CUSTOMER VALUE SCORE, EMOTION AND VALUE CHURN - bit of a ramble.
A vendor without a customer success team has a sales, support, and admin team. This is a basic level of customer success team.
They sell a client a product, typically SaaS, and provide some onboarding which is not much more than provisioning. They then show the client how to use the product. Moving forward, the only tech support is via telephone or email. Sometimes it's via a chat session but the chat session is not always monitored so there is limited value.
We may think that this is a scenario that only applies to new start-ups, but many large companies operate like this. This is why some large companies have average customer satisfaction.
Larger companies often compete on different terms compared to smaller companies. They compete using price, volume, breadth of capability, and the "one throat to choke" strategy.
The larger companies must maintain market and feature/functionality dominance to continue to win against small companies. If too many small companies get a jump on new features and deliver those features well, those larger companies get swamped.
The large companies can't react fast enough, and they start to lose market share. At this point, the large companies start to eat the small companies.
Let's get back on track.
So, the client is up and running on the SaaS platform, and they can access some help documents. When they have an issue, they call the support team, and the support team spends time asking "how to" questions instead of focusing on fixing bugs.
Often, the "Customer Success" or "Customer Experience" sits with the sales guy in these small companies as they have a revenue target. The thing with sales targets is they drive behavior, and often the behavior is not driven toward making clients happy.
Let's go back to our client. They are working their way through using the product…
We get 12 months down the track, and the client does not renew the service.
Why? A few reasons:
The customer likes you, but they don't love you.
The clients don't mind you, and your product is okay.
1. THE CUSTOMER LIKES YOU, BUT THEY DON'T LOVE YOU.
a. The competition has a better product at the same price. The client switches to that product, and the ROI is better for them.
b. The competition has a similar product but adds more value into the mix. For example, the client can use the competitor's product for 12 months, plus they get free migration services, free onsite services, premium support, and access to other educational opportunities, etc. A range of sweeteners can be offered. It's not until much later that you get to hear what the competition is offering your clients. By then, it's too late.
What's the recipe to stop churn? (Short answer = automation)
Assuming you're a small company, and the investment is on growth, investors want to see their investments grow quickly. There is pressure to acquire new customers.
To counterbalance this, the focus for the small company must be on automation. Automate as many interactions as you can with the client.
How do we do this?
You need to ask yourself why a client connects with your organization during the life that the client uses your product.
The high-level interactions are as follows.
a. The client's buying journey
b. On-boarding
c. Value realized by using the product
A. THE CLIENT'S BUYING JOURNEY
The client will do research during the buy phase. We need to see an extreme level of information available on the web that demonstrates product value. Use-cases, testimonials, trials, webinars, videos, events, online advertising, and click-to-buy option. etc
These days it's quite common to see a vendor provide a "University" of some sort to satisfy a client's desire to go deep into a product.
It's a great selling tool for some buyers, and it's a good way to populate the sales funnel for buyers starting a buying journey.
Consider these things as "Sales supports".
Go and ask five existing clients how they purchased your product. For each step the client took, we should consider having a "persuasion point". Some content can remove any barrier the client may have in their mind to buying.
B. ON-BOARDING.
I heard of one company that sometimes takes 4 weeks to provision the product for the client. Seems crazy! How come they didn't lose all their clients? Well, they did lose some!! It was a larger vendor that could leverage price across a range of products to keep the customer sweet…
On-boarding requires communication around servers and images provisioned, user access, testing, and security. The list goes on. During this phase, the Customer Success Manager is a great asset. If you can't afford a CSM, then the Account Manager is the next best thing. Make sure the Account Manager does daily touchpoints, even if those are by "slack." Automated emailing systems also help to keep communication going. As each phase of the onboarding takes place, provide an update.
Everyone's on-boarding is different, but communicating often and well is a key aspect.
C. USING THE PRODUCT
Once the client has been released to the wild and is using the product, they can be left to their own devices.
From the company's perspective, if they have their money for the next 12 months, why do they care what the client does? This sort of thinking gets worse as the value of the transaction drops.
If a vendor is in super high growth mode with limited cash, and their MRR is growing fast, it can become easy to miss the impact that low client engagement has on the renewal rate.
Get the client engaged by sending a personalized weekly or monthly dashboard on the current state of the client's usage. Think about how many times the client logged in, what functions were used, how many support calls were made, how many times they visited your blog, etc.
These sorts of metrics contribute to the client's health score.
What is the reverse of a client health score? The reverse of this is a Client Value Score.
To a client, the health score is really a measure of value realized. If we can support a client in being able to justify the value realized by quarter/year/contract length, we are building a defense against churn.
Note that not all clients churn because of value; they churn because of emotion. Often there is not much that can be done with "Emotion Churn," but "Value Churn" is different.
An example: I used to provide Customer Value Score information to large enterprise customers. I would schedule a meeting at least 6 months before a renewal contract was due.
I would provide the metrics around usage and support calls raised. In the on-prem world, you can see if a customer has downloaded the latest version.
I used to stand in front of a client and tell them they were not getting the greatest value from their investment in the software.
If they were not downloading the latest versions, they were not getting the most value from the latest features and functions.
If the client is not calling support about features, then they are pushing the software to the limit. The assumption is that they are not pushing their business to the limit.
I would also provide roadmap information, marketing events, webinars, and anything I could think of to make it harder for them to churn later in the year. i.e., showing the value reduces your churn potential.
Some folks will argue that if I provide this sort of information to a client, then they have all the power. Well, guys, the client always has all the power; they can always choose not to buy.
Providing value to a client over the time that they use your product is the job of the Customer Success Manager. If you can't afford one, make it the Account Manager's responsibility.
Side benefits of doing this are simple. If it's obvious the client does not get enough value from the product, then determine if this client is one of your dream clients. If they are one of your dream clients, change your product. If they sit outside of the dream client range, make a business decision if you want to change the product to keep them.
When automating anything in this stage, it's all about communicating with the right person. People change roles, executives sit in the same job on average 19 months, so the sales teams need to stay on the ball and make sure the right messages are hitting the right people.
2. THE CLIENTS DON'T MIND YOU, AND YOUR PRODUCT IS OK
A few points about these types of clients:
They will continue to give you money, and they are often low-touch clients, i.e., not requiring much help.
They are ripe for cultivating into a client that loves you if you want to turn them into that client. Sometimes, we are happy for them to continue as they are. The investment in turning them into a class A client is not worth the ROI for your business.
You read some stuff in blogs that if they are not your dream customers, then you may want to cut them from the herd. That is an investment question.
I tend to think that it's better to have a client giving you their money rather than the client giving their money to the competition.
Like most things in business, it's a compromise.
If the needs of this client will align with your product roadmap in the next 12–24 months, then you might want to make more effort in keeping them.
One way would be to bring them into your select VIP program and build a better partnership with them. Learn from them as you build prototypes of future products that are more relevant to them.
Think about it.
Testimonials are full of companies that say they have been with company XYZ for many years because of the value they received. I would bet that many of these long-term clients did not start out as "dream customers," but they evolved into dream customers over time.
SUMMARY
Providing value to a client over the time that they use your product is the job of the Customer Success Manager. If you can't afford one, make it the Account Manager's responsibility.
There isn't much you can do about emotional churn, but there is something you can do about value churn.
The reverse of the internal Client Health Score is the Client Value Score.
A bit of a ramble...
Do you want to learn more?
