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Yesterday the CEO of a $250m+ ARR company asked me: "Is there one thing we can do to minimize customer churn heading into a recession?" In a word, YES... Of course, real churn prevention isn't about just one thing but comes from driving customer results. But this particular CEO has done a terrific job of aligning everything in the company to produce, measure, and materialize customer results. He wanted to know if there is anything specific he can do right now to make a difference. I explained to him that there is one thing that makes a big difference, especially during an economic downturn. It has to do with two different ways of measuring "churn". Customer Churn vs. Revenue Churn Most companies don't experience significant increases in customer churn during recessions. But it's a different matter when it comes to Revenue Churn. That's because although they may not leave, many customers will need to downsize their accounts due to a slowdown in their own business. Revenue churn is inevitable in a recession. The problem comes when companies try too hard to prevent revenue churn, and end up causing customer churn. If you make it difficult for customers to downsize their accounts, their only other option is to leave! The One Thing... Here's the one thing I told the CEO to focus on... → Make it easy for customers to right-size their accounts. ← Don't make it difficult for them to downsize. Provide options for customers to reduce their usage at lower price points. Make these options easy to find, and simple to choose. Even reach out and tell them about it in your customer marketing. Too many companies limit the customers' downsizing options or make it difficult to do, mistakenly thinking they are protecting revenue. Actually, they are putting it more at risk! There are lots of ways companies limit customer downsizing. Some try offering incentives and freebies for customers to stay at their current level. Others bury the downsizing options so customers don't know about them or can't find them. Many companies even take the "cable company" approach by forcing customers to call in where they are subjected to aggressive pressure tactics. The problem is that these things don't work - even when they seem to. Customers will eventually react to the pressure on their own businesses by cutting things they would've preferred to keep. And this obviously gets a lot worse in a recession. But downsizing is actually a key indicator of customer health! Downsizing Drives Retention Our research consistently shows that customers who downsize their accounts retain far longer than those who stay at the same level. Customers who have ever downsized their accounts stay on average 57% longer than customers who didn't change. So my advice is simple: Resist the urge to "protect" your revenue by making it hard for your customers to stay. Help them right-size now, and they'll likely remain a loyal customer for a long time. If you found this useful and want to learn more research-driven insights and suggestions for customer churn and retention, visit my "Churn Whisperer's Guide to Churn"

A question I've been getting a lot lately is, "Will a recession cause our churn rate to go up?" The surprising answer is: Yes, but not because churn will get worse. Let me explain... Having been through a few of these major recessions I've had multiple chances to observe how they impact customer churn. Overall, most companies will NOT experience significant increases in their real customer churn. (There are obviously exceptions to this, which I address below.) But even if real churn does not increase at all, nearly every company's churn rate will go up sharply in a recession. The Churn Rate Problem The reason for the paradox is found in the way we calculate churn rates. The most common method is to use customers (or dollars) churned in the numerator, and total customers (or dollars) in the denominator. Something like this... But this formula has a serious flaw because it's sensitive to what is happening with sales. The reason is that customer churn is delayed because customers churn after a period of time. So the denominator changes before the numerator. When sales is increasing, the churn rate is distorted downward, making it look lower than it really is. When sales are slowing down, the churn rate is distorted upward, meaning it appears to get much worse than it really is. One way to visualize this effect is to simply plot growth over time as three lines: new sales, churn, and active customers like this... The way to read this is to see that when the sales and churn lines are getting further apart, growth accelerates rapidly and the churn rate appears very low. And when the lines start to converge, growth decelerates and the churn rate will switch to appear very high. This is true even if the real amount of churn is not getting worse! In the example chart above the real rate of churn is constant. I strongly recommend using this simple method to visualize what is going on with your churn. For those interested, I provide a downloadable spreadsheet to make it easy to build your own growth chart in my Churn Whisperer's Guide to Churn. The Recession-Churn Paradox To summarize: In a downturn or recession, slowing sales results in a spike in the nominal churn rate, even if churn has not actually gotten worse. This is one big reason why relying only on the churn rate as your primary metric is so dangerous. You need to be watching your real churn. I explain this and show how to improve your churn rate metric as well as how to measure real churn in my Guide to Churn. For Some, Churn Gets Worse In A Recession The First Law of Customer Retention is: Customers stay to get results. Most companies don't experience significant increases in their real churn during a recession because their customers are getting results that few customers would willingly walk away from during hard times. But this also explains why real churn goes up for some companies. During a downturn, customers take a close look at all their expenditures with the intent to get rid of anything that isn't producing significant, measurable value. Churn is what happens when customers fail to achieve their results, and recessions merely accelerate the inevitable churn that is the outcome of this failure.

Come and learn from industry leaders in Customer Success: Clare Peterson, Saydie Blanchet, and John-Paul Scoville! Topics will range from getting started in Customer Success, the necessary skills to advance in your career, and transitioning into management and operational roles. Sessions will be recorded and available on-demand for all registrants. See you there! Link to Register: https://lnkd.in/gJSkTnxi

I had a blast chatting with Scott and Michael on The Selling Podcast! We talked about how the new frontier in sales is all about selling for retention. It was a great discussion with lots of laughs! I hope you enjoy it! (Part 2 is coming next week) EPISODE 1 EPISODE 2 thesellingpodcast.com Greg Daines challenges all of our beliefs. Prospects pushing on our pitch, product or service is a good thing. There are some keys for client retention. One of those key drivers is measured result. Here are some other things discussed: The number one factor in customer turn is "the way we sell." Start with the result (the why) before you ever get to the 'what'. Giving a free trial might reduce barrier to entrance but likely has an opposite result on gaining new clients. How are you selling? If you are talking about your or your business, you are doing it wrong. Get the prospect talking about themself. Build a "results story" and not a sales pitch. Focus on the results and allow that to drive the story. Are you qualifying your prospects the right way? Are you asking these prospects if they are willing to change in the way that they need to drive results? Find out more about Greg at Total Customer Strategy. How has Greg's research changed what you will be doing? We want to hear from you. Mike@TheSellingPodcast.com Scott@TheSellingPodcast.com

A better customer experience leads to higher retention, right? RIGHT??? ...actually, the data says "nope" --> Did you know that customers who've had bad experiences stay an average of TWICE AS LONG as customers who haven't? It's a strange paradox, but not a new one... This paradox was actually first discovered way back in the 1990s when Sun Microsystems looked closely at their own customers. But WHY?? Does this mean that negative experiences actually cause customers to stay longer? No, that's not what's going on here. Let me explain... What drives customer retention is results. The First Law of Customer Retention says: **CUSTOMERS STAY TO GET RESULTS.** So, what do negative experiences have to do with customer results? Think about it... Who is more likely to run into problems: (A) The customer who is trying hard to use the solution --OR-- (B) The customer who isn't trying very hard OBVIOUSLY: Customer (A) is much more likely to run into: - Problems - Limitations - Bugs - Challenges BUT, it should surprise no one that Customer (A) is also much more likely to get RESULTS! So, that's the key to unlocking this paradox... • Customers stay to get results, and negative experiences are a common byproduct of the process of achieving results. BUT THIS HAS A VERY INTERESTING IMPLICATION --> A lot of customer "health" scores include support tickets as a NEGATIVE risk indicator when they are actually a POSITIVE health indicator! Our research shows that customers are increasingly likely to churn as time passes since their last support request. So the lesson is clear: • STOP worrying about negative customer experiences. --AND-- • START focusing on the customers who are NOT on their way to achieving results!

The key to crushing churn is knowing a customer is failing even before they do. BUT HOW?? The answer is pretty simple → Getting a customer back on track takes time. That’s why effectively preventing churn relies on our ability to predict customer failure far in advance. In my latest video, I show exactly how to build a killer early-warning system for customer failure that massively improves the effectiveness of your customer retention efforts. Watch the full video:

Downloadable PDF: THE 4 TYPES OF CUSTOMER SUCCESS MANAGER Here is a quick 1-slide summary of the 4 Types of CSM from my recent video that you can download and use. Enjoy! The 4 Types of Customer Success Manager 1. The PLEASER 2. The HERO 3. The ENABLER 4. The AGENT Download the PDF here:

There are 4 classic Types of Customer Success Managers. How each operates shows why we are so reactive, and how we can shift modes to start leading customers → One of the biggest problems with the conventional approach to Customer Success is that it's totally REACTIVE! In order to be effective, we must find a way to flip from operating in reactive mode to being truly proactive with our customers. In my latest video, I describe the 4 types of Customer Success Managers out there and explain why it's so difficult to resist becoming fundamentally reactive in our approach. But there's one type - the rarest of them all - that demonstrates exactly how to shift your approach and start leading rather than following your customers! Watch the Full Video:

Virtually every company out there claims to be “customer-centric”. But I think very few companies really are. And there’s a simple way to tell → What really matters is ultimately revealed in what we measure. That is obviously true if we chose our metrics based on our values. But it’s also true even if our metrics evolved independently of our values. Because we organize everything we do around improving our core metrics. That’s why they are always the clearest signal of what really matters in any organization. Our metrics are our destiny. So, what does that have to do with companies claiming to be “customer-centric”? It means that we can determine if that claim is true simply by looking at what the company measures. And this is where it gets interesting… Because virtually every company on the planet relies primarily on the same two core customer metrics: Customer Satisfaction AND Customer Retention I realize that these both start with the word “customer”, but what does that really mean? I argue that these are not metrics of the customer's success. They are measures of our success! Think about it… CUSTOMER SATISFACTION surveys literally ask our customers how they feel about us! Really?? Do we actually believe that we are centering on the customer by asking them to talk about us? And, the truth is CUSTOMER RETENTION isn’t a measure of the customer’s success, it’s a measure of our success! Retention is literally a metric of what we want from the customer! It’s madness to imagine that these metrics “center" the customer! If anything, these are actually perfect examples of the opposite by making it entirely about us! What would you think of a person who: is obsessed with and constantly asking what others think about them? is focused mostly on what they are getting from you? Would you say that person is genuinely interested in other people? Nope. We call that type of person a narcissist, and we avoid them because they are toxic. So, why is it any different for companies? I’m convinced that the Customer Experience (CX) approach and its obsession with satisfaction surveys (NPS etc.) have ultimately made us much LESS customer-centric! It's time for a 'Factory Reset' on the Customer Relationship If we are ever going to become truly customer-centric we have to start by embracing a simple and ancient truth… IT’S - NOT - ABOUT - YOU! The entire business world needs to stop right now and take a hard look at how inward-looking we've become. And if the need for this reconning is not already glaringly obvious, there’s also a loud warning alarm sounding right now in the majority of companies: customer retention is going down and churn is getting worse. And this is just as true for companies that have improved their customer satisfaction scores. What we are doing isn’t working. TRUE CUSTOMER-CENTRICITY So, how can a company truly be customer-centric? The answer is simple: by changing what we measure from what matters to us, to what matters to our customers. Fundamentally, customers “hire" our product to do a “job” that is important to them (Clayton Christensen). In other words, they come to get a valuable result. They do not come to “feel" happiness but to achieve something real and valuable! So that’s it. This is the fundamental change at the heart of any sincere effort to put the customer at the center: → MEASURE THE CUSTOMER’S RESULTS ← You cannot convince me you are customer-centric if you do not prioritize identifying the results that matter to your customers and systematically measuring those results to ensure they are achieved. → Every Customer → Every Result → Good or Bad This single change is the most revolutionary thing a company can do. Sadly few companies will muster the courage and conviction to do it. But for those who do, the transformation is breathtaking. For one thing, it fundamentally reshapes the customer relationship. Operating this way leads to what my favorite MIT professor Arnaldo Hax called “customer bonding". Customer Bonding is achieved when the customer comes to view your company as integral to their success. And how can customers see us in that light if we don’t even go to the trouble of measuring the results they came to achieve? But it's even worse than that - most of the time we don't even know what their key results are! The only rational conclusion to this situation is that most companies really only care about getting my positive reviews and my timely payments. And of course, that's completely true. CUSTOMER SUCCESS ON PURPOSE What ultimately bonds customers to companies is a shared sense of purpose. We care most sincerely about our customers when we make their purpose our purpose. Customer purpose - what they are trying to achieve - is what we really exist for. As long as customers come to get specific results, then our purpose must be to ensure they achieve those results. If you aren't diligently measuring them, then how do you even know if you are delivering them? It just isn’t credible to claim that you are placing the customer at the center without establishing their achieved results as your primary metric of success. Ever since I learned this truth many years ago I’ve dedicated myself to helping companies make this shift. It’s incredibly rewarding because this one change solves so many things that vex us and our companies. This new way of operating is what I call the Total Customer Strategy. This is just a name I chose for the set of new methods that emerged in front of me beginning from the moment I changed my perspective. I came to see that a new name was needed because of how dramatically this approach diverged from the conventional 'best practices'. DISCOVERED NOT INVENTED I want to be clear that this approach and its methods aren’t something I “invented” at all, but rather DISCOVERED as I followed the logical pathway that was revealed to me as a consequence of aligning with my customers’ purpose and measuring their results. One way that I know for sure that I didn’t invent this is because I’ve met countless people who’ve discovered exactly the same principles and methods. People from around the world constantly reach out to me to share their stories of how they came to the same conclusions and how they found their way to these very methods. After years of working with so many brilliant people, I'm excited that a small but growing movement is beginning to emerge to fundamentally shift our core understanding of what we and our companies are truly for. Every day, more people and companies are catching the vision to align everything they do to their customers' purpose by systematically driving and measuring customer results. I’m deeply grateful to be a part of it. I hope you’ll join us!

You can't learn to make customers SUCCESSFUL by studying FAILED customers Think about it --> The most popular method for analyzing churn is the Exit Survey. But it's a trap! Why? It seems obvious that if we… • Ask customers why they churned, • Identify the most common reasons, and • Fix the big problems ...then surely fewer customers will churn! But that's not what happens. It doesn't work. Churn never goes down. This drove me crazy. I couldn’t understand why this doesn't work. I eventually discovered the answer which is based on this one simple truth: **Customers don't leave because they have a reason to leave. They leave when they no longer have a compelling reason to stay.** As long as we focus on our FAILED customers, we will never understand why customers SUCCEED. What we need to understand is not why customers leave. We need to know... --- WHY DO CUSTOMERS STAY? --- That's why we need to STOP STUDYING FAILURE --> and start STUDYING SUCCESS! So, how can you do that? Begin by focusing on your most successful customers. These are the customers who are getting results - NOT necessarily the "happy" customers. Get them on a call and explore with them: - What results are important to them? - How do they measure success? - What did they DO to get results? I think you'll find that, although your customers are very different in many ways, there are just a few behaviors they share in common that are essential to getting good results with your product. This is powerful knowledge: understanding how customers achieve results. I call it: CUSTOMER EXPERTISE. And this expertise is your most valuable asset because it's what drives customer results. And customer results drive retention! The Second Law of Customer Retention says that: Customers achieve results because they change their behavior. Armed with this powerful expertise, you're now in a position to help all your customers get results by teaching them what they need to DO to win!

Downloadable PDF: THE 3 LAWS OF CUSTOMER RETENTION Here is a simple summary of the factors that really drive customer retention and churn. Enjoy! The 3 Laws of Customer Retention: 1. Customers stay to get results. 2. Customers get results because they change their behavior. 3. Customers change their behavior when they know why and how to change. Download the PDF here:

Here's a downloadable PDF that summarizes 4 key findings from our customer research --> 1. There's NO correlation between customer satisfaction and retention. 2. Positive customer experiences do NOT lead to higher retention. 3. Customer retention has gone DOWN even as satisfaction has improved. 4. Customer results are the BEST predictor of long-term customer retention. Download the PDF here: