Tuesday, May 13, 2014

5 Tips for Managing Customer Churn

"I got my first real six-string, bought it at the five-and-dime. Played it 'til my fingers bled, it was the summer of '69. Me and some guys from school, had a band and we tried real hard. Jimmy quit, Jody got married, I should have known we'd never get far."

I should have known! Actually I did know. Jimmy was never really that committed to the band. He wouldn't show up to practice, he never completed his action items and when we had the quarterly business review he was busy checking his email. And Jody, well Jody's goals were never really aligned with the project. Sure she was successful in the last three bands she was a part of, everyone liked Jody, but those bands never really took off. I knew Jody was going to flake when we had our kick off meeting and she was more interested in who we knew than establishing clear project objectives with measurable outcomes. We tried real hard… but I should have known.

In Customer Success we often do know. That deal that was signed in the last days of the quarter without proper scoping, a sponsor who moves from organization to organization before anything is really ever done, the deal that got signed despite the lack of clarity on whether the product does what the customer wants... these all point to risk that the account is going to churn. Risk comes from a lot of different sources but it is seldom a surprise. Some accounts we can turn around, get back on track and save, while others, well, we can try real hard. Over the last 10 years of managing customers and Customer Success teams I have been exposed to a wide variety of customer risk factors. In a high percentage of the cases we were able to keep the band together but sometimes it wasn't meant to be. "Oh when I look back now…" there are a few things that I have learned that help manage churn.

Use the fire alarm sparingly  To successfully manage risk you need to differentiate what constitutes a risk of churn and what is noise. In any account there are going to be issues. The customer wants a new feature we can't deliver, the system didn't work as expected because it was raining last week, the customer doesn't have the budget to invest at the same level despite great ROI and success with the product, etc. Issues are important and the team has to be geared to proactively identify and mitigate these issues before they escalate. But not all issues run the risk of creating account churn. Understanding the difference between account noise and contract negotiation tactics will enable your team to focus on where the risk really is.

Go after root cause  Managing risk reactively can quickly become an all consuming job. You can build a team that is great at the diving catch in the last minutes of the game but that is not scalable. To effectively manage customer churn you have to dedicate time and resources to going after the root cause. Identifying and fixing root cause issues can be painful, create some difficult conversations internally, and you aren't likely to win friends in the process, but it is a must-do activity if you are going to reduce account churn.

Talk it out  For years I have managed an "At Risk Meeting" where cross functional teams meet every other week to discuss at risk accounts. This has been a fantastic forum for customer success managers to discuss where they see risk in specific accounts and to discuss their specific plan for keeping everyone on the same sheet of music. Just as importantly, it highlighted for senior leadership what was happening in the business. One of my favorite leaders, Lars Dalgaard, told one of his executive new hires, "If you want to learn what is really happening in the business attend the at risk meeting." This was a fantastic endorsement of what can often be a painful discussion of facts that few really want to hear.

Leverage the team  One of the reasons the at risk meeting is so successful at mitigating risk is that it engages the broader team in the discussion. I continue to be surprised by the relationships and connections people have that we don't realize until we are talking about an account that is in trouble. "Oh, the COO is my brother-in-law… do you want me to schedule a meeting?" or, "If this is really important for saving this customer we could probably get it in the next release." Leveraging the entire team in the at risk program is the single most effective way I have found to drive a reduction in customer churn.

Follow the game plan  Mitigating risk is not an art. The same game plan you used last time is probably going to work the next time. Different people, personalities, or account problems may complicate the situation, but focusing on a plan that works will help drive consistent success. Arming your team with this plan, ensuring they know what levers to pull and when, and supporting them with resources are the keys to driving down your account churn and the resources required to manage your at risk program.

"Ain't no use in complainin', when you got a job to do." Managing customer risk is never going to be fun, but by focusing on the right actions you can effectively minimize the risk of churn and keep the band together.

About David Verhaag 

David is the Vice President, Client Experience at Degreed, the lifelong learning platform. Prior to Degreed, David established and scaled the Customer Success function at Kahuna and HireVue and spent eight+ years with SuccessFactors where he led the development of the global Customer Value team. David lives on a sailboat in Half Moon Bay, CA.

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