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5 Precursors to Customer Churn

customer defection

When software companies are seeking efficient ways to manage customer churn, some choose to monitor the health of their book of business by reviewing a few efficiency and productivity based metrics. These often help managers and leaders plan workload, identify top performers, strategically identify upsell opportunities, and get alerted to potential churn risks.

Tracking metrics to reduce churn goes beyond monitoring unique logins. Companies need to examine other metrics and patterns to get a clearer picture of what happens prior to a customer leaving their organization.

Customer Churn Warning Signs

As a customer experience consulting firm, we regularly talk with Customer Success leaders who are looking for new ways to identify churn before it happens. Here are some key areas of focus you may be able to leverage to help prevent churn and retain additional revenue.

1. Bad Customer/Bad Product Fit

Preventing churn caused by poor customer-product fit comes down to having an intimate understanding of your customers’ needs and making sure your messaging and sales process reflects the problem you’re asked to solve instead of your product’s features. It’s important to help prospects understand how your product might help them by asking the right questions at the beginning. That might be as simple as asking them, “What’s the biggest problem you’re trying to solve and how urgent is it for you to solve this problem?” Once you have a clear idea of the problem they’re looking to solve, you’ll be able to determine if your product meets their need to continue to the next stage in the sales process. In addition to this, you may consider past customer churn reasons and proactively address those to secure a better customer fit and experience.

2. Delayed or Extended Onboarding

A strong focus on customer activation can help curb churn. It’s important to learn your customer’s “time-to-value” expectation and work on getting customers there as quickly (and as smoothly) as possible. As a company, you can avoid frustration by having a well-tested and analyzed onboarding process that identifies their time to value expectations and clearly communicates how you will get them there by leveraging your activation process.

3. Program Sponsor or Main Point of Contact Attrition

Some people have challenges dealing with change. It’s common and almost impossible to control but there are ways to ensure that your company is managing it as best as possible. Companies that use your products and services may have turnover, and if decision-makers within a company are being reshuffled, often the products they use are up for negotiation as well. The goal of your company is to control the perceived value of your product or service as much as you can. That way, your service can withstand a main Point of Contact or sponsor leaving the company. This concept of perceived value should be addressed and revisited in a recurring customer business / account review.

4. Issues and Time to Resolve

For traditional product-based companies, when a customer depends on your product, there’s a limited amount of chances that you get when it comes to bugs. From our experience, tolerance varies with the nature of the product, the severity of the bugs and the frequency that bugs occur. Where the rubber meets the road is how quickly these issues get resolved. A key component in issue resolution is the Customer Success team. Customer Success teams can be a critical component but only if they have the correct communication channel to product and engineering. Organizations should have a commitment to issue reduction which could impact the speed of new feature development depending on the number of resources available. To help with this, Customer Success teams should respond to issues quickly and clearly, acknowledging the problem, and outlining the steps for solving it. If the issue is severe (the Customer Success team should be quick to understand how the issue is impacting the client), it may be worth offering short-term discounts, taking a temporary hit to avoid losing a customer for good and the negative word of mouth that can follow.

5. Low Product Engagement

Let’s say your product is being used, but not nearly as frequently as it should be. Or your customers aren’t using the features. These are forms of low engagement, which is almost always a strong leading indicator of churn. To determine if you have this problem, you first need to track engagement. An option may be customer surveys. A well-designed survey centered around Net Promoter Score is a good place to start. If you have the sample size and resources, you may be able to tie engagement numbers with churn. Then, you can come up with a metric or baseline to measure when engagement decreases to the point where you need to take action to prevent customer attrition.

Churn reduction is a vital component to any organization as it helps to retain customers and can lead to a source of predictable revenue. It’s critical that churn reduction is approached by product improvement, identification of the underlying reasons and most importantly a systematic way of addressing them.

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