Search Results

This week: DATA STORY: What's the impact of fumbling the Sales to Customer Success hand-off? PODCAST: 10 Customer Churn Benchmarks for SaaS Leaders UPCOMING EVENT: KAMCon 2023, Boulder Colorado, April 12-13 QUOTE OF THE WEEK... What's the impact of fumbling the Sales to Customer Success hand-off? I've sensed for years that time is of the essence for new customers. Any delay in getting customers started always seems to be a bad sign. But the hand-off from sales to onboarding can take time because people are busy. Anyway, what do a few short days matter in the grand scheme of things? IT TURNS OUT IT MATTERS A LOT! 📊 To answer this question, we looked deeply into one of our clients' retention data by comparing long-term retention differences based on how quickly customers started. [COMPANY INFO: SaaS, B2B, $50m-$100m] The difference was astonishing... 👉 Customers that engaged with the solution within the first few days experienced virtually no churn over the next FOUR YEARS, whereas those who didn't get started quickly NEARLY ALL CHURNED over the same period! 👈 ► Why does speed matter so much? ⦿ Remember that getting good results always requires customers to expend effort and change their behavior. ⦿ Their willingness is a finite resource that is most available right at the beginning. ⦿ Customer enthusiasm drops with every minute that passes as other problems and priorities demand their attention. HOW TO GET CUSTOMERS GOING FAST 🚀 ① SET YOUR KICK-OFF SLA: Determine the maximum number of days within which the customer kickoff or first engagement will happen. For example, in many cases, I recommend ensuring that the kickoff happens within two business days of signup. ② SCHEDULE THE KICKOFF DURING THE SALE: I've found that meeting the kickoff SLA is difficult to impossible unless the meeting is scheduled during the sales process. Finding a time to meet often takes too long. Provide a method for sales reps to quickly set up the first call 'live' while they're talking to the prospect. ③ GET CUSTOMERS STARTED PRONTO: Even if implementation and onboarding will take time, it's extremely important to get the customer going quickly. Build a "quick start" playbook for new customers by identifying key things they can DO within just a few days. PODCAST: 10 Customer Churn Benchmarks for SaaS Leaders I had a terrific conversation last week with Jay Nathan and Jeff Breunsbach on the Gain Grow Retain Podcast talking about my latest 10 Customer Churn Benchmarks for SaaS Leaders. UPCOMING EVENT: KAMCon 2023: Boulder, Colorado; April 12-13 I'll be speaking at the upcoming KAMCon event in Boulder in two weeks. The title of my presentation is: "Building Account Strategy On The 3 Laws of Retention" Quote of the week: Customers don't leave because they have a reason to leave. They leave when they no longer have a compelling reason to stay.

This week: ARTICLE: My 5-Point Emergency Churn Strategy RESEARCH: There Can Never Be Too Many Tickets! VIDEO: How do I define a "Customer Result"? ARTICLE: Why don't some customers know their key results? ARTICLE: How to choose which customers to 'save' QUOTE OF THE WEEK... MY 5-POINT EMERGENCY CHURN STRATEGY FOR PROFITABILITY Solving customer churn is the fastest route to stability and profitability in hard times. With the failure of Silicon Valley Bank and looming market disruption, here are the five things you need to be doing right now... ① STOP BUYING CHURN ▪︎ The primary source of churn for most companies is new customers that are destined to fail. ▪︎ Taking chances on bad-fit customers is a luxury companies cannot afford in hard times. ▪︎ Therefore, the first step is to choke off churn at the source. ② PRIORITIZE SAVE-ABLE ACCOUNTS ▪︎ It’s essential in a crisis to spend limited resources where they’ll have the biggest impact. ▪︎ In good times, you can focus on the customers who are most likely to fail. ▪︎ But difficult times require a shift in mindset to prioritize the accounts you can most likely make successful. ③ MEASURE + MATERIALIZE CUSTOMER RESULTS ▪︎ When the going gets tough, your customers will ruthlessly cut any costs that aren’t connected to their survival. ▪︎ You can no longer rely on your product's “benefits”, “value”, or even its “ROI". ▪︎ Retention depends on measuring and materializing the customer results that are vital to their business. ④ HELP CUSTOMERS DOWNSIZE TO STAY ▪︎ During challenging economic times, it's necessary to shift priorities from retaining DOLLARS to keeping CUSTOMERS. ▪︎ Budget pressure will lead customers to look for ways to “right-size” their spending. ▪︎ Helping customers down-size their accounts is a key crisis retention strategy. ⑤ INVEST IN UP-SKILLING YOUR TEAM ▪︎ You can never have as many people as you need, but in bad times you can often lose some of your best people. ▪︎ That’s why it’s critical to figure out how to improve your team members’ confidence and abilities to punch above their weight. ▪︎ The key is to focus on simplifying your processes and coaching key customer skills. THERE CAN NEVER BE TOO MANY TICKETS! WHAT DOES THE DATA SAY? 📊 ⤵ "A few support tickets are a sign of customer engagement, but too many tickets are a red flag for customer churn." Not only is this wrong, it turns out it's just the opposite → 👉 THE MORE SUPPORT TICKETS CUSTOMERS SUBMIT, THE LONGER THEY STAY! 👈 Our previously published research on customer retention (you can get the full report by following the link in the comments ↓) reveals a consistent relationship between customer tickets and average customer lifespan. But the fascinating finding here is that there is no threshold number of tickets beyond which the relationship reverses. In other words: customers can't submit too many tickets. 📊 Our research reveals that the customers who submit the most tickets stay many times longer than those who submit none or only a few tickets! WHY? Like so many other findings, this may seem counterintuitive. Doesn't a large number of tickets indicate that a customer is failing? Remember that... ► Support tickets are a signal that customers are engaging with the solution and trying to make it work. ✅ PRINCIPLE: Customers who are engaging and trying are more likely to run into issues AND ALSO more likely to achieve results! 💭 Now, simply follow that principle through to its logical conclusion... ⦿ Customers who are trying are more likely to run into issues. → When their issues are solved, they get results. → When they get results, they want more. → So they try to do even more things. → This leads them to run into even more issues. → (and so on...) What about high-severity issues? Our research didn't address this factor directly, though it's obvious these can lead to customer frustration and even the potential for churn. But in my experience, if an issue severely impacts a customer's business, it means that the solution is extremely important to that customer. These are the customers most likely to stay. I have found that when we do our best to address high-severity issues, customers tend to appreciate the effort, and most will not churn. How do I define a "Customer Result"? In my latest Churn Strategies Live Stream (3/23/23) I answer the question: What is the right way to define a customer result? WHY DON'T SOME CUSTOMERS KNOW THEIR KEY RESULTS? Customer results are everything, but... You can't drive your customer's results if you don't know what they are. It can be surprisingly difficult to get some customers to identify which results ultimately matter to their decision to renew and expand. Some customers already know their key business objectives, but many more are not that prepared. I've found that three things frequently happen when I ask customers for their key business objectives: ① They don't know what they are. ② They don't care what they are. ③ They won't tell you what they are. Knowing how to knock down these obstacles is key to establishing the customer's results and setting them up for success. In this post, I'm going to address the first (and most common) of these obstacles. ① WHAT TO DO IF THEY DON'T KNOW WHAT THEIR KEY RESULTS ARE? The most important reason they can't articulate their results is that they haven't translated WHAT they are doing into → WHY they are doing it. They often assume the business benefits are obvious and think this step is unnecessary. But we know that making the results explicit is critical to measuring and materializing (M+M) them for success. THE SOLUTION: The key to shifting the customer from a "WHAT" mindset to a "WHY" mindset is something called: ►► THE 5 WHY'S The great Sakichi Toyoda realized that you can't ask "why" more than 5 times without getting to the root cause of any problem. And the same applies to identifying the fundamental purpose. And since most people don't think in terms of root causes or purposes on a daily basis, we need to be able to ask "WHY" in up to five different ways to help them reason it out. For example, when you ask a customer what is their purpose in adopting your solution, they will commonly respond that their purpose is to "enable new tools", or "do new activities." They are thinking in terms of WHAT they are doing rather than WHY they are doing it. So we ask WHY Questions: 💭 "Why is this important to the business?" 💭 "How will it impact the business?" 💭 "What is driving the need for this now?" 💭 "How will you know if it works?" 💭 "How will you measure success?" If you are speaking to the right person, your customer will engage with these WHY questions. My experience is that the vast majority of customers genuinely appreciate the exercise and value the clarity it produces. [This simple skill is one of the 8 Core Power Skills we teach in our customer success team training. Reach out to me if you'd like to learn more.] HOW TO CHOOSE WHICH CUSTOMERS TO 'SAVE' It feels like you never have enough people, but in hard times you may quickly find yourself operating with far fewer resources than you need to execute your customer success process. There are two key strategies... The first strategy I'll discuss in a separate post: dramatically reduce what you do for your customers to only the things that directly impact results. In this post, I'm going to talk about the other strategy: reducing the number of customers you are actively engaging to concentrate your resources. Even when you've pared back your customer success playbook, you'll likely still need to target a subset of customers for active engagement. Doing this well requires a key shift in mindset... In good times, we work to identify which customers are at risk of failing and prioritize them for help. But in hard times, we have to flip this idea: Instead of focusing on the customers who are most likely to fail, the key is to target the customers who, with your intervention, are most likely to succeed. This ensures that your limited resources have the absolute highest impact on your results. HOW TO PRIORITIZE CUSTOMERS FOR SUCCESS: 1. AT RISK CUSTOMERS: The first step is to identify the customers at risk of failing. In order to get a manageable list, we need to be able to eliminate customers we have a genuine reason to believe are stable. Be careful not to assume "happy" customers are stable! Identify the lightest-weight processes that will be sufficient to maintain these customers. 2. KEY SUCCESS FACTORS: The next step is to identify the factors that improve the likelihood of your interventions driving results for at-risk customers. This is where your knowledge of your customers and their business is critical. Some key questions to ask: ► Why do some customers respond better to our help? ► What factors make a customer more likely to change their behavior? It's best to choose just a couple of key factors rather than build a complex model. The reality is that everything is a rough guess, but don't underestimate the value of that judgment. In order for this to work, a simple framework works best. I've found that in many cases, the two best factors to use are: The 'newness' of the customer: how long have they been a customer? The size of the customer: how big is their business or organization? 3. PRIORITIZATION FRAMEWORK: Once you have your key factors, the idea is simply to tag the at-risk accounts according to those factors. Now you can see one big reason why simpler is better: tagging accounts can be time-consuming. Finally, you simply organize them into groups by the key factors to form a basic prioritization framework. I've included a simple doodle to illustrate the idea below. WHY IT WORKS Understand that this method works primarily because it focuses your resources, and that cannot be done without prioritization. The power is not in the precision but in the concentration of effort. Quote of the Week...

"First get a customer to renew, and THEN expand the account." Wrong. Our research shows that this thinking is actually backward because... 👉 RENEWAL IS A FORWARD-LOOKING DECISION. 👈 Customers don't renew because of what you did for them. They renew because of what you ARE GOING TO DO for them! It's all about what's next. What you did in the past is important only because it makes your promises for the future credible. Our data clearly shows the powerful connection between account expansion and long-term retention. That's why I say... ► Companies that focus on retention tend to have poor retention. Companies that focus on expansion get retention for free. ◀︎

How you sell has a huge impact on customer retention. Here are 3 proven ways sales can start boosting retention right away... ① IDENTIFY THE PROSPECT'S PRIMARY BUSINESS OBJECTIVE Let's face it, some customers are bound to fail because they are a bad fit. A large share of customer churn comes from selling to customers who will not be able to get good results from the solution. But how can we know who's a bad fit? It's simple... 👉 If the result they expect is not the one your offering provides then they are NOT a fit. 👈 ► Before you start selling them anything, figure out what they are trying to achieve. Ask, "How will you know that this has been successful?" If they don't want or can't get the results we drive, then it's better to know before the sale. ② DON'T RELY ON DISCOUNTING TO CLOSE DEALS The data on this point are definitive: discounting is a major driver of customer churn. Our data show that discounted customers have HALF the average lifespan of those that paid full price! And it gets a lot worse with deeper discounts. ► The key to selling without discounts is to demonstrate the value of your proposed solution. Remember... 👉 It's not about what it COSTS, it's about what it's WORTH! 👈 That's why the question from ① above is so important: Show the prospect how they will achieve their objective and why their results will easily justify the full cost. ③ STOP USING FREE TRIALS Free trials are one of the biggest drivers of customer churn. Our data reveals that free trials cut the average customer lifespan by more than half! The problem is... 👉 Free trials make customers lazy. And when they don't engage and change their behavior, they don't get results. 👈 ► The unfortunate truth is that free trials also make sales teams lazy. The solution is to put in the effort to build a compelling value story. Start with the key question, "How will you know that this was successful?" and work your way back from that. Show them what they will have to do and how your company will support them all the way with all the tools and expertise they'll need to win.

I just got off the phone with an executive who needed some quick advice on improving their compensation plan for CSMs. While it's fresh on my mind, here are my key compensation principles for customer reps... PRINCIPLE 1: MOTIVATE EFFECTIVE ACTION The purpose of the compensation plan is to MOTIVATE reps to engage in THE MOST EFFECTIVE ACTIVITIES. If we know what activities produce retention, then we should pay reps to do those activities. Think about it this way... When variable compensation is based only on retention, what you are effectively saying is, "We don't really know what customer activities work, so figure it out on your own and we'll pay you for the outcome we want." APPLYING PRINCIPLE 1: Establish the most effective customer activities and use variable compensation to reward reps for their execution of those activities. For example, one of my clients reserves 50% of the variable component for key activities defined usually on a quarterly basis. In the first quarter, the goal was to ensure 80% of their customers have a written Results Strategy. In the next quarter, the target was 95% and they added completing an Executive Business Review for 70% of customers, and so on building up the layers of sound practice that ultimately yield exceptional retention and expansion. PRINCIPLE 2: INCENTIVIZE WHAT REPS CONTROL Prioritize compensating for things the rep/CSM can actually CONTROL. Nothing is more demotivating than having your compensation rely on things you can't control. For example, my client this morning is being pressured to compensate based on customer adoption. The problem is that pushing adoption is like pushing a piece of string - it's mostly dependent on the customer picking it up and deciding to do it. This is also the problem with compensating entirely for retention. APPLYING PRINCIPLE 2: It's best to limit the share of variable compensation dependent on adoption or retention to no more than 50% of the variable component. Use the remaining 50%+ for the key activities, as well as potentially for Expansion which is often more under the rep's/CSM's control than retention, and which has the benefit of producing retention for free! PRINCIPLE 3: COMPENSATE FOR CUSTOMER RESULTS The fundamental driver of customer retention is CUSTOMERS ACHIEVING MEASURABLE RESULTS. Reward customer reps for what they exist to do: make customers successful. For example, the same client has started reaching out to all their customers to identify what results matter most to them. The next step is to start measuring and helping customers achieve those results. This is the single most impactful customer playbook we have ever seen for systematically radically transforming customer retention and expansion. APPLYING PRINCIPLE 3: This activity is the perfect application of the first two principles: it represents a highly effective activity and is something that is much more directly under the control of the rep. But you can’t add this to your comp plan until you have trained your reps on the Customer Results Strategy, and found ways to track your customers’ key results. So, that’s the place to start. When you are ready, I recommend making RESULTS the primary component of variable compensation for customer success managers and account managers.

A massive wave of layoffs at companies like Twitter, Stripe, Opendoor, Shippo, Gem, and Facebook is likely only the beginning of a tough winter in the tech industry. The question many leaders are asking is: ► If layoffs are unavoidable, should companies risk cutting customer-facing success and support reps? Our research across many companies has revealed a simple rule that helps predict the impact.→ ✔︎ You can predict the impact of rep layoffs if you know what TYPE OF CHURN your company has. WHAT TYPE OF CHURN DO YOU HAVE? Our research reveals that there are just 3 "Types" or patterns of customer churn that companies experience... ① DECELERATING CHURN is where most of your customer churn happens early, within the first 12 months of their subscription. ② ACCELERATING CHURN means customers churn mostly later in their lifespan, usually more than 2-3 years. ③ CONSTANT CHURN means customers leave at a steady pace over time, neither mostly early nor mostly late.* HERE'S THE RULE: Laying off customer reps will probably increase churn - at least a little. But... ↑ The increase in customer churn will be significantly greater if the company has ACCELERATING CHURN or CONSTANT CHURN. ↓ Companies that have DECELERATING CHURN will experience a much smaller impact on churn. WHY? 👉 Early customer churn is primarily driven by bad customer fit which is when customers are unable to get good results. Customer success reps have little to no impact on customer fit, and therefore scaling back will have a relatively smaller impact on churn. 👉 Churn that happens later is mostly the result of customers not getting measurable results that improve over time. Customer reps can have a much larger direct impact on this kind of churn when they focus on helping customers achieve and expand their results. The other factor to consider is simply HOW MUCH CUSTOMER CHURN the company has. Companies with very little overall customer churn will not likely see it significantly increase with layoffs. On the other hand, companies with already high churn (I define "high" churn as a Customer Half-life of fewer than 18 months**) are much more likely to experience a severe spike in customer churn with layoffs. *I'll be posting soon a more detailed explanation of the 3 Types of Churn so stay tuned for that. **For an explanation of Customer Half-life and why churn rate is a worthless metric see my short thread: Churn Rates Lie (1/4) Churn Rates Lie (2/4) Churn Rates Lie (3/4) Churn Rates Lie (4/4)

① PRIDE: Our product is amazing and creates phenomenal results for customers. TRUTH: Technology doesn't produce results, customer behavior change produces results and technology makes it possible and scalable. ② GREED: The purpose of Customer Success is to get customers to renew their subscriptions. TRUTH: Customer Success exists to ensure customers get good results with your product. You have to earn their renewal by delivering value. ③ LUST: The key is to satisfy customers by making them feel good about the experience. TRUTH: Transactional experiences don't lead to long-term relationships. Customer Bonding is the outcome of real results, not temporary feelings. ④ ENVY: Our competitors are way better than us and we need to imitate what they are doing. TRUTH: Focus on your customers, not your competitors. Things always look good from the outside but are often not as they appear. Imitation leads to mediocrity. ⑤ GLUTTONY: It's all about the dollars (NRR), so we don't need to worry about logo retention. TRUTH: SaaS growth is entirely about account expansion (small accounts getting bigger). The problem is, you can't expand accounts you no longer have. ⑥ WRATH: The problem is my customers. It's their own fault that they're not getting results. TRUTH: Customers fail because they don't change their behavior. But blaming them is pointless because it's ultimately our responsibility to teach them how to win. ⑦ SLOTH: My job is to be responsive. I don't need to do anything for "healthy" customers. TRUTH: By the time you're aware a customer is in trouble it's already too late. The winning approach is hard work: proactively drive customer behavior change for results.

New research proves that even if you consistently drive measurable value, you'll still likely lose the customer. Why? Because, customer needs aren't static, they change and evolve and new problems and needs arrive every day. So if you keep delivering the same value, it eventually won't be enough. Your customer needs MORE from you. Our data shows that by far the biggest driver of churn for customers - after their first year - is the lack of expansion. We just completed a huge study (156k customers) that reveals how astonishingly huge this factor really is: The group of customers who have ever expanded their account stay 4.6 TIMES LONGER overall than the customers who never make a change! WOW! Let that sink in. This means that "renewal" does not mean what you think it means... When customers renew it isn't a reward for what you did, it's about what's next → what you are GOING to do for them. If you think about it... The customer already paid you for the results they've gotten. Their decision to renew is entirely about FUTURE results. If the customer doesn't have new value to look forward to, then they'll go somewhere else. The data shows conclusively that unless you continually improve and expand the results you drive for your customers, you will not have high long-term retention. This is the hampster wheel that you can never get off of in SaaS. So embrace it! HERE'S HOW TO ENSURE YOUR NEXT RENEWAL: Don't focus on what you accomplished! Show them the value - to them - of WHAT'S NEXT and the real results they should be looking forward to. And give them options to BUY MORE RESULTS.

Obviously customers won't get results unless they make use of the new solution. But that just begs another question: Why don't all customers adopt the new solution? Why do some customers take it on with gusto while others just don't? ► Pushing adoption often feels like pushing a piece of string: at some point, the customer has to pick it up and pull! ◀︎ So why do some go from a little bit of initial adoption to a lot? That's where results come in. → What motivates broad and deep adoption is results: Either customers are seeing results, or they strongly believe they will soon see results. And that's why I say that customer adoption is the OUTCOME of customer results rather than the cause. Clearly customers have to at least start using it first - and the vast majority do. But what ultimately motivates customers to go from that first little bit to widespread adoption is the sense of progress and improvement that comes from seeing results. The outcome is magic and you've probably seen it many times. It's when your product seems to "go viral" inside the customer. The key to driving this dynamic is getting the customer as quickly as possible to some kind of measurable result, or clear evidence that they are going to get that result. Show them their results - even if they are very minimal - and teach them how to expand them by driving adoption. Pushing doesn't push adoption, success pulls adoption.

Most salespeople misunderstand what conversation they are having with prospects, and this impacts both sales success and churn. How? Most salespeople think their job is to convince prospects that their solution is the best and produces terrific results. But prospects already believe that or they wouldn't be talking to you. ► The real sales conversation is whether the solution will produce results FOR THEM! ◀︎ Buyers tend to be acutely aware of their own organization's problems even if they don't talk about them openly. What they are looking for is evidence that they will get good results IN SPITE of these real problems and limitations. HOW TO CLOSE MORE SALES: To win their business, shift to addressing their REAL question by showing them specifically how THEY will get results. → Demonstrate that you understand their situation. Walk them through how your company's expertise and services will be applied to get THEM results. Share an example of how a company like theirs followed this process and got great results. HOW DOES THIS REDUCE CHURN? This approach not only drives higher conversion but also reduces churn because these customers are far more likely to engage with your process and change their behavior in ways that lead to great results. Customer results drive customer retention.

You can't get better results unless you change your behavior. The same applies to customers. Their results won't improve as long as they keep doing things the same way. That's why I learned to say NO when customers asked me to customize their new solution to completely adapt to their existing processes. The problem is that they won't get better results if they don't change how they work. And when customers don't get results they leave. Of course, we often need to customize the solution to be able to work for customers. But this can be a slippery slope to reproducing their existing processes wholesale. Customers can get really pushy on this. DON'T GIVE IN! HERE'S WHAT TO DO INSTEAD: ● Take the time to explain to the customer why certain new processes are essential to getting the improved results they are looking for. You'll discover that many customers aren't very clear about exactly what their results are. That's why establishing their Customer Results Strategy (CRS) is the most important thing you can do to improve customer success. ● Work through the DETAILS of the new process so they can see how it would work for them. People often can't visualize a new approach until they see it in the context of their organization. This is why sharing generic 'best practices' usually fails. ● Help them try out the new process with a dry run or a small pilot to demystify and get comfortable with the new approach.

One of the biggest sources of customer churn is selling features rather than results. Most of the customers who buy because of features will ultimately leave because features are not a compelling reason to stay. ● Features often fail to live up to expectations creating instant disillusionment. ● Features change constantly, and there's always something better out there. • MOST IMPORTANTLY: Features don't motivate customers to make the behavior changes necessary to get results. And when they don't get results, they leave. Does this mean you can't promote your product's amazing features? Of course not! THE SOLUTION IS TO START WITH CUSTOMER RESULTS: 1) Structure your Marketing messaging and Sales approach to focus the customer's attention on their key results. 2) Then show them how they can leverage your product's amazing features to achieve those results! Customers will win when they understand how your features drive their results because it motivates them to change and ultimately achieve compelling results.