What Customer Churn Really Means

“Churn” is a term that gets used a lot in the Account Management and Customer Success conversations that we have here at Kapta. Many Account Managers and Customer Success Managers take churn very seriously (and many are compensated based on churn rates).

Churn rate does of course directly show the percentage of lost customers in any given period of time – and is a major source of stress! But measuring and understanding churn can also give you some hints about how to improve your business and what you may be doing wrong. There’s a lot more to churn than meets the eye, and understanding it could help your business grow faster.

 

Here’s a quick primer for those of you who want to learn more about churn, and how to prevent it.

 

How Much Does Losing a Customer Really Cost?

By dividing the annual sales per customer account by the number of customers lost, you’ll find your own basic company average. In most cases, B2B businesses stand to lose a very large amount of annual revenues with each lost customer, especially when the cost of acquiring another customer is considered.

 

It doesn’t matter what type of business you run; customer retention is an important part of sustainable growth. The rate at which customers leave is referred to as your customer churn. Some industries have churn rates as high as 15%, while others sit closer to 2-3%. Every customer lost takes measurable value away from your company, which is why your churn rate is a vital metric to keep your eyes on. You can’t hope to continue growing your business if you’re unable to retain the majority of the customer you already have.

 

How Customer Churn Is Measured

Usually, churn is measured as the number of lost customers over a set period of time compared to how many you had at the start of the period. The time period is up to you, based on what makes the most sense for your specific business. If you have a monthly buying cycle, you may choose to measure your churn monthly or in 3-month intervals.

For example, a business that started their Q3 with 2,000 customers and lost 32 throughout the quarter is said to have a quarterly churn rate of 1.6%. Churn does not take into account how many customers you gained throughout that same quarter, as it’s only a metric used to find out the rate at which you’re losing customers. Your churn rate won’t tell you everything, but you can use it to make sure you’re regulating customer loss as much as possible. Lower churn rates usually lead directly to higher profits.

For SaaS or other subscription businesses that offer different tiers of service, especially any level of freemium service, there is another way to look at churn that may be more informative on the actual loss. You can calculate the monthly recurring revenue (MRR) loss rather than only focusing on the number of customers lost. This is calculated the same way, but replacing customers lost with MRR lost and total customers at the beginning of the period with total monthly revenue. This measurement will show you a more accurate representation of the impact of customer loss over that period.

 

You Are Directly Responsible for Your Churn Rate

The real truth about customer churn is that your business has failed a customer. The reason customers leave, especially when they are leaving to switch to your competitor, is that you are not providing the type of value they are looking for. This is especially true for B2B companies, as you’re dealing with larger buyers who are less likely to just stop buying altogether.

When your customers switch from your company to your competitor, it’s because you are not providing them with the value they’re looking for from a vendor. You may hear excuses such as price competition, incorrect product usage, issues with performance, or defects in the product. But, in most cases, these are not the underlying issues that drive the buyers away. All of these types of issues can usually be solved through communication, which hints that something else is missing.

Sometimes the value that’s lacking will be related to one of the excuses mentioned above, or other simple explanations. But more often than not, there is a larger problem underlying all of them, which is that your company is not providing consistent value. This can be seen by customers not getting the right end outcomes from your product, a lack of trust between your company and theirs, and a lack of relevance to the customer’s needs.

  1. End Outcomes Versus Product or Service Results

Even if your product is working exactly like it should be, it may not be getting the customer what they really want. If you do not truly understand what the customer wants to get out of using your product or service, you may not be able to notice if it’s working to give them the results they want or not. It’s even worse if your product or service isn’t being used properly or if it’s not working well.

The problem is that you may be tempted to believe the outcomes they want are the same thing as the solutions your product or service provides. This is generally not the case. While your customer may be looking for a product to fix a problem they have, that solution is not the end goal they are looking for. Instead, they have goals and outcomes that are important to them as a company. If your product or service isn’t helping them reach those outcomes, they are likely to look for other options.

You can only hope to help your customers achieve their outcomes by understanding what is actually important to their company. If you do not understand your customers enough, you may not be prepared to supply them with the outcomes they really need.

  1. Lack of Trust

People don’t buy from companies; they buy from people. If you want a successful buyer-seller relationship with your customers, there must be a human-to-human element that builds up a strong sense of trust over time. In many cases, there is a lack of useful interaction between buyers and sellers after that sale has been completed. Follow-ups can sometimes be treated as unnecessary chores, even though the buyer would like more opportunities to talk about the product and service.

B2B sellers can often forget that their large customers may want a lot closer of a relationship. Not all clients are the same. Some may be okay with limited interactions, but others may want more personal interaction so they can build a greater sense of trust and investment into the seller.

If you as the seller don’t pay attention to how you’re treating the customer and the level of service you’re providing, you may be creating a relationship that lacks trust. Customers who feel neglected, betrayed, or lied to by sellers are very likely to churn.

  1. Relevance to the Customer’s Needs

Most of your competitors may be able to supply a similar product or service as you, so the way you have to compete is with the other value you offer your customers. B2B buyers are looking for sellers who can help them build their business and become a stronger player in their own industries. If you can offer useful and relevant information or services that extend beyond the initial sale, you will put yourself in a fantastic position to foster customer loyalty.

If you cannot develop a deeper understanding of your customers, their industries, and their evolving needs over time, you risk becoming irrelevant to them. Customers are less likely to find value in a company that is only interested in selling without trying to understand the client’s needs and stay relevant in changing environments. Understanding your customers on a deeper level helps you give better support and advice on how they can use your products or services to meet their needs.

 

Some Churn is Normal – But It’s Not Good

Despite its obviously negative effect on your profits, some level of customer churn is inevitable. There will always be somebody with a reason to choose another company instead of yours. As a company, you cannot be all things to all people. If you try, you may end up losing more money and driving away more customers.

This is not a statement meant to encourage you to ignore your churn rate. But, the truth is you will have to learn to accept that some churn is absolutely normal for a business. It’s your job to see how you can get your churn rate as low as possible without spending more on customer retention than you would have on new customer acquisition.

Customer retention is not free. It’s vital to focus efforts and resources on customer retention, but only to an extent that it leaves you with an acceptable amount of churn. “Acceptable” should be the lowest level of churn possible in order to sustain your growing business. Churn may be normal, but it’s not a good thing. Keeping your churn rate as low as possible may help you to get a competitive edge in your industry, especially in SaaS or other subscription-based businesses.

Acceptable churn rates vary widely from business to business. What’s acceptable for sustainable growth in one business may lead to ruin for another. You cannot set a basic benchmark for your own churn rate by looking at universal averages. You should calculate it based on a combination of your own business circumstances and your industry churn rates.

The idea is to keep a steady rate of growth. If you start a quarter with 200 customers, lose 10, and acquire 12, you are not experiencing a high growth rate. You will have only made a net gain of 2 customers. There may not be much you could have done to acquire more customers, but you can increase your overall growth by lowering the numbers of customers you’re losing. If in that same quarter you could have retained 5 of the lost customers, you would have made a net gain of 7 new customers in a quarter.

 

How to Help Prevent Customer Churn

Although some churn is inevitable for most businesses, you should try to prevent customers from churning. Your industry and specific business may require some different strategies than other industries. But, many of the same principles can apply to a wide range of B2B companies:

  • Predict Which Customers Are at Risk

By the time a customer churns, it’s already too late to save them. In reality, the point of failure may have been months ago. While you can’t save those customers, you can use the churn data to help calculate risk factors and predict who is most likely to churn in the future.

Use this data to focus efforts on lowering risk factors. Learn from whatever mistakes were made with churned customers in the past. Find the areas that you are failing to provide value to your customers and develop a better system to keep your current customers from churning later on.

  • Continuous Communication After Sales

Insincere and useless communication is not what most B2B customers want. To promote customer loyalty and reduce churn, you need to see problems coming before the customer shows signs of leaving. That requires you to be communicating well and getting to the heart of issues before they turn into reasons for customer churn. Think of this as Continuous Relationship Management.

  • Focus on Customer Retention, Not Only Growth

Maintaining growth is important. But, you can help your growth rates to have a bigger impact if you can reduce churn as well. Balance your efforts to retain existing customers versus simply acquiring new customers. By increasing your customer retention budget, you may be able to put more efforts into reducing churn, which will actually help your company grow faster in the long-term.

Retention may require some segmentation of customers. Some customers may not generate enough revenue for your business to justify a large retention budget, while others are more worth the effort. If you are developing a Key Account Management strategy, this should already be on your agenda and will help you in that as well.

 

Customer churn does not necessarily mean your business is failing as a whole. But, it is a sign that you are failing to provide the value that some of your customers are looking for. Instead of ignoring this strong signal from your customers, adjust your view of customer churn and take action to prevent the loss of customers whenever possible.

How to Use Customer Success Software in a Non-Tech World

Customer Success software is an excellent addition to any business’s sales and CRM systems. It allows users to track their customers’ data which in turn helps the client succeed while retaining them for the long-term. For years, Customer Success software has been marketed as a solution for SaaS companies and startups in the technology sector. While it is a perfect tool for these businesses, Customer Success software can be used by any business seeking to retain customers and expand their profits.

In this article, we’ll discuss the benefits of Customer Success software, how the theories and concepts of Customer Success can benefit any business along with real-world, practical uses for Customer Success software like Kapta.

 

Benefits of Using Customer Success Software

 

Automation

Before Customer Success software came around, account managers had to do all of the tedious work to build relationships with clients including tracking and managing the customer’s important data. Key Account Management systems like Kapta automate much of the data tracking process so account managers can spend less time working in spreadsheets and more time building personal, successful relationships with clients.

 

Customer Retention

It’s cheaper to sell to an existing customer than it is to convince a new customer to come on board. Customer Success software systems help account managers maintain and strengthen customer relationships by accurately tracking the customer’s data. One of the most critical measures for SaaS companies is the client’s usage of their programs. With this metric, account managers can see who is logging into the app, predict usage trends and forecast churn.

By utilizing this data, account managers can determine which clients love the software and which ones haven’t used it in a while. They can then reach out to the inactive clients to try and correct any problems they may be experiencing as well as reaffirming their commitment to building upon their success.

 

Expansion

Renewals, cross and up-sell opportunities contribute significantly to a client’s lifetime value for any firm. Customer Success systems allow account managers to visualize and monitor each account’s long-term goals which make it easier for them to identify products and services the customer will be more likely to purchase. An organized system like this allows account managers to keep tabs on what each customer is looking to accomplish and then identify opportunities to cross-sell more products and services.

 Focusing on this link between the company’s products and services with the client’s goals will create long-term success for not only the customer, but the service provider as well, as the customer, will begin to see the intrinsic value in purchasing from them.

 

Using Customer Success in a Non-Tech World

 So, what if your company doesn’t specialize in software sales? Or what if your services and products have nothing to do with technology at all? The core-ideas and values of Customer Success still apply to you. Here are some examples:

 

Be Proactive

One of the key principles of Customer Success is remaining proactive and anticipating what customers might need next. Traditionally, businesses might have chosen to simply wait for customers to come to them, only relying on marketing materials and the occasional sales push.

The key to Customer Success is to consistently stay in contact with key accounts to better understand their goals so you can find ways to help them achieve their success. While SaaS vendors will do this through careful monitoring of the client’s usage data and other metrics, any business that serves clients with ongoing products and services can schedule a call or email once or twice a week to check-in with the client.

 

Be Strategic

Results-based strategies are another pillar to the success of CS. If you are careless, and just let clients fall to the wayside without creating and following a consistent game plan, the success of your clients and the ultimate success of your relationship will stumble. CS software packages like Kapta include templates and playbooks to ensure your business has a sound CS strategy; however, you can also accomplish this without software, it’s just much more tedious.

Grab a notepad and jot down these three steps:

  1. Identify your customer’s goal
  2. Determine how they will solve their problems
  3. Develop a list of your services or products that will help them achieve success.

Your strategy should be more detailed than that simple list, but breaking it down to those three steps is a simple way to visualize your entire Customer Success strategy. Keep a strategy playbook for each of your clients, and be proactive in your approach.

 

Build a Win-Win Relationship

If your client achieves success, your business does as well. The goal is to create a link between your services and your customer’s success so they will stay with your company for the long-haul and begin to see your products and services as a primary contributor to achieving their goals.

When speaking with each of these clients, you want to add a personal touch to your products and genuinely listen to their goals. Traditionally, sales were viewed in a negative light where the salesman does the selling and pushes useless products onto a client that isn’t really interested. Customer Success and Key Account Management are shifting this focus, and instead building a win-win relationship with clients where each party benefits from the exchange.

 

Determine Your KPIs

KPIs are different for every company and every business model, so it’s essential to determine what you’ll be measuring as a form of success. The most common KPIs for many companies are:

 

Churn

If your service is based on a subscription-model, measuring the churn rate is an efficient way to determine how often customers are continuing service and what percentage are canceling.

 

Expansion Revenue

This will determine if repeat customers are buying more products or services from your than they did the first time. Overall, you want to expand your offerings to customers in the long-run, so their success almost becomes dependent on your services.

 

Satisfaction

Sending a brief email survey after each purchase or asking clients about their satisfaction with the services will give you a beat on the pulse of your accounts and if there is anything that needs to be changed.

 

Conclusion

So how are you ensuring your customers are successful? Have you given it much thought? Try implementing some Customer Success strategies into your sales and account management teams and see how quickly your retention rates increase as your clients begin to look at your company as the leading proponent of their success.

 

If you would like to try one of the leading Customer Success software platforms available, download your free demo of Kapta today.

Customer Success for Services Companies

Up until now, Customer Success (CS) strategies have primarily lived in the software and technology fields. As a leading provider of Customer Success software, we’re always looking for new ways that Customer Success strategies can be integrated into any company’s existing customer relationship systems.

In this article, we’ll examine the different ways that service-based companies such as marketing agencies, along with product-based businesses can utilize the scientific theories and ideas of Customer Success to keep their clients happy, while also fostering the growth of their customers to increase profits in the long run.

 

The Theories Behind Customer Success

For those new to the Customer Success world, here is a quick overview of CS:

The primary goal of implementing a Customer Success software system is to ensure the long-term success of the customer. Traditionally, salespeople were instructed to manage accounts simply to keep the customer, and nothing more. With innovations in Key Account Management systems like Kapta, the goal is now to ensure that the client is more profitable with the ability to thrive in the long-run.

If the client is profitable, the service provider is profitable.Customer Success entails going out of your way to ensure that the client is happy while providing them with a quality service that sets them up for long-term success.

 

The CS Process for SaaS Vendors

 The structure of Customer Success varies from company to company, but traditionally it follows these steps:

  1. Customer Success is Launched – typically within an hour after a free-trial of software is secured or payment is made. It’s vital to be “on the ball” in a sense and to be proactive in your approach.
  2. Requirements Gathering – A salesperson will contact the client, preferably by phone, and have a brief conversation to determine which problems the client is trying to solve. These issues are collected and saved in a file with the account.
  3. Finding the Decision-Makers – the decision-maker for the company won’t always be the person that purchases the software. Finding the key decision-makers of the client’s organization will help the software spread throughout the company which equals more sales and a stronger connection.
  4. What Are They Doing Now? – Referencing the problems identified in step two, it’s important to know how the client is currently solving their problems to determine how your company can be of help to them.
  5. Help them Learn the Software – this involves sending any training material to them so they can get the most out of the software, additionally scheduling webinar training if possible.
  6. Keep in Touch – checking-in with the client regularly from the start of the relationship will ensure that 1) they are getting the most out of the software and 2) let them know that you care about them and it adds a personal touch.
  7. Survey – typically, SaaS companies will send an NPS survey to evaluate their satisfaction with the service so far and any issues that need to be corrected. It also keeps the door open for future contact.

 

Using These Steps in Your Service-Based Company

A lot of these steps may seem exclusive to SaaS companies, but they can easily be transferred over to just about any company that wants to implement a Customer Success platform in their sales and account management processes.

 

Step One:

Instead of contacting them after they’ve purchase software, here you would reach out after you’ve landed a new client in your marketing agency or other service company. As soon as they have started working with you, you want to be in contact with them immediately.

 

Step Two:

Not much has changed from the traditional SaaS approach in this stage. Here you’ll talk to the client and determine the problems they need help with. They may need to increase their social media engagement, boost their website’s SEO, etc. It’s all about identifying their needs and proposing your company’s solutions.

 

Step Three:

Finding the decision-makers may be easier as a service-based company because your clients may very well be small businesses simply looking to bring in more customers and more times than not, your initial contact may be the decision-maker. This will vary from client to client, so adjust your techniques accordingly.

 

Step Four:

This is identical to any company whether providing services or products. Identifying the customer’s needs is the root of the selling process and determining how your product or services can individually solve their problems will seal the deal for your clients.

 

Step 5:

While you are not selling them a software tool, there is still information that you can give your client. If you are selling a product, provide them with the manual or suggested uses packet. If it’s a service, for example, a marketing agency, provide them with case studies from your most successful projects with real, tangible facts to show how good you are at what you do.

 

Step 6:

This will be the same for all companies as staying in touch with your new clients is essential to building a healthy and long-lasting relationship with them.

 

Step 7:

Finally, you should provide them with some form of a follow-up to see how they are enjoying your service or product and keeping the door open for the future.

 

Automate the Customer Success Process

While a personal touch is nice, wherever you can automate your processes, you should. Kapta features tools for Customer Success including Templates to help streamline the account planning process for your company. Kapta also offers organizational tools, so every client and the key decision-makers are kept in order along with any notes about the specific account.

The goal isn’t to replace your account managers; instead, the goal is to make the process more seamless and efficient so your account managers can spend more time communicating with clients and building a relationship instead of trapped in spreadsheets all day, trying to stay organized.

 

Conclusion

Putting customer’s success as priority number one pays off in the long-run and implementing a CS system into your enterprise will help your company and clients achieve long-term success. Feel free to read some of our other articles on our website and download a free trial of Kapta today.

 

Customer Success for Non-SaaS Companies: 3 Big Reasons to Hop on Board

Did you know that by 2020, customer experience will overtake price and product as the key brand differentiator? Because search capabilities and social media have made today’s consumers more informed and educated about their options than ever before, it is imperative that businesses focus on more than just delivering customer service or support.

SaaS companies have realized this truth and are embracing Customer Success as a way to engage and connect with their clients and to ensure that clients excel alongside their brands. Strong success programs are helping to reduce churn rates, grow revenue, and build customer loyalty.

These same tactics can be used by any company. Every B2B company should begin leveraging Customer Success for sustained business growth.

The Difference Between Customer Service and Customer Success

Non-SaaS companies focus on providing excellent customer service or support in response to a problem the customer is experiencing. This is a reactive approach. Customer Success, on the other hand, is a proactive approach. Customer Success goes beyond solving problems—the goal here is to help ensure each customer not only understands the product they’re buying, but also achieves the results they’re hoping for.

Notice the difference? When this is carried out correctly, customers will enjoy their experience with your brand and will happily tell others.

There are some key reasons why non-SaaS companies should create Customer Success programs to engage their customers and help them generate results.

  1. Improves Customer Loyalty

When you take the time to prepare your customers with conversations and content geared to their success, they will love you for it. According to Capterra, “You’re 14 times more likely to sell to an existing happy customer than sell to a new customer.” Customer Success significantly increases loyalty as you develop real relationships that breed trust and faith in your brand.

Additionally, when your company delivers on its marketing promises and truly understands what success means to your customers, those customers often respond by promoting you to their social networks via Facebook, Twitter, Google+, and word of mouth. They become advocates of your brand, helping to generate new business for you.

  1. Saves You Money and Grows Revenue

Acquiring a new customer is anywhere from five to 25 times more expensive than retaining an existing one. Plus, every sale to an existing customer is less expensive than the previous one, meaning more profit to your business.

Repeat clients also tend to spend more money with your company, adding products and services over time to further meet their needs. Fifty percent of consumers use a company more frequently after a positive customer experience and 86% are actually willing to pay up to 25% more. Creating these positive experiences is at the heart of a great Customer Success program.

  1. Boosts Your Customer Acquisition Strategy

A successful customer acquisition plan includes attracting ideal prospects to your company, converting these leads into buying customers, and finally, delighting your customers so they become loyal, raving fans of your brand.

If you neglect the delight phase of customer acquisition, you won’t reap all the benefits this strategy has to offer. Wowing your customers bolsters your marketing impact. By proactively engaging with your customers, understanding what their common issues are, and being keenly aware of your customers’ goals, you can publish relevant content that continues to offer solutions but also meets the subtler demands of your target audience.

 

Lincoln Murphy, founder of Sixteen Ventures and advocate of Customer Success, states:

“Customer Success is about more than delivering service or support. It’s about having real-time visibility into the issues customers are facing and finding smarter ways to manage those issues.”

Customer Success is not exclusive to SaaS companies. Begin implementing a Customer Success program to position your business for long-term growth, and you will see your own success increase as you add value for your customers.

 

 

Top 15 Customer Success Writers to Follow on Twitter

One of the best ways to improve your skills as a Key Account Manager is by following the top experts in your industry. The knowledge and resources they share can be an invaluable asset and keep you on top of the latest trends in Customer Success.

Your role of customer success is critical to the growth of your company. The better you get at ensuring your customers love your product, use it to its fullest potential, and benefit from it, the more your company succeeds in retaining lifelong customers of your brand. You can get there more quickly by following the blog and social media content of thought leaders and influencers in the key account and customer success industries.

Wondering where to look first? Here are 15 of the best customer success writers to follow on Twitter. Learn from the best and discover what’s working now to enrich customers’ experiences and strengthen the ties between customers and brands.

  1. Lincoln MurphyFounder of Sixteen Ventures

Lincoln shares growth and Customer Success strategies regularly. Over 400 SaaS companies have accelerated their growth due to his expertise in customer acquisition, retention, account expansion, and advocacy.

  1. Jaime SteinCustomer Success Executive at Hootsuite

Employed by one of the most popular social media management companies, Jaime builds relationships with influential organizations to help strengthen their social media campaigns and reach targeted audiences.

  1. Perry MonacoCustomer Success Manager at LinkedIn

In addition to managing a team of CS Managers, Perry also shares content via talks on Customer Success and social media marketing. Follow him to check out his next engagement!

  1. Tomasz TunguzVenture capitalist at Redpoint Ventures

Tom is a true believer and enthusiast of Customer Success. He shares how it’s a key element to every SaaS startup’s growth in a brilliant blog post here.

  1. Ellie WilkinsonSr. Customer Success Team Manager at Moz

Ellie is a master at cultivating customer relationships with Moz through proactive outreach, personalized trainings, and providing relevant resources to complement the customer’s journey.

  1. Todd SheiveSr. Customer Success Manager at Adobe

At Adobe, Todd works with clients to understand their omni-channel marketing goals while offering solutions and strategies to help them achieve real success.

  1. Margot da CunhaCustomer Success Manager at Wistia

As a content marketing and Customer Success Specialist, Margot is super qualified in this area, consistently sharing useful articles that CS managers can glean helpful tips from.

  1. Lou SturmManager of Customer Engagement at Unbounce

Once holding the role of Manager of Customer Success with Unbounce, Lou has immense experience in helping customers succeed in their journey.

  1. David LightCustomer Success Manager at Autodesk

David works with prominent clients at Autodesk to identify business challenges, share strategic implementation plans, offer technology solutions, and help with account development.

  1. Petr PinkasCustomer Success at Feedly

Working for one of the best content curation platforms on the web, Petr shares a plethora of amazing articles in the area of Content Success. His Twitter feed can be your one-stop source for obtaining the freshest content available in this space.

  1. Tia FomenoffCustomer Success & Social Media Specialist

Her previous experience as a Customer Success Manager for Buffer and Unbounce makes Tia a resourceful gal that Customer Success managers should follow.

  1. Dana NivCustomer Success Manager at Oktopost

Dana writes marketing and Customer Success posts for Oktopost’s blog, mainly targeting B2B brands.

  1. Ed Powers – Founder of SE Partners

Ed is a self-confessed “process geek” and runs a Customer Success consulting company based in Colorado.

  1. Carolyn KoppraschChief Happiness Officer at Buffer

Carolyn leads the charge for the Customer Success team at Buffer. She offers her thoughts and experiences through content on her personal blog.

  1. Mike EwingCustomer Success Strategy & Operations Manager at HubSpot

Check out Mike’s Twitter feed and you will find golden resources for Customer Success managers to utilize. He also delivers amazing content on his personal blog for eCommerce professionals to improve their strategy and results.

So there you have it; 15 Customer Success writers to follow on Twitter to build your network and resource base. What Customer Success writers do you follow that aren’t listed? We’d love to hear about them. Drop their name and Twitter handle in the comments below!