Churn is when customers cancel their account, don’t renew their contract, or remain your customer but pay you less; the latter is referred to as “revenue churn” and includes discounts, down sells, etc.
Now, many companies find out about Customer Success when searching for ways to reduce customer or revenue churn, and in the past this was the primary driver for companies to invest in Customer Success; at least initially.
But once churn is taken care of, is that it? Not at all! In fact, once churn is under control, that’s when the possibilities of Customer Success really start to get good.
Unfortunately, many companies never get past that point; they have churn today, they’ll have it tomorrow, and that’s going to be the focus for the foreseeable future.
It doesn’t have to be that way!
If churn is a major issue in your business today – or if you are trying to keep that from being the case – it’s critical to view churn for what it is: a symptom of a deeper, underlying disease.
And that disease is a failure to ensure your customers achieve their Desired Outcome; either because you’re failing to Orchestrate, Operationalize, and Instrument properly once they become a customer… or because you’re acquiring customers without Success Potential in the first place.
Either way, let’s dig into this a bit.
Cure the Disease and the Symptoms Clear up
churn is a symptom, not a disease— Lincoln Murphy (@lincolnmurphy) March 15, 2016
Churn is an indication that something else is wrong; churn isn’t actually a problem itself.
Well, it’s a problem for you – you lose revenue, fail to pay back CAC, hurt morale, burn through your Total Addressable Market, etc. – but it’s actually not a problem for your customers.
Your customers have a different problem, the result of which is their churn.
Well, it IS a problem for your customer in the sense that they bought your product to help them achieve a Desired Outcome and you failed to do that so now they have to find a different solution.
But what ultimately resulted in their churning out is something else; a deeper problem.
Now, you can focus on fixing your problem, or you can focus on fixing their problem (which will ultimately fix your problem).
That’s the conclusion I’ve come to after working with hundreds of companies over the last decade… churn is the result of something else 100% of the time.
So obvious… but something pretty much everyone misses (you’re not alone; I did, too, until I realized what was going on).
Bottom line is, if you’re not taking care of the root cause of the symptom, the symptoms will always be there and will likely get worse over time.
Focus only on churn reduction, and you’ll always be focused on reducing churn because you’re not fixing the actual problem.
Instead, you need to focus on fixing the root cause of the churn – or ideally, avoid the root cause entirely by focusing on Customer Success from the beginning – so you can move beyond dealing with churn.
But what’s beyond churn mitigation? Account Expansion!
The New Measure of Success
Account Expansion – when customers consume more of your product, buy add-ons, move to higher pricing tiers, and invite your product into other parts of their company- is the new measure of success for SaaS companies; simply ensuring customers renew is not enough anymore.
Account Expansion is the basis for the type of efficient growth investors are looking for.
But when your attention is focused on churn reduction – that is, simply keeping the customer from canceling – the best you can really hope for is an increase in status quo retention.
That’s because Account Expansion – putting a customer on a real repeatable, predictable, at-scale Ascension path – only occurs when those customers are achieving their Desired Outcome.
And “churn mitigation” tactics rarely stem from a focus on the customer’s Desired Outcome because they are meant to solve your problem, not the customer’s.
From discounts and cancel-blocking workflows, to free months and long-term contracts, the go-to tactics are generally inward-focused quick fixes that temporarily relieve the pain… but the disease is still very much active; the lack of immediate symptoms only cause a false sense of security.
However, once you tackle the underlying issues that cause the symptoms of churn, you can move into a world where Account Expansion isn’t just a nice theory, it becomes part of your operating model going forward.
If you focus on churn more than you focus on the success of your customers, I think we found your problem.— Lincoln Murphy (@lincolnmurphy) May 3, 2016
Customer Success isn’t about Saving Customers
So let’s say right now you have a cohort of customers that is on the cusp of churn; you’ll have to do what you can to save them (though some bad-fit customers should be mercifully jettisoned).
Whatever you have to do to save those customers, do it, but remember that this is NOT Customer Success. It’s begging, discounting, promising, etc.
Customer Success is recognizing that a customer that you “saved” is still very much at risk and that you’ll have to work diligently to get them back on track since all you did was convince them to stay; you didn’t actually make them successful!
If you don’t have a plan to get them back on track, saving them will just delay the inevitable, only this time when they churn, they’ll be really upset that you wasted their time, and that’s not good for anybody.
Customer Success, of course, is also not letting them get to the brink of churn in the first place and that if a customer has started to veer off the path toward success, you intervene to get them back on track quickly.
Once you save that cohort from churn by whatever means are necessary and put them on a path to success, take any other potentially at-risk cohorts and put them on a path to success, then ensure any new customers coming in are – you guessed it – on a path toward success, and all of the sudden churn simply isn’t an issue anymore.
Then, once the underlying disease is cured and the symptom of churn is out of your life, you can focus your resources where they should be focused: Account Expansion!