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Value Every Day Keeps the Churn Away

Among our companies with incredibly healthy net retention that have grown rapidly to $100M+ revenue, one common denominator is clear: these companies understand hidden drivers of churn and have moved from reactive mitigation to proactively prevent churn moving forward.

Our last blog post in this series focused on the question, “I’m facing an at-risk customer – what do I do?” This piece focuses on how to apply preventative measures to maximize value delivery and make your customers feel like they are your top priority.

These initiatives are not only about revenue retention, they can also increase employee engagement. When you engrain such a mindset in your culture, you embed a virtuous cycle between your employees and customers.

This blog post only focuses on a subset of the most common challenges we see our portfolio companies face. We recommend annually conducting “Voice of the Customer” projects to gather feedback specific to your context and translate it into an improved go-to-market and retention strategy (more on this in Part III).

ARE YOU READY?

You’ve built a world-class (or at least very good) customer success and account management functions. You’ve read our first piece on at-risk customers (Don’t Be A Bystander). You have quarterly business reviews with your customers, and you even score customer health on a continuous basis. How could you still be inadvertently causing churn? And how do you mitigate?

Some of the most common challenges and mitigants we have seen across the Susquehanna portfolio:

ACCEPTING TERMS PRE-SALE THAT SET YOU UP FOR CHURN

CHALLENGE DESCRIPTION MITIGANTS

Misaligned expectations

 If a sales rep makes a promise before closing an account that employees post-close (CSMs, AMs, etc.) can’t accomplish, you are overselling – and customers have every right to feel frustrated.
  • Better align marketing, sales, implementation, and customer success: as appropriate, when closing a deal, make sure your services, onboarding, and success teams are at the table.
  • Involving appropriate parties effectively will improve hand-off so that the delivery team is also perceived as trusted advisors. As noted by Natalie below, you can ensure internal consistency and alignment.
  • Conduct sales training: record and review pitches with team members to highlight and correct any overselling.
  • Consider claw-backs for sales reps in instances of quick churn.
Functions don’t work well together cross-functionally Functions (e.g. sales) can be well-oiled machines when working alone, but still have processes fall apart when cross-functional effort is entailed.
Accepting unfavorable terms In trying to close a sale, Sales sometimes accepts terms that aren’t standard or acceptable (e.g. short-term contracts that raise questions on commitment, payment terms like “no payment until go-live” and create ambiguity on start date, etc.).
  • Get aligned on what employees should do when they find themselves in difficult conversations and negotiations with prospects.
  • An example best practice is having a robust and well-defined “concessions matrix.” For more on this topic, read Defensive Pricing.
  • Understand that it’s tempting to close a sale – but it’s more expensive and worse long-term to simply “win” a customer, but spend money (investment by sales, time during implementation, and more) on a customer that will ultimately churn because they are set up for it during the negotiation.
  • Require sign-off from VP Sales and/or CFO on sales with certain key terms

Customer Success can play an important part in the pre-sales process. For larger enterprise deals, we bring in the CSM or CS leader to explain their role and how they are committed to helping the customer achieve value throughout their partnership with us. This builds confidence in their purchasing decision, knowing they will have ongoing support to assist them in their digital transformation journey.”

-NATALIE FEDIE | VP of Customer Value, HighRadius

LACK OF NEAR-TERM VALUE

CHALLENGE DESCRIPTION MITIGANTS
Mismatch between price and value delivered If you provide an enterprise product that takes 6 months to implement, a customer prepaying a $1M per year contract is going to be wondering where their $500K went.
  • If you’re dealing with an at-risk customer post-sale, consider proactive contract restructuring – move around pricing in the contract to match value.
  • Some examples: maintain ASP (Average Selling Price), but structure less in year one versus later years, allow more users, add the customer as a “beta” for a new product, provide discount on upsell.
Drawn out time-to-value (TTV) Without the ”quick-wins” confirming TTV early, customers get discouraged and abandon implementation..
  • While a customer should probably still be paying for your product/service even during implementation (to prove commitment), ensure pricing ties to a clear ROI, timeline, or value metric (e.g. usage).
  • Incorporate implementation timeline into your overall business case and properly set expectations in the sales cycle and beyond.
  • Find ways to shorten and optimize onboarding so that users start off on the right foot.

If a customer uncovers a gap in product capabilities or has a unique use case requirement, we may decide to invest development resources to customize the solution in order to retain the customer. However, you must exercise judgment to determine when it makes sense to invest resources in these situations. Our focus on delivering business outcomes helps us eliminate product enhancements that do not directly increase value for the customer. Saying “yes” to every product enhancement request is not scalable, and using value as a filter is a good way to increase efficiencies and stay focused.”

-NATALIE FEDIE | VP of Customer Value, HighRadius

At iCIMS, our challenge centered around the fact that we knew had to stay pure SaaS architecturally, yet still listen to the customers’ individual platform needs – then act. The difficulty came in the number of change requests received across thousands of customers and how to best prioritize them. To deal with the issue, we created the philosophy, ‘BUILD FOR THE GOOD OF THE PLATFORM’ and actually marketed it to our customers. It allowed us to immediately focus only on changes that benefitted the platform and entire customer base, and say no to requests that did not have a broader benefit beyond the customer requesting the change.”

-COLIN DAY | Founder & Chairman (Former CEO), iCIMS and SGE Senior Advisor

MISALIGNED TIMELINE

CHALLENGE DESCRIPTION MITIGANTS
Misaligned renewal or Executive Business Review (EBR) cadence You may have a renewal cadence that is annual, every three years, etc. However, your customer is likely on a different schedule – they may be considering renewal on a timeline that is misaligned with your scheduled reach-out. By the time you’re reaching out, they may have already decided to switch to a different vendor and simply not formally informed you yet.
  • Understand when your different customers generally start considering their next contract (typically correlates with their budgeting cadence, contract size, or other milestones depending on the industry).
  • Get ahead on ensuring a future renewal, while also punting a potential churn further out.

 

LACK OF KEY RELATIONSHIPS

CHALLENGE DESCRIPTION MITIGANTS
Underestimating or neglecting
key stakeholders 		Stakeholders where you have a weaker relationship can play a swing vote for new sales, renewals, and expansion.
  • Often, particularly with enterprise sales, your buyers and users may be completely different constituencies. Build and nurture relationships with both.
  • Split CSMs and AMs as appropriate (refer to our growth hack, Boosting Revenue Growth By Scaling Customer Success for more on this topic).
  • Get in front of new stakeholders early and often – changing executive sponsors is one of the most material drivers of churn.

We realized that for some of our largest customers, if we’re going to hold an EBR (Executive Business Review) that will impact renewal, it needs to be at least 18 months before the contract renewal date. If a big customer is going to transition off our system, they’re going to start that evaluation around 18 months out and likely start implementation 12 months out. If we only start renewal discussions 90 days or even 6 months before renewal – the decision will have already been made without our team at the table to inform and influence the outcome.”

-ADAM FEIGENBAUM | Former Chief Customer Officer, iCIMS and SGE Senior Advisor

Because measurable value may not be recognized until after the implementation is complete, it is important to have a strong relationship with the customer’s executive sponsor to make sure expectations stay aligned during the implementation.”

-NATALIE FEDIE | VP of Customer Value, HighRadius

In summary, we’ve found better alignment across customer-facing teams, managing customer expectations on value realization, timeline, and proactively engaging with (new) key stakeholders can meaningfully impact customer retention. With this, and a little luck, hopefully this means fewer fire drills for everyone.

Stay tuned for our 3rd blog post in this series, “Roadmapping A Path For Retention Uplift.”


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Josh Elser

Josh Elser

Proud Pittsburgh native (and sports fan), Mars colonization enthusiast, and aspiring tennis player who won’t stop talking about self-driving cars


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