Why Customers Churn

A blanket statement - I get it. But in digging deeper than the reason your CSM gave you, or what your customer told you on the exit interview, I believe there is a core reason customers churn when you sort through the noise.

I’m asked about it almost every day. CSMs, leadership, candidates, peers, friends, etc. More this week than last. More today than yesterday. This question is not going away. 

My job as a CS leader is to not just understand why customers churn, but more importantly to recognize the pattern behind it, and to get in front of it. First - let’s get the usual suspects out of the way. Though I don’t think they are actually divorced from the core reason, here is what you typically hear:

• Low usage
• Buyer / Point of Contact departure
• Competition displacement
• Bad on-boarding
• Bad support
• It was the wrong deal in the first place
• Product issues / stability
• Budget Cut
• etc. 

The list goes on. But as I said above - I don’t believe these are the core reasons for customers leaving. They are child elements. They are secondary to what is actually happening (for the most part).

To get to the core, you must go back to the beginning: the reason for purchase. Most often, prospects convert to customers because they have a need to mature something. A workflow, a process, a department, a revenue stream, a cost cutting practice, an understanding of their organization or tech stack, etc. So then we, as vendors, communicate how we solve for the above. 

"Our platform has a proven ability to help mature [something]."

It’s probably true. I’m sure every SaaS organization communicates this to anyone that will listen. And when done effectively, prospects convert. Awesome. Kind of. 

When they convert, you embark on the journey with your newest customer. They are trying to mature their X [something - workflow, revenue stream, etc.], and you’re by their side. They are trained, the relationship is healthy, usage is acceptable - you’re off to a good start. You continue on this path for a while - weeks, months, quarters, etc. 

But then it happens. The phone rings. Or you get the email with the subject that makes your stomach drop.

“I understand how you have helped companies do this in the past, but for some reason, we’re not maximizing value out of the platform and we’ve only matured our ‘X’ slightly, not nearly as much as we expected. And with that, we have to discuss transitioning off your platform.”

Shit.

But what happened? You were off to a good start. Executive Business Reviews went well. Usage wasn’t low. You focused on value, and let it guide every interaction.

What happened is that the customer saw your platform as a silver bullet. They thought that their X would be matured by purchasing your platform. 

What happened is they did not use your technology as a foundation, and wrap it in organizational processes or standard operating procedures.

This is why customers churn. 

And this isn’t just about SaaS. Anything you purchase requires you to have a concrete plan on how to use it for you to be successful and re-purchase. The reason why you throw away the groceries that have gone bad is because you didn't have that concrete plan on how / when you were going to use those ingredients.

So how do you fix it? How do you help wrap your platform in a standard operating procedure to ensure there is true adoption as part of a larger process, not a point solution?

One approach is Professional Services. Models variate on how professional services are funded - whether it be the customer or the vendor. Another option is to include it in your implementation program as part of one of the artifacts created and milestones passed. Weighting the pros and cons on these is for another day. For what it's worth, my recommendation is to make this a part of your implementation program.

Whatever your approach be, you must be aligned with your customer. Let them know that your successful customers have gone through the practice of clearly documenting the when, how, why, etc. of leveraging your platform as part of a larger organizational workflow. Once that’s on the table, you can determine - as a team - how to get there. Whether the customer has a resource to allocate to this, or you have a resource you can allocate, perhaps you can provide the customer a template to act upon. There are options here. 

Look back at your list of customers that have terminated their agreements. You may have originally classified the loss reason as one of the above (POC departure, competition, etc). But I encourage you to look to see if they had a Standard Operating Procedure documented - ultimately leveraging your platform as a foundation and wrapping it in process to get to success. Or if they bought your platform and saw it as a silver bullet.

Now look at your current book of business. If you see 'silver bullet' customers - it should concern you.