Bad-fit Customers: A Perfect Illusion
Listening to Lady Gaga’s new song that just dropped, I realized that bad-fit customers are a Perfect Illusion.
Think about it… bad-fit customers often:
- pay you on a consistent basis
- use your product
- access your self-service support systems
- seem happy enough
But things are not as they seem, and you fell into the trap.
You’re so captivated by the revenue from these customers and how good your retention numbers look, you can’t see the big picture.
It’s time to wake up.
See, for many companies, bad-fit customers are the source of high churn, and for them, there’s no illusion… they realize the acute pain of acquiring bad-fit customers. Whether they stop acquiring bad-fit customers is a different story; but at least they have no illusions.
But for some companies — maybe yours — bad-fit customers don’t churn out; they stick around and keep paying… increasing support costs while dragging down growth rates (and morale) as they fail to expand their use of your product, won’t invite you into other parts of their company, and refuse to advocate for you publicly.
Bad-fit customers that stick around are likely just waiting for their contract to run out so they can bail, or for a better alternative to your company to come along.
But you think everything is fine.
You’re stuck in that middle zone; you see, they need something to help them do what they need to do, and even though your product doesn’t do it fully or maybe your product is feature-complete, but you don’t provide them with the appropriate experience, they stick around.
And you mistake that “sticking around” for “they’re successful and everything is great.”
But it’s not. They likely have one foot out the door, waiting for a company that understands their Desired Outcome to come along and give them what they need.
Or they might be perfectly content to just stay your customer, never doing anything to help, taking up more and more of your resources, perhaps requesting discounts simply to stay, as they work around the barriers you’ve put up that sit between them and their success.
Because you think a “good customer” is one that simply pays you every month, you’ll be shocked — SHOCKED — when they finally churn out and as a parting gift, they leave you a few bad reviews on the way out.
The new measure of success — not just my definition, BTW, this is what investors are looking for — is having customers that are on an ascension path. Customers that are simply renewing at the same level are seen as stagnating and are actually looked at as a negative; a drag on growth and ultimately company valuation.
A company with customers on an ascension path is simply a more valuable company than one with customers that are just renewing at a consistent rate.
Why is that? Think about it… companies that do business with you are always evolving; if you’re not evolving your relationship with them, then you’re growing apart and something will eventually give. Customer Success-driven Growth is pegging your growth to the success of your customers.
You’re doing the opposite of that; pegging your success to the stagnation of your bad-fit customers.
It wasn’t good revenue… it was a perfect illusion.
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Lincoln Murphy is a world-renowned Growth Architect, Consultant, Author, and Keynote Speaker. As founder of Sixteen Ventures — and previously leader of Customer Success Evangelism at Gainsight — he’s used Customer Success to drive growth across the entire customer lifecycle for more than 400 SaaS and enterprise software companies over the last decade.
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