Ever wondered why do Customers Churn?

Why do Customers Churn?

 This is the question, we ask, when it happens? What happened, why our customer churned when everything seems to be going well.

It’s like a relationship, everything was going good with my girl friend until one day she called up to meet and broke up with me. Everything going good from whose perspective, is it yours or hers.

From my experience, over a duration of time on X-axis, Customers churn due to the following primary reasons

1. Value gained by Customer < Cost of the goods or services subscribed for.
2. Great features in product/service have become the basic of the product/service.
3. Product innovation has stalled and focuses only on tactical features.
4. Customer Effort has remained the same or increased during this period
5. Absence of additional curiosity exhibited in knowing Customers Business and changes at their end, in other words being engaged superficially
6. Letting customers know of the internal constraints of them receiving an exceptional service
7. Devaluing the power of insights that can be derived and shared with Customer on their data.
8. Scope of services /features of product limited primarily with the Customer and forgetting about the Extended Customer which are the Customer’s Partners or Vendors.
9. Selling the same Product to different domains or businesses
10. Limited Education of how the Product works, for which they have been subscribed
11. Poor documentation and artifacts
12. Delays in Service and fixes of Defects in Product.
13. Absence of Strong Communication
14. Lesser importance to stakeholder management across different levels of Customer organization.
15. Measurement metrics being mostly tactical and not business metrics.

All or some of these reasons for Customer Churn are an eye opener for which, organizations should act proactively. These reasons could be converted as factors responsible for Customer Churn and can be considered as Critical to Customer Success. These factors essentially become the Voice of the Customer. To arrive at factors, one could convert the reasons as positive annotations.

For example

Reason for Churn: Delays in Service and fixes of defects in Product

Critical Factor for Customer Success: On time delivery of service or fixes in Product or both.

These factors, could be then be slotted into three basic categories that can help bring perspective to prioritization for that Customer to prevent a Churn.

• Basic Factors
• Performance Factors
• Delighters

The rule of thumb is

Basic factors to be met at all times, any non-conformance will definitely lead to a churn

Performance factors are more the merrier.

Delighters, if present can turn the favorable tide in your direction always.

One question is how do we know for which reason, the Customer has churned or likely to churn.

The answer lies in COMMUNICATION at all levels.

1. Listening to Customer communication through various channels
2. Through cases raised in CRM Tool
3. In Customer Meetings
4. In QBR’s
5. Through CSAT scores
6. In Health scorecards
7. In KPIs metrics and contracted SLAs
8. In offsite meets

• Share Customer feedback/perception to all teams supporting the Customer be it Customer support, Customer Success, Managed Services, Sales personnel, Professional Services, Product and Engineering.

• Planning internal action across different teams, addressing basic factors first, then performance factors and then delighters.  No questions to be asked on addressing basic factors as they are critical to Customer retention.

• Communicating back the plan of Action with the Customer, with status of work done.

• Repeat all the above steps in seeking feedback and closing the Loop again.

In other words, just like a relationship, you can start on an improved journey with your customer, with an Assessment of Current State, Achievement of Target State followed by Plan and Execution. This should be repeated every year. It also opens opportunities for you to monetize in the event the Customer is interested in some of the performance factors and delighters.

In other words, you would have turned adversity into an advantage for yourself and the organization.

Bottom Line, is Assess where you are with respect to your customer, visualize where you want to be, Garner Support, Develop Action Plan and follow it with rigorous commitment to please your customer.

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