Stretch vs. Bad-Fit Customers

bad-fit-vs-stretch-customersWhat are the characteristics of a Bad-Fit Customer for your business?

It’s great to know who your Ideal Customer is (my Ideal Customer Profile Framework is constantly updated), but it’s much easier – and I say required – to first identify the types of customers that are a bad fit and the characteristics that make that so.

If we want to build a business that’s free from churn and designed to move customers along an Ascension Path, we must acquire customers that have Success Potential. Period.

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Two Ways to Reduce SaaS Cancellations

2 Ways to Reduce SaaS CancellationsFairy Tales have happy endings.

That’s why they’re so popular; even if they include scary moments with monsters and evil blended family members, everything is pulled together nicely at the end when the naive protagonist is magically okay.

In business, the same types of fairy tale exist, with one being that customers cancel their subscription or don’t renew their contract but somehow, magically, those customers are brought back from past the brink and, in the end, their cancellation was reversed, they’re happy, and maybe they even took an upsell on the way back in.

The reality is, that’s not generally how things work; and if you’ve heard about the opportunity in cancellations others may have experienced it, I can guarantee their experience was unique and rare.

Regardless of your humility, transparency, and noble intentions, customers that cancel – and didn’t get acquired or go out of business; the only slightly acceptable reasons for churn – do so because they did not achieve their Desired Outcome through their interactions with your company.

Customers achieving their Desired Outcome through their interactions with your company tend to not churn; that’s why focusing on Customer Success is so important.

Ultimately, this means swooping in after your former customer made a decision to stop doing business with you, – because you didn’t enable them to achieve their Desired Outcome while they were paying you – probably isn’t going to work, and might even irritate ’em on the way out… a little insult to injury for the road.

In this article, I’ll introduce two things that will help reduce cancellations (if you forgot to focus on Customer Success): Cancel Flows and Cancel Intent.

But I’m getting ahead of myself; let me take a step back and start from the beginning…
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The Only Two Reasons Customers Churn

The Only Two Reasons Customers ChurnChurn is the antithesis of growth.

When you lose a customer, in order to grow by one customer, you have to first replace that customer you lost, and then add a new customer.

And when a customer leaves, they take the revenue they were paying you with them (often to a competitor!); but they also take other things, like negative sentiment, your employee’s morale, ammunition for the competition to use against you in future deals, and much more.

You know churn is bad, I don’t have to convince you of that. (Right?)

What’s even worse than having churn is not knowing why your customers churned. That’s why I say you need to know why each customer churned so you ensure no customer ever churns again for those reasons.

But I want to be clear that, whatever reason your customer gives you for why they churned, the details uncovered by your internal tracking, or (ideally) both, it all fits into one of two categories.

Let’s dig in…

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You Have to Know why Your Customers Churn

You Have to Know why Your Customers ChurnWhen customers churn, that’s a problem.

Even if their churn was “unavoidable” it still hurts.

Churn hurts on several levels: from lowering revenue to hurting employee morale.

And churn means something happened to the customer (out of business, acquired, etc.) or – and MUCH more likely – they didn’t achieve their Desired Outcome through their interactions with your company.

In order to avoid churn in the future, we need to learn from the churn that has occurred in the past.

Which means every former customer must have a reason associated with them.

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Pricing Strategy Framework for SaaS Startups

pricing-strategy-framework-for-startupsPricing doesn’t exist in a vacuum and is therefore not something you can tackle on its own.

Pricing is a function of marketing and determines, among other things, your market position. It also indicates – or is ideally derived from – the type of customer you want to do business with.

And of course in SaaS, pricing is tightly coupled to the product itself, which is different from other types of software and non-tech products where the price is decoupled from the product.

Which is why I can’t recall a time where a SaaS company came to me with a “pricing problem” and there wasn’t something else that was going on, too.

In fact, their “pricing problem” often had little to do with the actual “price” – the numbers – and more to do with pretty much everything else (chosen revenue model, customer segmentation, value proposition, marketing strategy, conversion optimization, etc.).

So, when those in an early-stage startup – or those bringing a new product to market within an existing company – ask me for help on pricing, I always say that you won’t get it perfect out of the gate, but you can get it as right as possible.

And then I give them a high-level pricing strategy framework, which I thought I’d document and share with you in this post.

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Qualifying Leads in a SaaS Free Trial

qualifying-leads-in-a-saas-free-trialI got this set of questions on Twitter: “Is there a certain level of activity during the free trial that is likely to predict conversion from free to paid? Also, how do other companies handle Sales vs. Marketing Qualified Leads (SQL vs. MQL) when it comes to Free Trials?”

I thought that was an awesome set of questions because it indicates the person asking is starting to look at their Free Trial as a true sales pipeline; something more people and companies should do.

So I loved the question and I thought my answer was equally awesome (if I do say so myself), so I decided to expand on it a bit and share it with you, too.

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Customer Success and Logical Account Expansion

customer-success-and-logical-account-expansionCustomer Success is a powerful growth driver.

Sure, in the early days when you’re putting out the fires of churn, Customer Success seems less like a growth driver and more like a stop shrinking driver.

But once you move past churn busting – or if you avoid that altogether by being smart about customer acquisition in the first place – Customer Success starts to come into its own as a true driver of growth.

One of the ways Customer Success drives growth is through account expansion or getting existing customers to pay you more over time.

When you can grow revenue from your existing customer base, you could essentially turn off new customer acquisition and not just stay at the same level of revenue, but continue to grow.

Sure, it’s probably a good idea to continue to acquire net new customers, but the impact of account expansion to both the bottom line of a company as well as the valuation (something very important when raising money, going public, or being acquired) is potentially transformative.

But for account expansion – upsells, cross-sells, add-ons, price increases, etc. – to be a consistent and long-term driver of growth, it cannot be arbitrary or expected to occur organically.

Account expansion must be orchestrated, and that starts with applying logic to the process. Let’s explore…

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Reasonable SaaS Free Trial Conversion Rate

Reasonable Free Trial Conversion RateWhat’s a reasonable conversion rate from free trial to a paid customer?

I get some form of this question from time to time and I’ve answered it several times over the years.

Well, I got it again so it’s time to revisit this very simple question.

As with most “simple questions” the question is easy to ask; the answer, however, is anything but easy to give.

But I tried and here’s my response that I thought you’d benefit from, too.

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Acceptable Churn Rate for Small Accounts

acceptable-churn-rate-small-accountsWhat drives a company to focus on Customer Success is changing. In the past, churn (or retention, depending upon how you look at things) was generally the catalyst.

Once churn is under control, the catalyst changes to expansion; driving use, consumption, and revenue within existing accounts.

And these days, startups are building Customer Success into their DNA from the ground up, understanding that an acquire-any-customer-at-all-costs-until-churn-is-a-major-problem go-to-market strategy is the wrong way to do things and are avoiding that unnecessary step in the startup lifecycle.

That said, churn is still a problem for some companies, so when I answered this email about different churn rates across customer segments, I thought I’d share the answer with you, too, so we can all benefit.

Here’s the email…

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Success is Uncomfortable

Customer Success WorkshopI’ve talked before about holding customers accountable and how customer success isn’t about making customers happy.

Sometimes you have to push customers out of their comfort zone and – if you’ll allow me to channel my inner Tony Robbins -progress is rarely made within our comfort zone

That means moving toward success – whether for us or for our customers – is not always comfortable.

In fact, success is often quite uncomfortable.

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