Customer loyalty is critical for any business. Loyal B2B customers are made; they don’t just happen. Yet, between vendors and customers there is a disconnect around what drives loyalty. To many vendors it comes from using the product, it remains installed and renewals paid. To the customer, it means products perform as advertised, additional value in the form of information, expected experiences and access is received over the lifecycle.
Just because a product isn’t tossed out doesn’t mean a customer is loyal. The size of the investment, extent of process changes made to integrate the product, and/or the hassle factor in switching out are hurdles that deter customers from hastily churning. They refer to it as being “stuck” or “hostage”.
Value is in the eye of the beholder. It is multi-dimensional and contextual. Customers perceive value as realized over time and cumulative. It’s the summation of the pluses and minuses of the customer experience. Understanding what “loyal” means in the eyes of the customer is key to how vendors can avoid churn.
Guy Nirpaz, CEO of Totango, a customer success and user engagement vendor, believes “If all you do is focus on value and do it right, you don’t need to worry about the rest.” When Totango first started, Nirpaz believed that customer success was an analytics problem. Five years later, he’ll tell you “it’s actually a contextual value problem because the definition of value changes over time.” Vendors need to “continuously drive momentum within customers.”
Many companies are embracing analytics to help spot customers that might churn based on their behavior patterns. But the analytics tracked need to be the right ones and show the link between vendor behavior and customer churn. That linkage is key to convincing organizations there is a big pink elephant in the room.
Nirpaz advocates that organizations adopt a health score comprised of five leading indicators:
- Usage and engagement
- Attainment of business outcomes
- Utilization and coverage
- Customer feedback
- Operational metrics (such as support, payments…)
Usage and engagement is, in Nirpaz’s opinion, an indicator of satisfaction and value. Totango’s Service Detail Record tracks detailed usage at the user, account, product and transaction level. Comparing trend lines enables vendors to easily spot changes in customer behavior. It’s then up to the vendor’s customer success manager to ask “Why?”
A key question to ask and which all too many companies skip hoping instead to find the answer in their datIt’s not there. Asking “Why” reveals how and what the vendor needs to change to reduce churn.
In our experience, the ten B2B best practices that reduce churn are:
1. Keep the customer-to-CSM ratio between 25 and 50.
Keeping the ratio below 50 enables front line personal to develop real personal relationships with customers and have the time to meaningfully impact the customers’ definition of success. Enterprise customers perceive greater value and are more loyal when the help they receive is customized to their situation instead of being generic.
2. Implement company-wide transparency and real-time reporting of customer health scores.
Every employee, regardless of function, impacts customers, directly or indirectly. When employees are blind to how satisfied customers are, they don’t have the opportunity to make informed changes to how they work. Customer health scores are not a secret; sharing them empowers every employee to make a difference.
3. Have the CEO and leadership team model the company’s customer values in their behavior.
Employees look to leaders and emulate their behavior. Which is why having posters and platitudes around customer-centricity fails every time when leaderships’ actions do not mirror their words. The fastest way to pivot a company to be customer-centric is to hold management accountable, starting at the top, for their actions.
4. Customer Success, Marketing, Professional Services and Sales jointly own customer-facing processes.
Organizations are rife with silos which imped value-creating customer engagement and alignment. Instead of ‘handing’ a customer off from Marketing to Sales to Professional Services to Customer Success, bring the groups together and charter them to collective re-engineering their processes to not only streamline customer engagement but also increase value delivery, as defined by the customer.
5. Measure CSMs on their customers’ satisfaction, business outcomes, and CLV and compare that to cohort benchmarks.
Customer Success managers today are often measured on renewal rates and up/cross-sales. The result is behavior focused on the next transaction instead of customer lifetime value. While revenue is important, future revenues comes more easily if customers achieve their outcomes, of which product usage is only a small part. Measure CSMs on Totango’s health metrics as well as within and across like customer groups and cohorts; the trends lines will be accurate and insightful.
6. Replace periodic check-ins with contextual engagement.
Check-ins consisting of “how are you doing and do you have any questions?” are appreciated by the customer once or twice. Front line employees should look at customer product usage, trouble tickets, etc. compared to benchmarks and from that to craft the scope and content of routine check-ins. That’s the secret of customer loyalty; make it all about them and advice they can act on right away.
7. Continuously capture and make available to customers tribal and domain specific knowledge.
In every vendor organization is a treasure trove of knowledge and expertise; share it. Value, in most cases, is defined by B2B customers as access to the knowledge, experience and best practice that is in the heads of Professional Services, Customer Success, Engineering, etc. Leaving it in their heads is a disservice to the organization’s potential as well as to customers. Leverage it and turn it into your key differentiator.
8. Use post-purchase journey maps to identify key trigger points and align processes.
Most companies believe they understand their customers’ post-purchase journey. If they did, churn would not be such a hot topic. Instead of guess, journey map the desired and expected post-purchase experience. Loyal and defected customers will gladly what they expected and were the vendor mis-stepped. That becomes your blueprint for change management; it’s a faster and easier approach.
9. Enhance products with multi-channel engagement and just-in-time education.
Replace the traditional method of calling customer support or emailing when a customer has an issue or gets stuck. Embed into your products text chat, video calls, Skype phone calls, hardware ‘call home’ protocols or a direct link to a peer-to-peer community so the user can get the advice they need. If they have to stop and wait for an email response, they’ve lost work productivity and just might not use the product.
10. Set customer expectations during onboarding.
Customers come into the onboarding process with preconceived notions based on other similar products they’ve used in the past. Vendors, however, believe that customers have a blank slate of expectations. Understand those preconceived expectations and clearly and directly address them during onboarding. Also set the expectations of what they can expect in terms of cadence of contact and scope; it’ll go along way.
2015 should be turning point year. Customer success use cases are increasingly becoming more sophisticated and companies, with the help of technology, are looking at customer relationships holistically. The debate is shifting from whether companies should invest in customer success to how they can build it into a world-class function. Lastly, new metrics for measuring customer success and the cost of that success are being developed and socialized. In the next article of this series, I’ll explore a new, more meaningful model, for measuring customer success.
Further reading: What Causes B2B Customers to Churn? Three Things, and “Price” Isn’t One of Them
Hi Christine: Interesting to read Nirpaz’s evolution in thinking over five years. If value were simply a static construct that could be extracted from context and empirically measured, we’d have solved the problem of how to continuously provide value a long time ago. But, every day, it’s a struggle. Hence the reason that 10 ways to stop churn is a visceral topic today.
Some good ideas here, but two questions – one regarding #4 and the second one regarding #7. On #4: I understand the appeal of joint ownership of processes, but I’ve seen so many enterprises belly flop on the implementation. Glitches always seem to be another department’s problem, because no one department fully ‘owns’ the process or outcome – in this case, positive customer experience. How can companies foster the process harmony implicit in this recommendation, while ensuring that operational problems are not routinely passed from department to department, or person to person? On #7, this is an important point, but for companies, it’s a fine line to walk. On the one hand, companies need to be open and above board when sharing product information (see my blog, “The Winner’s Curse . . . ” which describes what happened when a former employer wasn’t.) On the other hand, indiscriminate transparency can be hazardous and at times, even unwanted by the customer (see my blog “A Contrarian View on Transparency). Do you see corporate openness as a balancing act, and if so, how can companies figure out which knowledge (both tacit and documented) is most valuable to share?
In addition to the methods you’ve cited, there is another process that can be applied wtih positive effect: predictive churn modeling. This can pinpoint factors that are driving customer risk and turnover, several of which you’ve identified within the post: http://customerthink.com/now-revealed-and-proven-the-true-marketing-value-of-return-on-word-of-mouth/
And, there’s an effective, and productive, variation on your method #10, namely doing a better upfront job of identifying the customers who are a round peg/round hole fit for the products and services your organization offers will reduce the level of churn: http://customerthink.com/avoiding-the-one-night-stand-targeting-customers-who-will-stay-with-you/
Finally, targeted research among former customers, that gets beyond the typical red-herring stated reasons for leaving – prices, budget pressure, billing problems, service, elements of functional breakdown, etc – and examines the real meanings and drivers of churn, can help organizations reduce it in the future: http://customerthink.com/what-consumers-say-vs-mean-vs-do-toward-understanding-the-emotional-and-subconscious-drivers-of-behavior/
Great questions. Regarding #4, to avoid the finger pointing and the ball dropping, especially for processes that span departments such as customer marketing and customer success, I’ve found the key is the “owning” executive. The teams need to be accountable to a (one) CxO AND the entire C-Suite needs to be bought into the approach. That one CXO doesn’t need to be the functional manager of all the departments, but a majority. The objective tied to #4 must be on that CXO’s MBOs and measurable.
REgarding #7, I’m should have been clearer. I’m not talking about sharing company secrets or strategies. I’m talking about being forthright. For example, if we know the release will be late, tell the customer. If the release is buggy, then tell the customer in advance and what the plan is to fix it and protect them. There needs to be clear guidelines on what can and can not be shared and those guidelines are unique to every company/culture. Common sense should prevail. If you were teh customer and would like to know the news/event/whatever in advance to minimize risk to the business, then tell the customer.
I do see openness as a balancing act and it comes from the top. And is driven by the culture. Tin Tri is very open about everything – that is core to their culture and values. Other companies are more secretive – it’s part of their culture. My rule is if you want the customer to trust you, you need to trust them with information that could impact them, positively or negatively. That requires training of employees, partners and customers on trust.
I, personally, hope openness becomes more widely adopted. It would improve real communication which would drive more trust and collaboration which would drive more meaningful growth.
Thanks, Christine. I thought about your article a little more, and recognize a different side – an upside – to customer churn. While we mostly discuss how to reduce churn, there are many situations in which it’s preferable for a customer to defect. As most of us know from experience, there’s often a subset of clients that are chronically unhappy, and prone to complaining. (This often occurs because salespeople are compensated for capturing revenue, but not for capturing the RIGHT revenue. That’s a subject for a different blog on a different day.) These clients consume much of a company’s resources, and are often a distraction from serving other clients. So, jettisoning – or churning – them work to a company’s advantage. Strategically, this brings up a top-level question: instead of ‘retain, no matter what,’ the first question to ask is ‘should we retain?’ When the answer is ‘yes,’ then figure out how to accomplish that.
You make a good point that just because a product isn’t tossed out doesn’t mean a customer is loyal. An article I read on this topic, “Why Satisfied Customers Defect,” (Harvard Business Review, November/December, 1995) explores this topic deeply, and offers some great insights that hold true twenty years after publication. The authors distinguish the difference between ‘merely satisfied’ and ‘fully satisfied,’ what that means for customer churn, and which actions managers need to take. And according to the article, there are substantial external risks that impact customer churn, including deregulation, loss of patent protection, entrance of new competitors, decrease in brand dominance, and the advent of new technology. Companies must be aware of these forces and anticipate how they might erode customer loyalty.
A couple of things to quickly add, namely regarding operations and measurement.
1. Voluntary and involuntary churn – Beside losing customers because they, of their own volition, decide to leave, companies can also make the decision to, if not jettison (Andrew’s word), make it so uncomfortable for customers to stay that they will almost be forced to go. Organizations do this to the ‘selected’ customers by exacting higher service fees, not responding to complaints, etc.
2. The 1995 Jones and Sasser HBR article was relevant 20 years ago, but it has long been proven that satisfaction is very tactical and attitudinal, and correlates poorly to meanings behind this rating and/or to actual customer behavior. So, to paraphrase W. Edwards Deming, it’s entirely possible for a customer to say that he/she is satisfied, but then defect because better emotional and tangible value can be located elsewhere.