Churn. Nobody likes it. Everybody hates it. It might as well go eat worms. But addressing churn is an essential part of the work of every company with a subscription-based business model. You can’t avoid it.
So, what can you do?
You can face it head-on, do the work to uncover the reasons your customers churn, and become a better, healthier, more mature company as a result.
That’s exactly what Anita Toth helps her clients do as Chief Churn Crusher of her consulting agency. Her Churn Crusher System™ helps SaaS companies uncover the hidden reasons behind their customer churn rates and develop ways to mitigate them – helping both their company and their customers thrive. So, I sat down with Anita to chat about the twenty-five different factors customers use to decide if they will stay with you or look for another solution when renewal time comes around. We wanted to learn how to see beyond surface-level metrics to uncover the real reasons your customers leave.
Marley Wagner (MW): Thank you for chatting with me today, Anita! I want to dig into these twenty-five customer churn factors that you’ve developed, but first, let’s talk about why companies want to work to reduce churn in the first place. What makes them decide to tackle customer churn?
Marley Wagner (MW): Thank you for chatting with me today, Anita! I want to dig into these twenty-five customer churn factors that you’ve developed, but first, let’s talk about why companies want to work to reduce churn in the first place. What makes them decide to tackle customer churn?
Anita Toth (AT): I have two groups that I typically work with. One is Customer Success. The other is, surprisingly, the Founders of SaaS companies. Customer Success leaders usually reach out to me because churn or retention is a key metric that they need to focus on. SaaS Founders are often getting external pressure from investors or their board to do something about churn. So, people reach out to me because they realize they have a problem that is limiting their ability to grow profitably. That’s really their biggest challenge. But my best clients are the ones that want to grow profitably while serving their customers in the best way possible. If they are only coming to me because they’re being pressured to deal with a house on fire, that’s a different mindset altogether. I really prefer to work with companies that want to see their customers succeed and want to keep customers because they help them succeed. They want to create a better customer experience because it helps solve a problem. Maybe I should say that I’m not a firefighter.
MW: It sounds like the difference between those two mindsets is that one of them recognizes the problem a lot earlier on.
AT: Absolutely. They see those red flags and it prompts them to take action.
MW: What are some of those red flags that help your clients recognize customer churn issues before they get to that firefighting stage?
AT: One of the biggest is usually because they’re doing all the right things, they have a customer health score, and it looks good. CSMs are going a great job. Things are going well. Then, all of a sudden, the customer just leaves. What happened there? What I do is provide visibility into the thoughts, feelings, and goals their customers are trying to accomplish. It’s often hidden from the metrics, or the metrics just don’t tell you what the whole story is.
MW: You’ve got to dig a little deeper.
AT: Yes, but there’s a risk too, right? Because, in digging deeper, you start finding things you might not want to see, you might not want to hear. So, when it comes to churn, it’s easy to settle for just good enough.
MW: Even when there’s a low percentage of churn, you’ve still got to pay attention. It’s still something you want to tackle.
AT: Definitely, because it’s not uniform across all products across all customer segments. That overall churn percentage is a very general number. You’re going to have segments or products that are churning at a much higher rate. So, it’s discovering who those people are and where this is happening. And then the big question, why? Right on the hot heels of that is asking what can we do about it?
MW: Yes! What does that discovery process look like when you start asking these questions?
AT: It really depends on the company, their products, and who they’re selling to. A tech touch company often has very different churn reasons than an enterprise company. But if there’s one thing that I can hammer home here, it’s that the greater the gap between customer expectations and reality, the worse churn will be. You usually see this gap more often with early-stage startups when they’re trying to figure out who their ideal customers are, product-market fit, all of that kind of stuff. The bigger challenge is when that gap is a lot smaller. Then, it’s trying to figure out, of these twenty-five customer churn factors, which are the biggest at play.
MW: When there are so many, it’s hard to narrow it down the true reasons for customer churn. What are some of the roadblocks we should look out for?
AT: One is not knowing how to interview your customers. You’ve got to do exit interviews, if you can, and check in with your customers throughout their lifecycle as well. It’s also critical that whether you hire an outside consultant or you do it yourself, you’ve got to standardize your interview questions. Ask the same of questions of everybody so that you can compare apples to apples. Really important. Then, you want to standardize the interview depending on who is being interviewed. If it’s your decision makers, then the set of questions for the decision makers should go to all decision makers. And the questions should change if it’s not a decision maker but a champion of your product. Those are a few key things.
MW: Customer interviews, not just surveys.
AT: Exactly. I really think you should be having interviews with your customers all throughout the whole process, from day one. Surveys are cheap and easy, so people depend on them a lot, but interviews get into those thoughts, those feelings, those goals and expectations your customers have that you’ve got to keep a pulse on. It helps you be more strategic and methodical.
So, you think you’re a ten out of ten, but then you talk to your customers and they’re putting you at a five. Any company can sit down and ask, how do we think we’re doing? But you need to talk to your customers and find out if it’s actually true.
MW: That last part sounds really important.
AT: And it’s the hardest part because you’re going to be uncovering issues. There’s no way you can be ten out of ten on all twenty-five of those. And it constantly changes. There’s flux to this. So, this is why it’s critical to it to keep interviewing your customers. Not just exit interviews, either. Exit interviews are great, but the customer is already leaving. The decision has been made. You want to understand what’s happening before they make that decision.
MW: Customer interviews can be a pretty involved process, though. Do you think a lot of organizations run into issues when they try to integrate these more involved check-ins into the customer journey?
AT: Companies need to build a feedback strategy, which can be part of the Voice of the Customer Program. Depending on the size of the customer base, you can start with a handful of customers at critical stages of the journey and do interviews on that sample set. The point is that you really want to see how your customer expectations are meeting with reality, especially post-onboarding.
MW: How often do you recommend doing these customer check-ins?
AT: Right after onboarding is complete is the first critical one. Because onboarding is similar to the honeymoon. When you’re newly married, everything’s wonderful. Everything’s great at the beginning. And then you start seeing the little things that you overlooked or didn’t notice before. That’s definitely one spot. Another spot is halfway through the contract. Now this is assuming either multi-year or annual contracts. That would be a great place. The third, I’d say, is three to six months pre-renewal. And the reason I recommend that is so you can start finding out what those churn factors are. How have things changed? How are they feeling about things? Everything might look good in the metrics, but it does not necessarily mean that things really are going well.
MW: It’s all about talking to your customers more often, having those conversations that uncover buried issues sooner, and making sure people on your team are skilled enough to do these interviews.
AT: Yes, my recommendation is to have people on your team who are trained to do this, and that they are not the ones who are normally responsible for those customers. Even if your CSMs are fantastic, it shouldn’t be them conducting these interviews. You want your customers to feel like they can be honest, and you want the person asking questions to be able to build trust very quickly. It takes practice. Otherwise, you’re just going to get surface-level answers, which aren’t going to help anybody.
MW: Absolutely! Is there any other general advice you would give to our readers who are starting to dig deeper to uncover reasons for customer churn?
AT: I think that the best advice I can give is to build out an interview guide that’s very specific, with the kinds of questions that you want to ask during your interviews. Make sure the guide includes questions that allow for a narrative, not just yes or no questions or rating on a scale like you often see in surveys. You want to be able to put together a story from these answers. Like, tell me how you felt the first time you signed in. Or, when you signed up for our product, what were you trying to accomplish?
Also, I would say, always record your interviews. That way, you can take these video snippets and use them in reporting. It’s not just you saying, this is what we’re hearing. A video shows your customer’s exact experience, in their own words.
MW: Thank you again for talking with me, Anita! We know how critical this topic is for our audience. Preventing churn is really the key principal of Customer Success, so uncovering the reasons for that churn becomes a crucial exercise in order to fight it!