We talked about lots of different topics, but the post that my friend Steli Efti from close.io shared a while back – 4 Sales Mistakes That Lead To High SaaS Churn – came up.
Greg said the post was a brilliant summary of tactics that can help you focus on the right customer segments and therefore decrease long-term customer churn.
But then he said something that I thought would make a great post… it’s one thing to know who to sell to; it’s quite another to actually make the sale.
It’s yet a another to make the sale with Customer Success in mind.
Luckily, Greg agreed that this topic would make a great post.
I have a few things to say in the After Word about how churn hurts your Total Addressable Market, but until then, take it away Greg.
Customer Success Starts at Sales Done Right
At growbots.com we help SaaS companies create high quality sales funnels, so I decided to describe most common sales mistakes that lead to losing customers, that could’ve been retained otherwise.
There are a Limited Number of Companies that Will Buy your Product
How many customers will buy your enterprise package? The truth is that there is a very limited pool of potential clients, that could become your most valuable customers, generating most of your profit (as the 80/20 rule says). And those customers rarely come from inbound sources, which means you have to reach them first.
To be blunt – your long term revenue and profits depend on how good you are in reaching those customers and closing deals with them. The more prospects you lose, because of bad treatment or poor strategy, the less Monthly Recurring Revenue (MRR) your company will see during its lifetime.
Let’s say you have a 1000 companies targeted and the average outbound sales channel gives you a 5% response rate. How many out of those 50 companies will become paying customers? Looking at an average outbound sales funnel conversion rates you should expect around 5 paying customers.
Just 5 customers out of a thousand companies – that’s an incredibly low conversion rate. It’s still incredibly low even if you double or triple that number.
Choosing the Wrong Metric
The situation described above happens if you focus on the wrong metric. Most startups work under a huge growth pressure, so no wonder some of them myopically disregard conversion rates and think that they just need to reach out to more customers in order to meet their sales targets.
That might work in the very short term, but after a couple of months there is nobody left on the “sales ideas” list because you already contacted everyone! It’s not a bad dream scenario, but reality where your short term sales victories become a reason of your long term failure. What you should do instead is convert more companies into paying customers, even if it takes much more time.
Often people tell me: “You know what? We’re really trying hard to personalize emails, we spend lots of time on proper lead qualification, but the conversion rate is only 50% higher”.
The problem is that they don’t realize they focus on the wrong metric! What matters is how many customers you DIDN’T LOSE because you annoyed them with your SPAM.
If you really care about their problems, spend time analyzing challenges they face, etc. then in the worst case scenario you will simply hear: “Thanks for your email, but it’s not the right time”. Nobody gets angry, nobody puts your message into the SPAM folder. The contact is not lost and you can still close the deal with that company when the time is right.
It usually takes much more time than just sending an email.
Not Qualifying Prospects Before Contacting Them
“Positive answers” are great, but are not all equally good. Getting a lot of interested customers will only bring you success if they match your perfect customer profile. Steli already elaborated on the importance of focusing on the right customer, so I’ll only add: getting on a phone with an interested customer only to learn he won’t make a great customer is a waste of time.
At growbots.com we always qualify all prospects before performing outreach activities, which helps to decrease the amount of work spent on trying to close a deal with a lead that is bad fit to a minimum. Your sales team should also do that – otherwise you will always waste time on talking to the wrong people. Take better care of the most promising customers instead.
Using Ready-to-Use Templates
Ready to use sales templates are the best way of saying: “I don’t care about you enough to even take the time and write the email myself”. Do you think that using a template from “Predictable Revenue” (don’t get me wrong – it’s an awesome book and you definitely should read it) is a great idea? Believe me – the person you want to reach out to already knows this template.
Not because they read the book, but because they saw it in their inbox not once, but like 20 times, the same pitch repeated ad nauseam! It was super-efficient before Aaron published it in a book, but now it’s just another copy & paste email template you can find on the internet.
And boy do people hate those.
You have to write your own emails and make them uniquely about your customers challenges.
Customer Success starts with first impressions – nobody will believe in the standard of your services, if you won’t show that you care about their individual problems.
Directly Pitching the Product
“Hey, I don’t care that you are busy – please leave everything and think about buying a new project management tool. The best time to make that decision is now! Our software will help you to [insert sales pitch]. Ok, that’s all. How about you postpone all your plans for tomorrow 2:00 pm and get on the phone with me (so I can close that deal asap)?” – this is what I get from most of the “sales pitches” I receive in my inbox.
You can also find those long letters from a person who’s claiming they know everything about my problems, without even talking to me for a minute – yet they know I should buy their product.
Well, all those people haven’t yet realized, that actually… even direct sales activities are not about selling the product in the first place! The process leading up to a purchase decision for most SaaS products takes a few weeks, involves couple of decision makers, competitors evaluation, testing the ROI and budgeting.
There’s plenty of time for you to start a relationship with your potential customers. Try to provide any sort of feedback they might find useful, give advice or simply ask “how are you doing?” – whatever you do is better than just pitching the product. This way you can learn more about their business and gain their trust.
You will know more about their needs and your potential customers will remember that you’re trying to help their business, which means they’ll come back to you when the time is right.
Being patient and not pushing too much will help you to convert way more than 0,5% (or 5 out of a 1000) of companies into paying customers.
Summary
At growbots.com we often experience 100% email open rates and over 25% of positive answers – it’s really worth stopping spamming people and taking a quality approach instead.
And yes – we send automated emails, because automated doesn’t mean low quality and poor performance. In your outbound sales activities you should focus on long term revenues and not ruin the first impression with an impersonal, direct sales pitch spam.
Smart companies gradually convert their list of target companies into their customer base, because they know the number of their potential customers is limited.
The most important metric in the direct sales process is the conversion rate from a sales opportunity to a lost opportunity. The fewer opportunities you lose short term, the more MRR you can drive long term.
You should care about every potential customer, as if they already were your customer.
About Greg Pietruszynski
Greg Pietruszynski is CEO and co-founder at Growbots, a 500 Startups company. Growbots’ goal is to create A.I. for Sales. Greg is a serial entrepreneur, he was running 3 companies in China & Europe before Growbots and developed more than 200 different web/mobile products over last 6 years. He’s an automation freak and growth geek. Follow him on Twitter @pietruszynski
After Word by Lincoln
Churn is a big problem and can significantly hurt your Total Addressable Market (TAM). Think about it, churn reduces the number of potential customers when you burn through potential customers by selling to them when you’re not ready to help them achieve their Desired Outcome.
It’ll be difficult – if not impossible – to get them to give you a try again if you burned them in the past.
But churn does even more to reduce your TAM – it’s really the gift that keeps on giving – including hurting your reputation (which becomes a drag on new customer acquisition and therefore growth) as well as making investors see your company as risky which hurts your ability to raise funds (at least in a way that’s favorable to your stakeholders).
Remember… the seeds of churn are planted early, and it’s often during the sales process that those seeds are sown en masse.
Here are some additional resources for you:
- You Don’t Know Me. Can I Get 30 mins?
- 7 Sanity Checks for Sending Cold Email
- Engaging at Scale: The Secret to Automating Personal Emails
I hope this helps you!
