Rough math (varies):
80% or so of your customers will renew no matter what
10% will churn no matter what
10% are on the fence
SMB SaaS focuses all energy on first category
Support often tied up with second category
Enterprise SaaS spends huge energy on third
— Jason ✨Be Kind✨ Lemkin 🇮🇱 (@jasonlk) June 25, 2023
The other day, I had an experience I’ve never had in 14 years of building and buying SaaS: I became That Angry Customer. Really, an Angry Ex-Customer.
I don’t have time or energy to get too angry about a few bits and bytes, or a few nickels. But in this case, the vendor just went too far, too many times, and created disruption all across our little tiny team. Again and again and again. The details don’t matter, but it was a piece of software that simply did not work at all for us. We never used it in production. And yet, the vendor kept charging us, and well, more.
Again, the details don’t matter. The learning was being on the other side. For the first time ever, right or wrong, I felt so mistreated by a software vendor that I became … The “Crazy” Angry Ex-Customer.
All I really did was complain a bit about it, but quickly, a deluge of other prospects and customers approached me. They reached out on LinkedIn. They reached out on email. They reached out on Twitter. Dozens of prospects and customers reached out to share their similar stories of frustration.
What I saw from that was how, if you aren’t careful, a few angry customers can become an avalanche.
I let it go and moved on. But it was a vivid reminder, that just as Happy Customers can create a massive amount of Second-Order Revenue from upsells, word-of-mouth, referrals, champion change and more … (a deeper dive on that here) … a Very Unhappy Customer, especially a Very Unhappy Logo Customer, can do a lot of damage:
- Customers talk with each other — about the good and the bad. One logo customer, one nexus-type customer, can easily spread the word to 20-30 prospects and customers, or more. At events. At meet-ups. On Facebook groups. And it can spread quickly. Everyone knows other peers in the industry. They will spread the word if you treat them well. They also can do the opposite, if they feel treated especially poorly.
- They tell your partners if you fail them. Your top customers and logo partners will also tend to work closely with your top strategic partners. If they tell Salesforce, or Zendesk, or Shopify, or whomever that you failed them — that damage can reverberate at an entirely different level. And for years. Just as your top partners recommend you, and bring you into deals … so will they avoid vendors that make them look bad.
- Customers can churn but still recommend you. Don’t forget this. I didn’t really get this for a long time. In your team’s drive to hit the ARR target, every churn can seem like the enemy, and every lost customer can seem and feel like every other. But that’s not the case. You can lose customers just because now isn’t the right time for them. Or maybe your product is good, but too heavy or complicated for today. Or maybe they loved your product, it just lacked a key feature. But that doesn’t mean they won’t tell other prospects and customers you are one of the top vendors. When folks are asked for a vendor recommendation, they often share not only the vendor they are currently using, but also their #2 choice. It’s natural when asked to share several recommendations. If they leave you, if they churn, at least make sure they leave with you as their #2 choice. This can pay huge dividends down the road.
Always play the long game with customers. They want to quit, you instantly help them quit. A refund? Instant refund. They have a complaint, dig deep, get your best people on it. Bit by bit by bit you invest in a reputation that will pay dividends for a decade. Do any version of…
— Eoghan McCabe (@eoghan) February 8, 2024
So what’s actionable here?
- First, if you want to go long, win, have the highest NPS, and the highest net revenue retention, you have to make it easy to leave. Pleasant. Even, make sure they leave with a warm feeling. Don’t play games. Don’t force folks into multi-year contracts they don’t want. Don’t force inorganic renewals. Let folks out of contracts if they aren’t using your product. The easier you make it to go … the easier you make it to come back. And to recommend you to others.
- Create Top Logo SWAT teams. You want all customers to be happy, but especially the top brands and logos. If you close Google or Twilio as a customer, you just have to make them happy. Even if it’s just a $10k deal to start. Create a special Logo SWAT Team in Customer Success that is responsible for logo % retention for top accounts. Give them a bonus and a core KPI for retaining the logos, no matter how much revenue is associated with the accounts. They don’t have to grow the accounts. That’s not their job. They just have to keep them happy.
- Ask for an exit interview. Let the customer go the second they ask to go. Just ask for one thing as a favor — an exit interview. Ask them what you could do better next time. And ask if there is any chance in 2-3 years you could get them back. Once in awhile, you’ll even hear they may want to keep you for one small group or division for now.
- Send chocolate and T-shirts. Say Thank You for Trying Us. Be Grateful. Remember: They didn’t fail you. You failed them. To you, it’s just one deal. But your customers spent so much previous time qualifying you, testing you, deploying you … and if it didn’t work out, that’s on you. So send them a big Thank You package when they leave. It can’t hurt. And no one does this.
- Never let it happen again. There is no “churn” in key and logo accounts, only failure. Review why it happened. Make the product, onboarding and process changes so it doesn’t happen again.
- Show up. Visit all your top logos and accounts at least twice a year. The more often you do, the less likely they’ll leave angry. It’s harder to be angry with someone you’ve broken bread with.
- Be careful about signing customers you can’t properly service. Churn-and-burn deals are bad for everyone. Don’t let your sales team do them.
- Never, ever, ever blame the customer. This is the last error I see so many vendors make. Don’t blame the customer. The customer isn’t always right. But they trusted you.
If you let them leave as happy as possible. If you thank them, tell them how much you appreciated them being a customer for a while, they just might come back some day. And there’s a far, far more likely chance they’ll say better things to their industry friends.
And talk to their industry friends, they will.
(note: an updated SaaStr Classic post)