Recognizing Good Churn
Every Customer Success organization has a metric to increase retention, but recognizing when to allow or encourage an account to churn is also critical. The resources that can rescue a troubled client are typically scarce. Forcing your organization to fight to keep every account can backfire. You can spend a fortune trying to save a client that winds up leaving anyway, while an account that could have been saved winds up churning due to lack of attention.
It’s no revelation that, at times, an account gets sold that is just a bad fit. Perhaps the implementation needs significant customization, the organization is in too much turmoil to embrace the new solution, or the business has changed leaving a reduced value prop. Figuring out an amicable way to disengage with a “bad” customer will create goodwill and be a net positive in the long run. Recognizing this early can save both companies a ton of money and frustration.
What are some of the parameters to review before deciding to step away?
Solution Fit - Is the solution a good fit for the problem they are trying to solve? If the solution will require customization or new code, is the direction consistent with your product roadmap or company strategy?
Value - Is there sufficient value in the problem they are trying to solve?
Executive Appetite - Do you have senior-level sponsors willing to push the teams through the complex technical and transformation challenges? Are they ready to push back on requests outside the rapid time-to-value framework?
Reediness - Does the company have the money and resources to succeed within the budgeted timeline?
Profitability was intentionally left out of the above list. There are several reasons a software company might want to invest in getting a solution across the finish line. This does not mean you give all the work away for free. If there is value in the solution and you have executive sponsorship, you should be able to charge for delays caused by the client and areas that were poorly scoped or underestimated.
Leaning into the problem and pointing out the elephant in the room, while challenging, will pay off in the long term. Once both companies have recognized the problem, there are options other than churning. For example, you can pause the project and offer a reduced subscription fee until the project restarts (with a time-bound). Another option is to adjust the sequence of releases. Implementing a value vs. complexity analysis and sequencing releases based on time to value can buy time needed to be successful.
Often, companies give away consulting services to try and ease the frustration; however, in most cases, this is avoiding the root cause of the issues and just kicking the problem down the road.
Since you have been working on the problem together, if you decide to terminate the relationship, it can be done amicably and not generate negative perceptions in the market.
It is essential to have an account escalation process that recognize when it is time to allow an account to churn. Without a structured approach, it is unlikely that the account team or customer will come to this conclusion in time to save the relationship.
If you need help reducing churn, expanding accounts, and increasing value to your clients, contact us at Tilloo Advisors. We are a small team of experienced SaaS executives that take a data-driven approach to help technology companies achieve their Customer Success objectives.