March 03, 2024 | Read Online
{{OPEN_TRACKING_PIXEL}}
By GrowthCurve.io
It's time to level up your career.
Increase your business acumen and #CoverYourSaaS with our upcoming financial literacy course.
Available March 11
One-time, USD $249
For a customer success director or VP, moving gross retention is like being in a boxing match with one arm tied behind your back.
You don't own the product roadmap, ideal customer targeting, sales messaging, and expectation-setting; a long line of value chain activities that may or may not have set them up for success.
Nevertheless, companies often hire you to help solve persistent gross retention problems.
In addition to handling your part of the value chain, you must also influence customer and retention strategy company-wide.
If you’re one of the many brave souls who step up to this task, there’s a methodology you can follow to maximize your chances of success.
Here are the steps:
Let's walk through each one.
1/ Break down the problem
So, gross retention is 85% and your board thinks it should be 90%.
Time to become a quant.
Group customers by common characteristics… segments.
Could be by the products they use, the pricing plan they are on, annual contract value, their tenure as a customer, number of employees, industries, etc.
Which segments have the highest attrition rates?
The goal here is to pinpoint where the churn is coming from.
This is best done a on spreadsheets. With raw customer data, VLOOKUPS, and pivot tables. If data analysis isn’t your strong suit, find someone to help you.
But you must not skip this step.
2/ Diagnose the root causes of churn
Once you have a sense for which customer segments are problematic from step 1, it’s time to understand WHY they cancel.
Not all churn is controllable. Companies go out of business, change directions, or sell out.
But there are many churn reasons you can address. Lack of sponsorship. Product fit. Limited resources. Unclear results. Untrained users.
Start with cancellation reason data available in your CRM, but verify it by interviewing team members, former customers, and current customers to get a deeper understanding of what's happening.
For each segment, make a problem statement such as the following:
"50% of customers in the SMB - Retail segment cancel in year one because they don't make it through the onboarding process."
Then ask why five times. Keep digging until you can make clear statements about the root causes of churn in each segment.
3/ Define guiding principles
Now that you know WHICH customers segments churn and WHY, you can make educated guesses about ways to reduce churn.
These aren't generic, e.g., "hold business reviews." They are specific countermeasures aimed at the root churn causes you identified in step 2.
How much do you believe these tactics will improve retention in each segment? For each churn reason?
Prioritize where you can make the biggest impact in the shortest amount of time. You'll want to focus lots of energy on just a few things. Because you can only run so many initiatives at one time.
And, quick wins are your friend.
This is also the time to set expectations with the leadership team. Bad news early is good news. So, if you don’t see a numerical path to getting to 90%, now’s the time to communicate it (versus later, after you miss).
You’re at the roulette table, about to place a handful of bets...
Share your work. Align with the team on your findings and hypotheses. Get feedback from others, and incorporate it into your plan.
People don't tear down what they help create.
4/ Identify a set of coherent actions
No strategy is complete without a plan to execute it.
Now that you know which customers to focus on, the churn reasons you can resolve, and established expectations, it’s time to lay out the specifics of your plan.
What process changes do you need to roll out?
What product enhancements do we need?
What teams need to additional training?
What resources need to be created?
What tactics need to be tested?
Who is responsible for what?
Simply stated, what will you DO? And -- importantly -- how will you measure it?
5/ Execute your plan
This step is pretty self explanatory. Go do the things you said you were going to do.
The key here is measurement.
Retention improvements are lagging, but you can’t afford to wait a year for results. If you wait a year, it’s too late.
You’ve already lost the battle, and probably your job.
Identify measures that will give you early feedback on your hypotheses.
Do you believe onboarding program improvements will yield higher year-1 retention rates in SMB - Retail? If so, then start measuring the percentage of customers with a successful, on-time launch.
Anecdotes and stories are cool, but you need data to demonstrate progress. Don’t skip this.
Review the data, metrics, and progress with your core team weekly. Share your progress with the leadership team as you go. This will keep you accountable to action and outcomes.
Finally, don’t get stuck executing plays by rote. Monitor metrics, test your hypotheses, and iterate tactics.
--
This article is about gross retention. But, apply this methodology anywhere you want to make an impact.
🤘
GrowthCurve.io is a weekly newsletter for SaaS sales, marketing, product, and customer success leaders.
Join over 3,000 subscribers who are leveling up their companies and their careers.
Update your email preferences or unsubscribe here
© 2024 The Chief Customer Officer
2070 Sam Rittenberg Blvd Suite B-272
Charleston, SC 29407, United States of America
We’re grateful you choose to read each week.
When you’re ready for more, there are a couple ways we can help:
» Cover Your SaaS is a financial literacy course for go-to-market leaders. Grab your copy here.
» Promote your product and services to over 4,000+ senior SaaS Sales, Marketing, and Customer Success pros by sponsoring our twice-weekly newsletter and podcast.
