change
While preparing for your next customer call, you receive an Owler alert that your customer's company was acquired by one of its competitors. This is alarming news as organizational change often brings an unsettling degree of ambiguity and unknown circumstances. Your long-standing, and otherwise "healthy," vendor partnerships can suddenly become subject to debate and reevaluation at a moment's notice.
What to do:
Get in touch with your primary contact and secure specifics about the unfolding changes. If they don't have any meaningful information to share, request that they send you updates when new details become available. You're looking for any relevant factors that will affect this company's likelihood to churn, such as:
- Expected layoffs
- New decision-makers or executive sponsors
- The acquiring/merging company's current tech stack
- Impending invoicing changes that could disrupt payment
To demonstrate continued investment in your partnership, ask the customer how you can be an asset to their team during this transition. In this case, let's say the acquisition is part of a service diversification effort. This is good news as there's a lower likelihood of one of the company's departments being displaced due to overlap.
But with future budgeting still unknown, you should conduct an Executive Business Review (EBR) with the new stakeholders to showcase your product's performance and value. In this presentation, you should highlight KPIs that support the product's efficiencies and the ROI achieved over the past year by using your product.
6. The customer leaves their company.
At the start of your workday, you get an alert that a customer, who is a power user, hasn't logged into your platform in the last 14 days. This is alarming because they're a daily user as well as an account champion. You email the customer to check-in, but after sending the email, you receive a prompt auto-reply informing you that they're no longer working with the company.
What to do:
When an account's power user and/or main point of contact leaves their role within their company, it can come as a complete surprise without any forewarning. An absence of a customer champion to support your product makes your brand susceptible to being undervalued by peripheral groups.
To verify the customer's departure, you should check LinkedIn to see if they've updated their current position. If you don't see a new job listed on their profile, send them a direct message to check-in. If you can verify the customer's departure, be sure to offer them your best wishes in their job search. You should also ask them who you should connect with from their former company to establish a new liaison.
Once you get in touch with the recommended point of contact, schedule a training with them to demo your product's most used features. Your new contact may not be aware of your platform's full functionality and may want to apply its features to other use cases as well.
7. The customer experiences an unexpected roadblock.
You're in the process of onboarding a new customer when suddenly you learn from the customer's admin that their development team will need to update some of their code to enable the use of your product. The only problem is that their development team is currently backlogged for three months, so the customer won't be able to complete the onboarding program until their team is available. You're concerned that this extensive delay may cause irreparable damage to your customer's likelihood to adopt your product and you want to take action before it's too late.
What to do:
First, schedule a strategy meeting with the customer to review your customer journey map and analyze any roadblocks affecting their development team. This is where having a consistent customer journey helps you discover trends and commonalities between user setbacks and points of confusion.
Knowing that the delay will take three weeks, you should create a plan to onboard this customer immediately after their development team completes their work. Provide the customer with information about your product and onboarding program so they can review your strategy and clear up any confusion before the delay is over. If possible, try to fast-track or customize your standard onboarding program so that it fits this customer's unique needs.
Getting to the Root of Customer Churn
Unfortunately, there's no cure-all for customer churn. A quick-fix or blanketed approach ignores the conditions and context that brought about its very existence. Without understanding and addressing the underlying causes of churn, you'll never get to the root of your retention issues. To forge lasting change, you need to stop churn at its source before it festers and grows into a costly problem.
Keep improving customer retention at your business by reviewing these key reasons for customer churn.
Originally published Feb 5, 2021 8:00:00 AM, updated February 05 2021