7 Reasons Why Your Customer Churn Rate Is High

Wondering why your customers are leaving you and choosing your competitors?

With a drastic shift from an “on-premise” model to a “subscription-based” model, the enterprise SaaS industry has seen a radical shift of focus from profit-centricity to customer-centricity.

Now customers have the power to decide on how they want to solve their problem and who would solve it for them. If your company cannot deliver what was promised to them during sales, it’s most likely that you would service a “lost customer” for the rest of their subscription, and eventually, the customer will opt for another service provider (probably your competitor).

You don’t want that, do you?

In fact, no one would enjoy losing their customers because we all are well aware of the customer acquisition costs.

Lincoln Murphy, Customer-Centric Growth Leader & Expert has explained in his article that 5%-7% is an acceptable customer churn rate in the enterprise SaaS industry.

Is your churn rate under 5%-7%?

If yes, then you are doing all the right things and you should aim to further optimize your customer churn rate. (Good Job Here!)

If not, this blog is exactly going to talk about 7 such factors that are causing your customers to opt for your competitor’s business over yours!

Let’s get started

Churn Rate

Shaky Onboarding

The transition of a lead to a prospect and then finally to a deal closed is no less than a victory for your sales team. And in this process, there are chances that your sales team would have committed to delivering something that the product or any internal team isn’t aware of.

When the deal is closed, the sales team usually covers all the customer requirements in a SOW (Statement Of Work) document. The onboarding team then translates the requirements in the SOW document into a BRD (Business Requirement Document).

The onboarding team does this in two steps,

  1. Internal call with the sales team
  2. Kick-off call with the customer - Here the aim is to come to terms with the actionable items and set right expectations from the beginning.

Failing to follow these steps leads to a rocky onboarding process and creates a gap between the customer’s expectations and your actual deliverables.

This makes for a slippery slope for all the future interactions with the customer

This initial disappointment often leads to churn of customers making a negative decision about the retention of your products and ultimately choosing an alternative for their problems.

Zero syncs in cross-functional teams

Your customer’s first point of contact is usually your sales team and once the deal is closed, the sales team then passes the information to the onboarding/implementation team or the project management team.

The information passed on from the sales teams is often in silos of tools, which might have all the information needed, but they might have missed the nuances of the project promised during the sales process.

Capturing all the requirements in a centrally located tool or business requirement doc and getting a verbal sign off from the customer sets the tone for the rest of the engagement.

Result?

Your implementation team would have no knowledge of some of the use cases put forth by the customer, while the customer, on the other hand, would expect the delivery of the same.

Now, this is where the customer’s expectation goes for a toss because, during the time of delivery, the product would miss some of the important use-cases that the customer requires and was expecting.

B2B SaaS businesses have been facing this problem of successful customer onboarding and streamlined implementation process for a long time now.

This challenge of unsynchronized cross-functional collaboration has affected the NRR (Net Revenue Retention) for many major organizations.

Zero Visibility

Once the customer has subscribed to your product, they have low to zero visibility on what has been the progress of their requirements.

They would convey their use-cases to either the sales team (initially) or the customer success or the project management team, and then they would just wait till the product comes out to check if you have met their requirements.

Any customer would like to see the progress of what is happening with the product they have paid for.

Your customers do not know what is going on in the implementation phase and when they should expect the delivery.

Your implementation or the project execution teams usually handle this situation by preparing weekly status reports to keep the customer updated about the progress. However, it’s more of an added task for your team.  

Not having a cadence of project status reporting will lead to your customers having no reason to trust your process as they can't possibly see what has been the progress since the deal was signed and the project kicked off.

Again, give your competitors a chance to win over your customers.  

No Accountability

The sales team will help your business lock the customers, the product and implementation team will help you build the product and the customer success, and the account management team will help you maintain your customer relationships.

So when a customer leaves, who would you blame?

If your answer is one particular team, let us tell you, you are completely wrong!

As we mentioned earlier that information is passed from the sales team to the other teams in silos of tools. Many details (nuances) of the deliverables may have been missed out.

The product team would then work on whatever information is available and the customer success team will work on getting things delivered on time.

But having no one accountable for the delays and information gaps is also a major problem faced by the enterprise SaaS businesses.

In the end, the customer is left with a partial product and no one to be held accountable for, which again leads to churn of customers moving towards your competitor’s road.

Lack of Innovation

When your business is at risk of losing your customers, you then shift your entire focus towards operational fire-fighting and customizing the product to meet their needs.

The product roadmap takes a back seat and the primary focus is product customization.

This leads to your implementation teams moving into frenzy mode and, in-turn shifting focus away from adding value through innovative solutions to simply making sure the customer needs are met.

And when a product lacks innovation, there is a high chance of the product becoming obsolete or stagnant, giving your competitors an advantage in acquiring new customers and snatching your old ones.

Negative Value Realization

With the implemented product/solution lacking the agreed upon requirements, you are now at the risk of servicing a lost customer who might be biding time till the end of the subscription before churning.

Before we move further, let us first understand what value realisation is.

What is Value Realisation?

Mathematically put Value Realisation = (Value Promised/Value Delivered)

Here the value promised is the commitments made by your team while signing the customer and the value delivered is the actual product delivered to your customer.

Simply put, the value realizations help your business analyze how successful your product was in solving your customer’s problems.

The positive value realization shows that your customer is happy with your product, but a negative value realization is a sign that there is an enormous gap between your customer’s expectations and what is being delivered to them.

Go-Live Delays

With internal conflicts, delayed communication because of silos of tools, back and forth of customer use-cases, inevitably, the go-live date fixed during the onboarding stage is definitely going to be delayed.

No customer wants to wait for a longer period to get their issues resolved, especially when they know that some other company (mostly your competitor) can get things done much faster.

The delayed go-live process is also one factor for B2B customer churn that moves your customers to the competitor’s business.  

Final Thoughts

The B2B SaaS market has been constantly growing and so is the competition in the industry. Your product can be a differentiating factor, but that’s not enough to sustain in the competition.

Customer success and experience are now taking the forefront and any company that fails to understand the importance of this will gradually decline in business.

Global leaders like Microsoft, Salesforce, Amazon, and many others have adopted customer-centric approaches in their business and it’s high time that even small and medium scale businesses take a leap too.

Competition is inevitable in today’s enterprise SaaS world, but what makes your company stand out from the competition is how efficiently your product helps your customers and how often your customers come back to you.

Overcoming the above 7 challenges will help you retain your customers and help you minimize your customer churn rate.

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