Your churn data is screaming, are you listening?

You can’t (normally) sell yourself out of a churn hole*. Your churn data is talking, but what’s it saying to you? What are you using it for? 

My guess - you use it to bash your Customer Success organisation over the head; “How come you’re losing so many customers?!”... I’ve heard this one before. 

The challenge with using Churn as a metric of CS effectiveness is that it takes an entire company to churn a customer. Someone has to own churn, and I agree, it should be customer success, but it isn’t and shouldn’t be a measure of how they’re doing as a team. It’s a measure of how you’re doing as an organisation. 

1. Ideal Customer Profile

Do you have one? Is it radically narrow? Are you looking at your customer base as a function of who is staying and growing, and who is leaving? You may have an ICP, but is your sales organisation sticking to it rigidly, or are you flexing? If you’re flexing it (and we’ve all been there), how much of a flex are we talking?

Churn will show you the answer to this. Your logo churn % will show you whether your ICP is effective and whether it’s being adhered to. Ultimately, this is a business operation and runway decision. If your cost of acquisition is low and your product team are up for experimentation across use cases and personas, then churn is the other side of the coin that you must accept.

To reduce churn, your Sales, Success and Product organisations must align on who you’re selling your product to and why. What is the value that this customer will get from their investment in your product? What is the key problem that you solve? Is that problem painful enough for the customers in your ICP?

2. Land and downgrade?

Is your problem significant downgrades art the end of the first contract term? You might be overselling. 

The majority of sales organisations I have been part of, including those I have led, were very clear on the most important method for hitting targets; “We need to increase our average contract value”. 

Firstly, if only life was that easy. Secondly, you need to earn the right to sell the high volumes to customers, especially if you’re solving a new problem. It’s land and expand for a reason. Just because you can convince a customer that they need x quantity of whatever you’re selling, doesn’t mean you should. 

Successful customers tend to expand, this is literally what Customer Success is all about. Yes, it’s been true for me throughout my career that customers who have higher ARRs churn less, but if you’re selling them too much stuff you’re making “expand” a problem in the onboarding process. 

If downgrade is your problem, consider selling less up front (I know, kill me) and building mutual success together.

3. Your segmentation is wrong 

Segmentation is a cruel lover. 

Example: The vast majority of your customers are SMBs, and your average contract value is £25k, however, your cut-off for Enterprise Customer Success is £50k. Yes, you need to draw the line somewhere, You can’t scale CSMs linearly with ARR growth, but you need to service the customers you have not the ones you want. 

If your customer base is split across very defined use case verticals, you might be missing key data splitting them by region. If you ignore key geographies in your segmentation, you could miss nuances of how business is done in certain countries which impact the way your customers use your products. If you have multiple products and your CSMs aren’t split by product or use case, they’re likely not experts and can’t go deep enough to understand the customer challenges you’re trying to solve. 

However you’re doing it, review churn by segment and focus on where you have issues. If you want to maximise growth opportunities, focus on the segments with the highest percentage of logo churn. If you want to retain revenue, focus on the £ amount of downgrade and churn and where it’s coming from. 

There’s no “one size fits all” to segmentation, roughly speaking ARR will work if you’re trying to minimise your cost of doing business, and region will work if you have a geographic focus. However, we’re back to the ICP question - if your ICP is German Banks, don’t start selling to Indian ones unless you have the coverage to deliver the service. ICP, ICP, ICP. 

4. Life Time Value

As a SaaS product, you’ve got a very limited amount of time to prove the value that you sold yourself on. Hence, you need an amazing onboarding experience. However, if the lifetime value of your product is 6 months, the best onboarding experience in the world isn’t going to help you. 

What’s your core mission statement? What’s your value proposition? 

Another great CS word is “stickiness”, we all want to make our products as sticky as they possibly can be. Is the problem you’re solving 1) Real and 2) pervasive? Think like  COO/CFO, if I can use your product for 12 months to “optimise my procurement processes”, then the law of diminishing returns says I can cancel after a year. Excellent. 

The first sales conversation is about why you need to solve this one problem. A renewal conversation is about what else can I help you solve. It’s not let me solve that same thing again, just with a slightly better UX or a new font. Want to improve your LTV? Make sure the problem you’re solving is pervasive and meaningful. 

5. Your product just isn’t very good 

Sorry, but this one hurts. I can be the best CSM in the world, but I can’t magic up features that customers request. Nor can I ensure you have platform stability. Before you consider scaling your go-to-market approach, make sure you have at least one strong feature that you can hang your hat on. One truly exceptional bit of software that delivers value and solves a genuine problem within your addressable market. 

If you don’t release new features fast enough, some customers may get bored. If you sacrifice reliability for new features, they’ll leave because they can’t use what you sell. Focus on one big problem you’re solving for customers, the one that makes them want to pay the invoice, and make sure that solution is good enough to compete in the marketplace, or else. 

So, what now? The good news is that you don’t have to solve everything at once. Re-group and go through the data, analyse what it’s really telling you about the way you’re currently doing business. Look at wins as well as losses, maximise what’s working and review what’s not giving you the success you deserve.

When you’re in the middle of the problem, it can be hard to see the wood for the trees. If you need help experimenting to find the fit for you, let me know ✌️