Every SaaS founder will know how hard it is to build a customer base. But once you’ve achieved a reasonable number, the job isn’t done: you also have to make sure you don’t lose them. That’s what’s known as the dreaded Sales churn.
Understanding and measuring Sales churn is critical. As a metric, churn is objective. But how to solve churn is much more subjective. Here, I will outline how to manage these metrics and solve sales churn.
Before I start though, I should state a few baseline premises upfront; they might be obvious, but none of the below advice will work if we don’t assume:
- Your product works, which is to say there are no major technical issues, APIs exploding, service outages, etc.
- You didn’t sell your customers some fictitious vaporware and/or vague promises (it’s okay to commit to features on a roadmap as long as everyone at the table understands what’s happening).
Deliver Value Early On
SaaS can be a double-edged sword: delivery is easy, but an unhappy customer can walk away just as easily.
Enterprise software sales in the 80s and 90s were all about shock-and-awe, love-’em-and-leave-’em Sales strategies: get as much up front as possible and move on. This was possible because software was complicated to implement and success depended on a wide range of variables that were often outside the vendor’s control. These days, the double-edged sword of SaaS comes into play much more readily: as an enterprise SaaS vendor, you need to deliver value pretty early on, and there are far fewer excuses for you not to.
Stop thinking about customers as dollars; instead, think about them from a value standpoint – and the dollars will follow .
Think About Value from the First Sales Touch
The bad news is that there are no silver bullets to fix Sales churn, — and you should avoid anyone who tells you otherwise. But, there are some concrete factors you can focus on that could be helpful:
- What gives the customer value?
- What are they trying to accomplish?
- What makes them more successful?
- Was this identified early in the sales process?
If for some reason you aren’t creating value for your customer, figure out why.
If a customer buys something that doesn’t solve their problem, they’re going to churn. Don’t sell to that customer in the first place. It might feel great to hit the quarter, but you’re creating churn debt that’ll be paid down the line. Plus, you spent your precious time and energy selling to the wrong customer – even if you closed them.
Be Strategic About Onboarding
Onboarding is critical, and it’s where a lot of businesses make a huge mistake. They think I built the coolest thing around, I know how it works, my customer bought it (presumably because they saw how cool it was). Surely, that means they know how it should be used. Right?
The #1 reason why customers churn in the first 90 days is because they weren’t successfully onboarded. Customers don’t have infinite time to figure things out. At some point, the shiny new object halo wears off, and if you haven’t been able to show value by then, you have a problem. Onboarding is an integral part of establishing value, and it should be built into the Sales process.
Here’s a checklist you can implement in your SaaS business:
1. Do you have an onboarding process? In other words, do you have consistent steps that can be iterated and improved for:
– Assessing your customer’s needs?
– Getting your customer set up with your product?
– Teaching your customer how to use it?
2. What are the success criteria for onboarding?
These questions sound basic, but you’d be surprised how often this is an issue. Be honest with yourself when it comes to the final assessment: does your customer actually know how to use your product?
The reason you need some process is that at some point you’re going to start doing bigger numbers, and while you as a founder might personally be amazing at onboarding and customer success, you don’t scale as an individual. But processes do. Processes can also be iterated and improved upon. If you’re operating at scale, you’ve no doubt learned to do this with sales; you can do this with onboarding, too. Most businesses have a customer success function: a group of people responsible for interacting with customers and making sure they’re happy and getting value. Your customer success group should be able to:
- Understand the product
- Look at how it’s being used
- Ask the right questions of your customers and product people
Customer success isn’t just sending a generic email every quarter; it’s about establishing value.
Measure Usage of Your Product
Once your customer’s been onboarded successfully, do you know how they’re using your product? What are you measuring? Logins? That’s a good start; is it enough? Do you know which product features are getting used the most? The least?
Today, there are many ways to instrument your product beyond logins; look at what companies like Pendo, Gainsight, Amplitude, and others can do for you. Over time, you can identify what drives success. For example, it might not be logins – logins don’t matter as much as length of session or specific product feature use. Correlate your product use to your churn.
If you do it right, you can not only see where to build and invest for the future, but you can also start to tell who’s going to churn.
Some people like to say that trouble tickets are a problem and lead to churn. I’ll tell you this: if you do your job right, that’s actually not true. In fact, the time to be terrified is when you hear nothing; no news is almost always bad news. You want to make it easy for communications to flow. If you have a company culture that says tickets are bad, you’re not building a business focused on customer value. And you know what I think about customer value!
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Identify the People Who Will Champion Your Product
Champions churn, but your product shouldn’t. Your champion is the one who brought you in and usually consumes the service, but they’re not always the same as the person who pays for it or makes the executive decisions. What happens when your champion leaves?
Can the value your product brings be demonstrated to a broader set of people? It’s good to make someone in your organization into a superhero, but it’s even better to make an entire team of heroes. If one of them leaves the company, there are others who can represent your product at the next quarterly business review. In the long term, people are going to be your best advocates and marketers.
Aim for Renewal as the Norm
Renewals shouldn’t be a surprise. The renewal should be focused on delivering proven value – you should feel good asking for the renewal, to the point where it’s pretty much routine. The time to start focusing on renewals isn’t the quarter before the subscription is up; at that point, you have almost zero chance to correct for happiness or solve for value.
Customer success is an ongoing process. This is where all that hard work your customer success team does should pay off. If someone is at risk of churning, not only should you know months beforehand, you should be able to get out in front of it and have some conversations with them. Great companies can predict churn early pretty accurately. You’re going to have churn – again, it’s a fact of life – but being able to predict it well in advance puts you in control of your business.
Look at Your Growth and Learn
If accounts aren’t growing, you’re at risk for churn. Why? In the enterprise, it’s rare for you to sell into an account at full potential immediately. That first deal is essentially your hunting license – your opportunity to shine. If you have a service that lends itself to upsell or expansion and you’re not doing it, that demands a closer look. Figure out why.
If you create value for your customer, your opportunity to continue to sell into that customer is tremendous. This is why everything flows from value.
Just as in Sales and Marketing, there’s usually never a simple answer to why you have high churn, but I can tell you from experience that one of the above factors are likely at play. Since most of them involve some degree of process and measurement, they should give you concrete ways to focus on reducing your churn.