If you’re in the SaaS business, it’s natural for you to worry about customer churn. Churn is what gives your customer success team fever chills, hurts your recurring revenue numbers, and anything beyond 5% will rock your company’s foundation.
But, can we leverage conversation intelligence to identify potential customer churn signals so that we improve our customer retention efforts? The short answer is yes, and this blog post explains how.
Let’s start with understanding the common reasons for customer churn.
Common reasons for customer churn
Customer churn is like the common cold —while everybody gets it at some point or another, some are more prone than others. The downside is—it’s hard to put a finger on something as a specific cause for customer churn. It’s usually a consequence of a set of things that may or may not be in your control.
Here are some common, addressable reasons for customer churn:
1. Poor product-customer fit
When customers sign up for your product, they usually have clear goals they want to achieve using your product. They will stick around if they get the results they want and abandon your ship if the investment on your product doesn’t justify their return on investment (ROI).
That said, sometimes we don’t realize poor-customer fit until it’s kinda late. For instance, it could be your brand and marketing hype that brought a customer on board, and this is where a thorough qualification process helps. You’re better-off listening to the early tell-tale signs of misfit than ignoring it for short-term gratification.
2. Sales-to-customer success account handoff experience
Sometimes, the reason for customer churn needn’t be your product or service, instead it could be a gap in terms of customer experience—for instance, it could be the way an account handoff happens from sales to customer success.
In absence of a proper transition from sales to customer success, customers can often feel like they are ignored or neglected. And when customers are not fully engaged with your brand, they don’t stick around for too long—hurting your customer lifetime value (CLV) and other key retention metrics.
3. Failing to meet customer expectations and poor service quality
In general, sales teams are filled with hard-charging, go-getter individuals. Their Type A personalities lead them to overperform, overdeliver, and sometimes over promise too. It’s the overpromises that later become a self-sabotaging factor for customer churn.
Take product roadmaps for example. Roadmaps at times are beyond everyone’s control—the product, engineering, marketing, or sales teams. And yet, sales reps often find themselves in tricky deal situations where customers ask them about certain features and the sales folks have to commit to it with a timeline. But we all know that new feature releases may or may not go as planned. And from a customer standpoint, that’s a mismatch between the promise and the outcome.
Poor customer service adds to the story. It also leads to a loss of $75 billion in business worldwide. Just for some perspective—that’s three times the ARR figure of Salesforce, the biggest SaaS giant.
4. Bad product experience
For product companies, launching new features and fixing bugs are two sides of the same coin. Updating an existing feature, for example, often leads to new technical snags that nobody expected. Having bugs is fine—as long as you’re committed to fixing them on time.
Product bugs are the viruses that can kill customer retention if you ignore them for too long. Studies show that about 14% of customers abandon brands due to bad product experiences.
Customers are usually forgiving of brands that listen to their bug reports and fix the problems ASAP. But the problem is, not all customers are forthcoming with bug reports. Also, a lot of product bugs go unreported or undetected.
The latter is probably the reason why the global market for bug bounty was valued at $223 million in 2020—projected to become a whopping $5465 million market by 2027! The takeaway here is—buggy products are exit doors for customer churn.
5. Cutthroat competition in your niche
While it’s easy to attribute customer churn squarely on the success team for failing to communicate your product’s value to the customer, it’s not always in their control to stop customers from falling through the cracks when they are constantly evaluating other options.
Buyers can sometimes fall for the shiny object syndrome—a phenomenon that draws people’s attention towards the latest trends, new products and offers. B2B buyers are no exception to this, and high customer churn is especially rabid in highly competitive niches like SaaS, media, and education.
The logic is pretty simple—the more options customers have, the more likely they are to switch for convenience factors like cost, features, and other benefits.
Leveraging Conversational Intelligence to tackle customer churn
Most customers don't just wake up one day and decide to cancel your product subscription. As discussed above there are usually a set of reasons that eventually lead to a customer deciding to ultimately cancel your product subscription. And more often than not, there are leading indicators that signal potential customer churn which can be used to improve retention.
How to identify these signals?
Leveraging a customer intelligence software is a good starting point. A conversation intelligence software typically records, transcribes, and analyzes customer and prospect conversations. The software allows sales reps, account managers, and customer success managers to gain deeper visibility into their conversations and learn how to improve those conversations.
Using natural language processing (NLP), these platforms analyze conversations to identify topics discussed, talk patterns, questions asked, customer objections, sentiment, and more.
Using these insights, you can:
- Get visibility across all customer conversations to make data-driven decisions to improve their satisfaction and product adoption
- Proactively learn issues customers face, understand their expectations and prioritize your product roadmap accordingly
- Identify the talk patterns of your best CSMs to help improve upselling and cross-selling across the board
- Reduce customer onboarding time and improve productivity overall
Now, let’s look at how exactly you can leverage Conversation intelligence as a preventive measure to tackle customer churn.
1. Improving prospect qualification criteria
The job of sales is not just to close deals. They are also responsible to feel the customers’ pulse and offer them their honest advice. It all starts with asking the right qualification questions, running an effective discovery call to explore a mutual fit, and disqualifying prospects that don’t fit your bill.
Asking probing, open-ended questions will help the sales team avoid negative surprises later and also makes it easier on the customer success team to have enough context about the customer as they get onboarded. More importantly, keep your customer success manager (CSM) in the loop right through the deal stages.
As when you are in sales discovery mode, it helps to learn from previous customer conversations across sales, customer success, and customer support functions.
If you don’t have the time to listen to those entire conversations, you can go through the call summary notes and look for objections raised by customers, positive moments during the demo that a got a customer really excited, successful use cases (what problem was the customer trying to solve when they bought your product), etc.
In fact, we at Avoma,use the Jobs to Be Done framework across all our functions. It helps us set the right expectations with the customer by understanding what they are trying to accomplish with our product.
2. Identifying potential customer churn indicators
You know it’s important—but how exactly do you identify potential customer churn indicators? It’s hard, especially in today’s world of remote selling where you don’t have the luxury to read your customers’ micro-expressions.
Typically, CSMs are always on top of what's happening with their accounts—are they actively using your product, is the number of support tickets going up or down, if the renewals are happening on time, etc.
That said, customer success sync up meetings can be a gold mine for you to understand potential customer churn indicators. For example, use Avoma to track usage of phrases like “leadership change,” “champion left,” “change of direction,” “critical for operations,” or “in-house initiative” on these meetings which can be potential churn indicators. You can set up a tracker to understand the most common reasons for customer churn in case of your product or service.
Further you can proactively set up alerts based to look for these phrases uttered by your customer. And that can help you proactively take preventive measures such as devising an account-based action plan to make your product contextually more relevant.
As a customer success leader, you can also search for those keywords across all customer success meetings and filter specifically for customer utterances and dive deep into those conversations for better context.
Make sure that you aren’t pinning your customer churn analysis based on recent behavior, but are looking at the account historically. If you look beyond the recency bias, you may be able to identify a pattern across the customer lifecycle historically, and improve your customer success process based on those learnings.
3. Democratizing account intelligence using playlists
Prospect and customer conversations are a treasure trove of account intelligence that everyone in your organization can benefit from. Like we discussed earlier, having access to intelligence from sales conversations can help customer success teams draw up suitable plans for retaining customers and expanding opportunities.
Conversation intelligence softwares helps you create playlists such as discovery calls, onboarding calls, etc. so that all the teams involved in the customer journey have enough context about the customer historically.
For example, the CSM gets to know every minute detail of how the sale went down. If the customer was originally planning to buy ten licenses of your product—but then discovered some internal issues and then finally decided to start with five licenses, the CSMs will be able to weave those points into their post-handoff upsell conversations at a later period.
Remember, from a customer perspective—they are interacting with one brand, and not several teams. Therefore, the experience needs to be seamless.
4. Using AI-assisted notes and transcripts to create seamless sales-customer success handoff
Sales is often the first point of contact for your customers. They do a pretty good job of building excitement in customers, giving them a high of your brand’s promises and product capabilities.
If a CSM takes over the customer account with enough knowledge transfer from sales, it creates a first-rate experience for customers.
Think of this process like an airline passenger onboarding a flight and getting a VIP treatment that they signed up for. If sales is the ground staff at the airport, the cabin crew are CS team members who can help customers settle in, upsell them on the various meal or entertainment services, and make the most of their in-flight experience.
Some of the most common hindrances, however, are the lack of proper documentation and CRM notes when the account handoff happens from sales to customer success. And eventually the miscommunication results in customer churn. And that’s where transcripts and AI generated call summary that gets auto-synced to the CRM comes in handy.
5. Being in sync with the voice of the customer
Call transcripts, meeting notes, all key customer data discussed until now help you understand the Voice of the customer (VoC) and be aligned with them. Being in sync with the VoC helps you understand what’s working with the existing customers and how your product and organization can be their extended partner to help them achieve their goals.
It helps to delegate VoC programs to all teams across your organization so that they can aggregate customer data from all possible touchpoints. You can create templates for each function to source key information. For example, sales and marketing can run focus group interviews, product teams can conduct user research interviews, and customer success teams can focus on customer satisfaction (CSAT) conversations.
Regular VoC programs can tip you off on potential red flags that customers are experiencing with your brand. Alternatively, they can also tell you who are your best customers and what they love about your brand so that you can focus more deeply on them to build lasting relationships.
They can also help you keep an eye on your competitors and focus on positioning your brand apart from the crowd—especially at the marketing and sales stages.
Final words on managing customer churn
Customer churn is an inevitable part of running a subscription business, and contributing to retention is part of everyone’s KPI. Focusing on customer retention and improving customer engagement improves your bottom line. There are two ways to fight churn: either be reactive and learn from your customer churn analysis to course-correct your processes or proactively identify the churn signals before they happen and prevent them from churning away.
Know your competition and your areas of improvement. More importantly, know what makes your customer happy and the positive moments your customers have with your product and brand.
Finally, track relevant KPIs that make sense to your business.
