Are you concerned about your company's high customer churn rate and looking for ways to lower it?
With a drastic shift from an “on-premise” model to a “subscription-based” model, the enterprise SaaS industry has seen a radical change of focus from profit-centricity to customer-centricity.
Now customers can decide how they want to solve their problem and who will solve it. If your company cannot deliver what was promised to them during sales, you would most likely service a “lost customer” for the rest of their subscription. Eventually, the customer will opt for another service provider (probably your competitor).
You don’t want that, do you?
No one would enjoy losing their customers because we all know 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 enterprise SaaS churn rate under 5%-7%?
If yes, you are doing all the right things and should aim to optimize your customer churn rate further. (Good Job Here!)
This blog is precisely 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
The transition of a lead to a prospect and 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 an SOW (Statement Of Work) document. The onboarding team then translates the conditions in the SOW document into a BRD (Business Requirement Document).
The onboarding team does this in two steps,
Failing to follow these steps leads to a rocky onboarding process and creates a gap between the customer’s expectations and your deliverables. This makes for a slippery slope for all future interactions with the customer.
This initial disappointment often leads to the reasons for customer churn making an adverse decision about the retention of your products and ultimately choosing an alternative for their problems.
Your customer’s first point of contact is usually your sales team. Once the deal is closed, the sales team 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.
Your implementation team would need to learn of the use cases put forth by the customer, while the customer, on the other hand, would expect the same delivery.
This is where the customer’s expectation goes for a toss because, during delivery, the product would miss some of the critical use cases that the customer requires and is expecting.
B2B SaaS businesses have been facing this problem of successful customer onboarding and streamlined implementation process for a long time.
This challenge of unsynchronized cross-functional collaboration has affected the NRR (Net Revenue Retention) for many major organizations.
Once customers subscribe to your product, they have low to zero visibility on the progress of their requirements.
They would convey their use cases to either the sales team (initially), the customer success, or the project management team, and then they would just wait until 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 must learn what is happening in the implementation phase and when to expect the delivery.
Your implementation of the project execution teams usually handles 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 give your customers no reason to trust your process, as they can't see the progress since the deal was signed and the project kicked off.
Again, give your competitors a chance to win over your customers.
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 customer relationships.
So when a customer leaves, who would you blame?
If your answer is one particular team, let us tell you, you are entirely wrong!
As we mentioned, that information is passed from the sales team to the other teams in silos of tools. Many details (nuances) of the deliverables may need to be included.
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 someone accountable for the delays and information gaps is also a significant problem that enterprise SaaS businesses face.
Ultimately, the customer is left with a partial product and no one to be held accountable for, leading to the customer churning and moving towards your competitor’s road.
When your business risks losing your customers, you shift your 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 shifting focus away from adding value through innovative solutions to simply making sure the customer needs are met.
And when a product needs more innovation, there is a high chance of the product becoming obsolete or stagnant, giving your competitors an advantage in acquiring new customers and snatching old ones.
With the implemented product/solution needing to meet 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 the customer churns.
Before we move further, let us first understand what value realization is.
Mathematically put Value Realization = (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, value realizations help your business analyze your product's success in solving your customer’s problems.
A positive value realization shows that your customer is happy with your product. Still, a negative value realization indicates an enormous gap between your customer’s expectations and what is being delivered to them.
With internal conflicts, delayed communication because of silos of tools, and back and forth of customer use cases, inevitably, the go-live date fixed during the onboarding stage will be delayed.
No customer wants to wait longer to resolve their issues, especially when they know that some other company (mostly your competitor) can get things done much faster.
The delayed go-live process is another factor for B2B customer churn that moves your customers to the competitor’s business.
The B2B SaaS market has constantly been growing, and so has the competition in the industry. Your product can be a differentiating factor, but that’s not enough to sustain 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 companies leap too.
Competition is inevitable in today’s enterprise SaaS world, but what makes your company stand out 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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