Churn is a paramount topic in SaaS, as we all know. If every dollar of ARR is worth $6+ in the long term, including upsells and second order revenue … then of course, by the same token, for every dollar of ARR that churns … you’re losing $6 of notional ARR. Lose a $100k customer? That’s really $600k over the long term. Yikes.
So of course all great SaaS companies carefully measure churn and target decreasing it as one of their core metrics.
But maybe even more important is measuring Almost Churn. Why? Well, for every customer that churns … there’s at least another one just like them that almost would churn. Maybe they stay out of laziness. Maybe they stay because it’s already in the budget. Either way, these at-risk customers are certainly only behaviorally loyal — not attitudinally loyal (more on the difference here).
And the customers that do Churn — well there’s not much you can do about them. You’ll only get a handful back. And the customers that love you? Of course, you need to keep investing in them. But if some love you, and are buying more — you’re doing something right. It’s the middle category, as founders, as CEO, to put the extra effort into.
One simple way to think about it: whatever your churn rate is, find an equal percent of your customers as At Risk. As Almost Churn. If 15% of your revenue churns each year, find the other 15% that’s at risk.
Once you’ve systematically found them — what’s actionable here? A few suggestions:
- First: Get On a Zoom or When We Can Again, An Airplane for Bigger Customers. Meet Them. Talk to Them. Hear Them Out. Show them what’s coming. Acknowledge your mistakes. Explain to them where it’s getting better. And by on a Zoom or a plane, I mean You. Mr. or Ms. CEO / Founder. Not just your client success manager. Having your team do the rounds is critical. But you showing up — that’s a sign of respect. It shows you care. And it will produce returns.
- Get Weekly Reports on Who the At-Risk Customers Are, and Quantify It. Force your client success team to identify the 15% (or whatever number) of customers are at risk, each week. With an action plan. This can be hard to measure with utilization alone — sometimes your most unhappy customers may still need to use your product. For now. So if you don’t know who this 15% is, you’re going to need to ask your customers and find out. And Force your Customer Success Team to Force Rank Their Top 5 Most Requested Features. And build 1 or 2 each quarter or even each release. But if the team doesn’t force rank them, it will be way too many one-off inputs to process.
- Hack Net Promoter Score and CSAT to Find the At-Risk Customers. Readers of SaaStr will know I’m rather skeptical of the use of Net Promoter Score as a primary metric in SaaS start-ups. It’s backward-looking, and more importantly, it’s subjective, not really quantitative, and not connected to revenue. But Net Promoter Score can be a great way to ferret out individual unhappy customers. If you don’t or can’t ask them 1-on-1, a NPS or other survey will quickly ferret out unhappiness. And Don’t Rely on Falling Utilization Rates as a KPI / Health Score. Because it is a Lagging Indicator. Once usage stops or slows down, they’ve already chosen another vendor.
- Do QBRs With Customer > $20k ACV, Even If You Think They Are Not a Great Use of Time. Quarterly Business Reviews may seem a bit stilted and even dated. But they work. They work because customers prepare, and they work because customers provide structured, honest feedback. They work because in fact customers often won’t share all the critical feedback unless you ask them in a structured format. The QBR is that structured format. And Do More Customer Marketing. The more marketing you do to your existing base, the more chances you give them to raise their hands. More on that here.
- Angry Customers Aren’t Lost Customers. So Go Save Them. Believe it or not, you really can save a ton of your most unhappy customers. You really can. You can save customers that never deployed. You can save your biggest complainers. You just have to engage. Sell them all over again. It won’t be fun — you’ll need a thick skin sometimes. But it will work. I guarantee it. And believe it or not, you can turn a lot of them into your happiest customers. If you invest the time. Most importantly, remember angry customers haven’t yet given up on you. Once they stop complaining, well that’s when they’ve given up.
I know you want to spend more of your time on new potential customers first, and on your top logos and biggest and happiness customers second. But if you do that, you’re shortchanging one of the highest ROI activities you can do as founder and/or CEO. Which is to save, and then ultimately even grow, your Almost Churn accounts.
(note: an updated SaaStr Classic post)