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Retention Requires Expansion

This week's Newsletter:

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YOU CAN'T HAVE HIGH CUSTOMER RETENTION WITHOUT EXPANSION.

Here's why and what to do about it...

I say it often:

๐Ÿ‘‰ Companies that focus on retention tend to have poor retention. Companies that focus on expansion get retention for free. ๐Ÿ‘ˆ


๐Ÿ“ˆ Our research shows that customers who expand stay 3 TIMES LONGER than customers who stay at their original level.


There are multiple reasons why expansion is essential for retention, which I've discussed in other posts. Here's one I haven't spent time on...


๐Ÿ”‘ The key is to see it from your customer champion's perspective and understand what your product is really FOR...


โ€ข Customers sign up to get results.

โ€ข When measurable results arrive, your champion uses them to demonstrate that they are having an impact.

โ€ข This is how people advance in their careers while driving their companies' initiatives.

โ€ข When it comes to renewal, showing measurable results is KING.๐Ÿ‘‘


๐ŸŽž๏ธ Now play the movie forward โ†’


โ€ข Next year, they show the SAME value. Maybe it's still appreciated, but it is NOT as impactful as the first time.

โ€ข It's more difficult to make a splash.

โ€ข What they need is something MORE. What's next?

โ€ข You cannot expect your customer to be indefinitely satisfied with the same results.


See the problem? You aren't just producing valuable results for the company; you are supplying vital bragging rights for your decision-maker.


Every cycle (usually every year), your decision-maker needs a win. What's new? What's next?


๐Ÿ›‘ If they can't see clearly WHAT'S NEXT for them, then the renewal is in jeopardy.


๐Ÿ™‹๐Ÿฝโ€โ™€๏ธ Okay, but why does that have to be expansion? Can't we just keep showing more results?


โ€ข Yes, and it can work well for a while.

โ€ข But it's impossible to keep this going indefinitely.

โ€ข Eventually, to achieve significant gains, customers will need to do something different.


This also explains why a change in your key champion or point of contact (POC) is so dangerous โ†’


โ–บ Any new leader naturally needs to show a new and better impact. If you don't have a "What's Next" to offer them, they'll happily find another vendor who does.


Remember that RENEWAL IS A FORWARD-LOOKING DECISION.

๐Ÿ‘‰ Customers don't renew because of what they accomplished. They renew for what they're going to accomplish next. ๐Ÿ‘ˆ


This is also why companies need to have clear expansion pathways.


Companies that sell "all-in-one" solutions eliminate one of the most essential retention tools: a series of opportunities for customers to get more/different results through expansion.


Among other things, expansion pathways must be a primary consideration for product design and the foundation of the product roadmap.


The best way to manage the expansion motion is a separate topic. What's important to understand is how inseparable expansion is to retention.

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Here's another reason why RETENTION REQUIRES EXPANSION...


In my last article (above), I explained why expansion is essential to motivate customer retention. Here's another reason expansion is not optional...


It starts with the 3 Laws of Customer Retention:

1๏ธโƒฃ Customers stay to get measurable results.

2๏ธโƒฃ Customers get results because they change their behavior.

3๏ธโƒฃ Customers change because they know why and how to change.


๐Ÿ”‘ The key is Law 2. Remember...

๐Ÿ‘‰ Technology doesn't transform organizations. Behavior change does, and technology makes it possible and scalable. ๐Ÿ‘ˆ


WHAT DOES THIS HAVE TO DO WITH EXPANSION?


๐Ÿ’ต When a customer subscribes, they put down real money against the promise of improvement. Committing money signals the importance of the improvement, not just to the vendor but, more importantly, to THEMSELVES.


That commitment represents a serious - and perishable - intention to do something new and different. This is why onboarding is so important; there must be real urgency to tap that energy to get customers to change.


๐Ÿฅฑ But, the customer's commitment and energy to change inevitably dwindles over time.


We know they won't continue to renew unless there's continual improvement and new "wins" that they can achieve and brag about (see my last post).


โ–บ Customers don't renew for what they achieved but for what they will achieve NEXT.


However, customers don't achieve significant new results unless they make significant new changes.


โœ… THIS IS WHERE EXPANSION COMES IN:


In order to drive the customer process change necessary for big new results, the customer must have significant new motivation!


It's NOT enough to show your key contact what they could achieve. You have to lay out a vision and get buy-in from the organization and top leadership.


๐ŸŽฏ Expansion is how you generate the organizational energy and commitment for the customer to go after something new/bigger/better.


๐Ÿ’ฐ And this is also why it's critical for customers to PAY for what's next.


Customers need to signal to your company - and especially to themselves - that it's important and they are committed. Money is the universal signal of this commitment.


This is why I argue that we must charge for significant improvements in value, even if we don't care about the money!


The paid expansion process is essential to the customer's own process for identifying a significant opportunity and for mustering the energy, resources, and commitment to win.


๐Ÿ›‘ This reveals another problem with All-In-One solutions/pricing:


The all-in-one approach naively assumes that because all the features are "in the box," customers will expertly and effortlessly move up the adoption curve, perpetually achieving meaningful wins along the way. Nope.


Customer results require change, and significant results require significant change. Change is hard. You need every tool you can get.


๐Ÿ”‘ The customer expansion process is essential to driving the kind of change that produces big customer results!

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Upcoming Event: Using Results to Hold Your Customers Accountable

Hosted by Client Success โ†’ Register Here


Join us live as I present my 2023 CS100 remarks on the importance of using customer results to hold customers accountable


See you there!

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Upcoming Speach: The Future of Customer Success - Silicon Slopes

November 17th, 2023 @ 11:30am MT

Hosted by Silicon Slopes - Utah Customer Success Meetup


Join us for food, networking, and some big ideas about the future of Customer Success. I'll be showing why it's time for a total revamp of the discipline and even propose a new name for what we do! I hope to see you there!


Register here

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QUOTE OF THE WEEK:


The most important feature of any product is to measure the results it produces for customers.







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