By Chandrashekar LSP, managing director, Zoho Canada
Understanding why customers leave is critical to improving customer retention. By taking a closer examination of customer behaviour, businesses can gain a fresh perspective on how to manage customer churn.
In an era where both businesses and consumers are tightening their budgets, the emphasis on customer acquisition has intensified. While this reaction is understandable given economic challenges, it’s essential to recognize that acquiring a new customer is significantly more costly – at least five times more – than retaining an existing one.
However, the issue runs deeper than a mere numbers game. Some aspects of the customer acquisition process might inadvertently drive customers away. So, without a precise understanding of why customers are departing, businesses are doomed to repeat their mistakes.
The process of identifying the causes of customer churn requires a deep dive into internal processes and data collection, ensuring that the right metrics are being tracked. For many companies, this can seem like a daunting task, particularly in the upmarket segment where thorough analysis is complex, costly, and demands considerable employee effort. Nevertheless, the rewards far outweigh the challenges.
Understanding Customer Behavior
Customer turnover statistics provided by technology vendors only tell part of the story. There’s a substantial difference between a customer who briefly tried a product and one who has been a loyal user for years but suddenly departs. This distinction is often overlooked in customer success analysis, where both scenarios are treated equally, relying on single data points to encapsulate a multifaceted statistic.
To gain a deeper insight into why customers leave, businesses must precisely identify the types of customers they want to evaluate, and then generate relevant statistics for each category. For instance, technology vendors keen on understanding the success of long-term users should exclude measurements related to their freemium products, which are more likely to be dropped easily. Additionally, it’s crucial to monitor which apps are being used and their frequency during a typical workday. Some software, like project management tools, might become less relevant after a project’s completion, while others, like email or video chat programs, remain integral to daily office life.
Also, examining clients’ timelines as a business can provide invaluable insights into turnover statistics. While some information may initially appear irrelevant, it’s crucial to read between the lines. For example, consider a long-time account leaving a technology vendor due to a change in their CTO, who subsequently advocates for a different CRM system. While some individuals within the organization may be aware of this change, it’s vital to ensure that this information is communicated and correctly incorporated into any modifications to customer success strategies.
Eliminating unclear variables is essential. Customers switch software for various reasons, and it’s imperative to pinpoint the exact cause before attributing it to the company’s actions. Perhaps a customer was acquired and compelled to switch due to external factors. Given the many clients on a company’s roster, it’s understandable that some customer use cases might fall through the cracks – this is the time to track them down.
Starting Anew
To prevent customers from leaving, companies must consider how they initially engage with them. GardaWorld (formerly Liberty Security), is a prominent independent security system provider in Canada that offers a compelling example of this engagement fact. Facing challenges in their sales operations and customer management, the company sought a new CRM system. GardaWorld’s approach was unique – they realized that their sales strategy was heavily reliant on a “land-and-expand” model, requiring significant customer interaction and support. However, limitations in product offerings hindered their ability to upsell customers effectively.
The company’s solution was to adopt a CRM that facilitated deeper customer segmentation. For instance, they could isolate customers using free software trials, allowing sales teams to provide tailored attention. This level of categorization streamlined their operations, reducing the time spent tracking essential customer information.
Upon implementing the new CRM, Liberty uncovered critical insights. They learned that certain customer departures were beyond their control, driven by regulatory requirements. By removing this factor from their metrics, it no longer influenced their decision-making. Furthermore, they identified that the most crucial factor in customer retention was the onboarding process. The existing one-on-one training sessions were not yielding the desired results. Liberty integrated a training module into their CRM, standardizing and simplifying the process for customers, who could now train at their convenience.
The results were remarkable – customer turnover rates plummeted to a mere 1%.
Another Viewpoint Perspective
When a customer leaves, it’s natural to seek reasons for their departure. However, the root cause may originate long before the customer even uses the application. Decisions driven by fear, such as inflexible pricing models, can deter customers and lead to wasted efforts in retaining them.
A better approach for mid-market companies is to establish dedicated onboarding and migration teams. These teams can pinpoint the factors contributing to customer churn and address them proactively, empowering companies to retain their customers more effectively.
