The question many leaders are asking is:
► If layoffs are unavoidable, should companies risk cutting customer-facing success and support reps?
Our research across many companies has revealed a simple rule that helps predict the impact.→
✔︎ You can predict the impact of rep layoffs if you know what TYPE OF CHURN your company has.
WHAT TYPE OF CHURN DO YOU HAVE?
Our research reveals that there are just 3 "Types" or patterns of customer churn that companies experience...
① DECELERATING CHURN is where most of your customer churn happens early, within the first 12 months of their subscription.
② ACCELERATING CHURN means customers churn mostly later in their lifespan, usually more than 2-3 years.
③ CONSTANT CHURN means customers leave at a steady pace over time, neither mostly early nor mostly late.*
HERE'S THE RULE:
Laying off customer reps will probably increase churn - at least a little.
↑ The increase in customer churn will be significantly greater if the company has ACCELERATING CHURN or CONSTANT CHURN.
↓ Companies that have DECELERATING CHURN will experience a much smaller impact on churn.
👉 Early customer churn is primarily driven by bad customer fit which is when customers are unable to get good results. Customer success reps have little to no impact on customer fit, and therefore scaling back will have a relatively smaller impact on churn.
👉 Churn that happens later is mostly the result of customers not getting measurable results that improve over time. Customer reps can have a much larger direct impact on this kind of churn when they focus on helping customers achieve and expand their results.
The other factor to consider is simply HOW MUCH CUSTOMER CHURN the company has. Companies with very little overall customer churn will not likely see it significantly increase with layoffs.
On the other hand, companies with already high churn (I define "high" churn as a Customer Half-life of fewer than 18 months**) are much more likely to experience a severe spike in customer churn with layoffs.
*I'll be posting soon a more detailed explanation of the 3 Types of Churn so stay tuned for that.
**For an explanation of Customer Half-life and why churn rate is a worthless metric see my short thread: