- Greg Daines
The Cardinal Sin of Customer Success Is Not Churn. It’s Unexpected Churn!
As long as your customer success efforts are reactive, they will never be effective. The only way to change this dynamic is to stop trying to prevent churn and start learning to predict it!
The Conventional Reactive Mode
Everywhere I go I see customer success teams operating in a constant state of crisis. Their entire approach and everything they do is reactive. They react when customers complain, or run into trouble, or stop using the solution, or ask for help, and even when they are happy and successful. The conventional approach to customer success is profoundly reactive.
In my experience everyone knows this and wants to change but they don’t know how. First of all, it’s nearly impossible to stop reacting when there are so many things to react to. What are we going to do, stop answering our customers calls? I don’t think so.
And even if you could stop reacting long enough to do something proactive, what would it be? You’ve already done everything you know: the solution has been installed and configured and the customer has been trained. What else is there? Anyone with sense has figured out long ago that merely reaching out to customers is a waste of their time, and ours. So merely establishing a customer “touch cadence” will never qualify as operating proactively.
Customer retention efforts are the ultimate reactionary force. They kick into action when signs appear that a customer is in distress. Often “rescuing” the customer requires a great deal of effort and demands resources and personnel from multiple parts of the company. In many cases, there is little time so a scramble takes place. A certain level of “heroism” is often involved.
Sadly most of these customers will never be saved. Even when heroic efforts result in a successful renewal, my research findings show that the majority of rescued customers will not renew again. But that’s down the road, and in the mean time any temporary wins perpetuate the illusion that reactive efforts are effective. The truth is that, aside from the celebrations and shout-outs at company meetings, there is precious little to show for your heroism in the long run.
Obviously, there’s a fundamental problem with operating in this reactive mode. By the time a customer is visibly at risk, it’s usually too late to save them. The only way to escape this trap is to understand a simple truth:
You can’t prevent churn if you can’t predict it.
In other words, you need to stop focusing on preventing churn and start learning to predict churn! Only when you are able to predict customer risk consistently will you be able to do something meaningful about it.
Success Takes Time
One crucial reason predicting churn is so important is that it takes time to address the real causes of customer failure. The typical customer rescue doesn’t allow for anything but slavish compliance with the customer’s list of demands. Often you sense that these demands don’t address the true underlying cause of their troubles. The customer says, “Jump!” and you say, “How high?” when you should be saying, “That won’t solve the real problem.”
This scenario is nearly universal, and things will never change until you flip the script.
The only way to transform customer success is to know customers are failing even before they do.
Only when you are able to see trouble coming far in advance can you intervene with a proactive approach. That way urgency and the customer’s demands don’t get in the way of pursuing the right solutions.
But it goes far deeper than just ensuring there’s enough time to address risk. Learning to predict churn leads to a much more fundamental transformation in the entire organization.
You can’t predict what you don’t understand
Once you seriously commit to learning how to predict customer churn in advance, you run headlong into a serious challenge: in order to predict churn, you must first understand why customers fail.
If the customers’ demands won’t address their real problems, then what will? What is the real underlying cause of their troubles? Answering this question is more difficult than it appears. You can often go a level deeper than the customer. But can you get all the way to the bottom of it? Do you truly know why your customers are consistently failing?
The conventional approach is to look at the failing customers and their problems. But this way of thinking is a trap. As long as you are looking for what is wrong it will be easy to find plenty of things. But are those things really at the root of your customer’s troubles? This approach is fruitless because there are endless things that can go wrong, but none of them reveal the fundamental cause.
The most important outcome of learning to predict churn is to finally gain a clear understanding of what is driving it.
What Causes Churn?
In my last article, I argued that the way we think about churn is all wrong. The key to uncovering the foundation of churn is to change the question that we ask:
The essential question isn’t why do customers fail, but why do they succeed?
I don’t think we can understand why customers churn until we know why they succeed. We won’t find the true cause of customer failure in all the difficulties they encounter or the complaints they lodge. Customers don’t leave because they have a reason to leave. They leave when they no longer have a compelling reason to stay.
Think about your most successful customers. Haven’t they also experienced many of the same problems? Successful customers actually tend to run into more issues because they use the solution more actively and deeply. So why aren’t these customers failing?
This point is demonstrated in another fascinating finding. My research shows that customers who complain are actually more likely to renew than those who don’t.
The insight is powerful but counterintuitive:
Problems don’t cause customer failure, and resolving problems won’t make customers successful.
Now understand, I am not suggesting that resolving real customer problems is unnecessary. You must continue addressing issues and removing friction from the customer experience. But these activities won’t significantly reduce the rate of customer failure. You will never fundamentally gain power over customer churn until you understand what is really driving it.
A New Hope
The way out of the trap is to reverse your perspective on how you look at customer churn. The fundamental reason customers churn is that they did not achieve or perceive measurable success. So in order to understand failure, we really need to deeply understand what drives success.
That’s why the most productive route we can take is to seek to understand our most successful customers. What are they doing that ensures they are getting undeniable value from our solution and that it is key to their success? I’ve been asking this question for years with dozens of leading companies and literally tens-of-thousands of customers. This is what I have consistently found:
The primary difference between successful and unsuccessful customers is that successful customers change how they work to take advantage of the solution’s benefits.
Understanding this truth is the gateway to a completely different, and much more powerful way of thinking and acting. It shines a light on the ineffectiveness of the conventional reactionary approach. Most importantly, it shows us the path to a much more proactive mode of operating.
How To Predict Churn
The key to radically improving retention is to identify the essential customer behaviors or processes employed by your most successful customers. This is more than a matter of simply asking them why they succeeded. You need to study them more deeply.
What’s standing in the way is the reactive approach that focuses most of your attention on failing customers. Turn your attention instead to the most successful customers. Look beyond the limited view of what they are doing with your solution. Dig deeper as you observe their process. Why do they do it that way? Who is responsible? What other processes or systems are they using to get it done? How do they use the solution’s outputs in their broader organization? Why do they think they were successful?
In addition, there is likely a significant amount of expertise already in your organization. This valuable knowledge is often underutilized. Talk to the most experienced people in your company to find out what they know. Ask this question: “Why are some of our customers so much more successful?” This is different from asking why they are successful with your solution. This is taking it one level further. Why are they better at their business, or at least in the major function that the solution supports? What are the most successful customers consistently doing that sets them apart?
The answers are relevant precisely because your solution won’t succeed unless the customer does. You must understand precisely what the most successful customers are doing in their business and ensure that we are helping all of our customers to operate that way. Typically there are just a few essential customer behaviors. There may be many things they do right, but I have found that there are usually just one or two key behaviors that are responsible driving most of their superior results.
Having identified the key behaviors, you can then engage with all of your customers to help them make those changes. Start early by committing customers to change their process right during the sale. Then refocus your onboarding process system configuration and training to teaching and supporting customer behavior change.
Finally, implement a simple tracking system for monitoring whether customers make the essential process improvements. When they don’t, you’ll know even before they do that they are inevitably going to fail to achieve good results down the road. Now you can proactively intervene to improve their process and get them back on track.
I’ve implemented this approach repeatedly for the last several years, and the outcomes have been phenomenal. Not only does it transform retention results, it also provides the methodology for aligning all activities around your company’s central purpose: driving exceptional results for customers.
Here are just a few ways it radically changes how we care for customers…
Finally Become Proactive
The primary reason teams behave reactively is that they monitor customer risk retroactively. If you think about it, the things we typically track to identify customer risk aren’t predictive at all.
Think about the major components of a typical “Health Score”. Are these leading or lagging indicators of churn? In other words, are you measuring something that happens before or after a customer has failed?
Usage (utilization, adoption) is a good example. We know for sure there’s a problem when a customer stops using the solution. But is it predictive? I don’t think so. By the time usage drops meaningfully the customer is already in the later stages of distress. The warning flag goes up too late. Although this may happen before a customer cancels, it does not happen until after a customer has failed. Responding to this signal can never be truly proactive. Other things we measure are similar.
The underlying principle is simple:
Most warning signals of customer risk don’t appear until after the customer is already failing.
This is the fundamental problem with conventional customer risk metrics. And it’s why predicting churn requires flipping the script. What we need are truly leading indicators that customers are at risk of failing. This kind of early-warning detection can only be created by identifying and tracking the customer behaviors that are essential to success.
Focus Your Efforts
Another benefit of learning to predict churn is that it maximizes your leverage. We all have extremely limited resources to care for our customers. As long as we are operating in a reactive mode, much of our efforts are wasted. Failing customers set the agenda, but what if they don’t know what matters most to achieve success? You must take control to steer the ship back on course. But how do you do that?
The good news is that you have the perspective that the customer desperately needs. After all, you’ve seen many customers succeed and fail, and so you are in the best position to understand what really drives success and offer customers what matters most.
Whether a customer is successful is primarily dependent on the degree to which they change how they work. In order to succeed, customers must change their behavior in ways that are essential to achieving good results. That’s why you need to go beyond merely training and pushing adoption. In fact, the delusion that customer adoption leads to success is one of the deadly fallacies.
Instead, turn your attention to your customer’s behavior. Teaching the essential things customers need to do differently and tracking when they do is the key to operating proactively. But you can’t teach the key behaviors if you don’t know what they are. That’s why I always conduct a Success Analysis, and I’ve even posted the process I follow for you to use (download it here). The essential insights will never come from surveying failed/churned accounts.
When a company fully converts to this way of operating, they discover to their delight that most customer churn is preventable. It’s only when you are in the end stages of customer failure that you feel powerless over the situation. But when you see the entire process of how customers succeed you can engineer a process that transforms retention.
Love What You Do
Perhaps the most surprising outcome of this transformation is that Customer Success can start to be a lot of fun! I mentioned the continual state of crisis that I see in companies everywhere. The constant drumbeat of churn and the focus on problems, complaints, and failure takes its toll and the outcome is often chronically low morale. Customer Success can be a bummer.
By contrast, shifting to a focus on driving success through customer behavior change really puts the spring back in your team’s step. Operating proactively to help customers achieve their goals is inherently motivating and satisfying. And it’s exhilarating for a team to dramatically reduce churn while simultaneously increasing customer results. When done properly, customer success is the best and most rewarding role in business.
Try this approach for yourself and let me know how it goes. I’m anxious to learn about your experiences so I encourage you to reach out to me with questions and ideas.