This article was written in collaboration with Ekaterina Korneeva. Ekaterina is an established professional with more than 4 years of experience in sales, account management, and client service. She is currently working in Wrike as a Customer Success Manager.
In today’s high-tech world, it’s all about the subscription-based model (SaaS). The internet has erased borders between countries and leveled the playing field. Now tiny startups can compete with established enterprise players in international markets.
What does this mean for you? Your company is now faced with different challenges and more competitors. In the traditional model, a company received most of its revenue at the moment of sale. After the sale, they weren’t all that motivated to provide high levels of customer service.
The situation in this new subscription model is totally different. Now companies receive a relatively small percentage of revenue at the moment of sale, and the main source of profit comes from providing value to a customer on an ongoing basis. It’s crucial to please the client so they continue to renew their subscription. But sometimes the client decides not to renew. In the SaaS business, we call this “churn.” We’ve listed 10 common reasons for churn and solutions for each.
Reason 1: The changing of the champion
This one can be really disappointing. You’ve done a great job connecting and getting close with a client. You invested time studying their business goals, you know their plans and expectations.
But suddenly your advocate, or champion, calls and informs you that a new person will be responsible for the processes established with the help of your product (service). Not only does it mean that you’ll need to onboard the new champion, sometimes you’ll have to sell the product all over again to that new person.
How to avoid:
One of the best ways to avoid this is to build strong relationships not only with your champion but also with a number of other stakeholders. They can be the heads of departments that are using your product, managers of dedicated teams, or the opinion leaders of the company.
In this case, if the champion changes, you’ll have a relatively large group of advocates for your product whose opinions will carry weight. At Wrike, we try to gather the contact information of at least 3 stakeholders.
It’s also good practice to regularly ask your client, “How does our product help your organization?” The more arguments you have, the stronger your position in renewal negotiations will be.
Reason 2: A new employee loyal to a competitor’s solution
Similar to the first one. Selling your tool to someone who’s used to a different solution is quite a challenge. Often, when a new executive starts to work in your partner company, they need to introduce change, develop current processes, innovate, go above and beyond, and just generally stir things up. The switch from one tool to another might be part of their global change-management strategy.
How to avoid:
This can be a tough one. The new executive might have used your competitor’s product for a long time, is happy with it, and doesn’t want to learn a new tool. So what can you do?
First, the switch to the new solution doesn’t usually happen in a day or a week. You generally have some time to prove the value of your product to the new executive. Start by gathering information on the client’s pain points that your product addresses. Next try to evaluate (or at least, approximate) the cost of transferring to a different tool. And then gather the opinions of your advocates in the company. Finally, present all this data to the new executive. If you do your homework well, your arguments will be pretty convincing.
Reason 3: Integration issues
Your product may be super-efficient. It’s a brilliant solution — as are the other 15 solutions that your client is currently utilizing. One of the key benefits of a subscription-based product is its ability to integrate with other tools.
This alone doesn’t always help. Let’s say that your product has an open API and a number of pre-built integrations. But the client wants your organization to establish the integration. They simply may not have an engineer to build the integration. Or their IT department may not be willing to add any integrations for security reasons. In any case, customers might leave if their integration expectations are not meet.
How to avoid:
Start by highlighting how your product has already helped your client. (You’ve already gathered all the arguments for reasons 1 and 2, right?). If you have an API, you can find an external technical services organization with reasonable pricing. Make sure you agree up-front on the specific benefits you are going to provide to the client when the integration is set up. For example, the client pays for the integration and gets a number of additional CSM hours from your side. Maybe you throw in an extra training session.
Based on best practices at Wrike and some other companies, here are 3 great ways to support integration initiatives:
- Prepare detailed documentation on establishing the integration, available through your help center.
- Create a dedicated section in community/help forums where clients can ask their questions on both building and maintaining the integration.
- Invest in technical services teams that specialize in building integrations per customer request.
Reason 4: Unrealistic Expectations
What can you do when your customer needs a CRM system and gets project management software? Or when they were informed of the new release that’s going to include a wide set of new features and, in fact, none of these features have been added to the roadmap? You can keep coming up with new workarounds that may cover the client’s pain points for some time, but what if you don’t have one up your sleeve at a critical moment?
How to avoid:
This problem can be solved relatively easily. Tie the sales team’s bonuses not just to how many deals closed, but also to their customer retention rate. In this case, the sales team are not going to close the deal if your company’s solution does not meet the clients’ needs. This approach will meet with strong resistance from the sales team, but the results are definitely worth it.
Reason 5: Scalability problems
Customers get bigger and more mature, but maybe you can’t keep up with their growth. They need a new feature or integration, and you don’t have it yet.
How to avoid:
Your R&D team definitely has to plan ahead for this one. You can gather feedback from your clients on a regular basis (we hope that you’re already doing it), segment this feedback by certain criteria (e.g., customer size or ARR), and use this processed feedback to prioritize new features on your roadmap. This way the needs of your most valuable clients are always taken into account.
Reason 6: Low correlation between price and value
Sometimes you need to admit that your competitors can offer more features than you do. Customers start asking you, “Why should we stick with your product when we pay more and get less (or the same)?”
How to avoid:
To address this issue, you need to gather information on why the client initially decided to use your solution rather than your competitors’, and how your product has already helped the organization. Price isn’t always the deciding factor — the value you provide is. Your competition may have more features, but what’s important are the features that the client needs and uses.
Also, point out the switching costs for transitioning from one solution to another. It will take time for the client’s teams to adapt to a new tool, especially if the majority of the employees are loyal to your solution.
Reason 7: Low quality of service
If you receive comments from customers that your service is poor, you’d do well to listen. Otherwise, it’s only a matter of time before you lose your clients to a competitor.
How to avoid:
Only one solution here. You must provide high-quality service. Period.
Reason 8: Failed adoption
So, you’ve just signed a contract with a client. Don’t start celebrating just yet. The onboarding process dictates the rest of the customer journey. Will customers adopt and stay with your solution, or give up and churn? Adoption is always a challenging process. Don’t expect quick results. But if you’re not putting in the time at the very beginning to address your client’s needs, they will become more and more dissatisfied and disgruntled. After a certain point, the client is gone.
How to avoid:
We’ve already mentioned it several times, but we’ll keep stating it — ask the right questions. Ask them all the time. Ask the questions in the initial phase to understand your client’s goals. Conduct regular health checks (especially in the first few months of use) to see how everyone’s doing. If your account champion and a couple of managers are happy with the tool, it doesn’t necessarily mean that the whole company is onboard.
Deliver additional training sessions to different teams and departments. Sometimes conducting an open mic session for the all your client’s employees that are using (or planning to use) your solution is helpful. Don’t ask, “What features don’t you understand?” Instead go with, “What are your pain points?” The answers might surprise you, and the use cases can be very different from what you expected.
Industry best practice is to have quarterly business reviews or executive business reviews. They don’t necessarily need to be held on any specific time frame. However, they need to be strategic, recurrent, and goal-oriented. During these reviews, go back to the initial questions you asked even before your product was implemented into your client’s business.
One of those key questions is: “When you decided to use our product, you set the following goals. Did you achieve these goals, and are there any additional ones?”
Wrike offers a variety of Professional Services packages that are mandatory, depending on the size of the subscription that you purchase. These packages rely on a set of well-built processes to prevent the typical challenges of adoption.
Reason 9: Language barrier
As your product gains traction around the globe, you’ll find yourself with more international customers. That means it’s time to go beyond English-only. The language barrier can be a major issue when it comes to conversation.
How to avoid:
Start by translating your help resources (help center, collaterals, video materials, etc.) into different languages. Begin with the most popular ones and work on increasing the number of languages available.
If your budget allows for it, consider hiring customer success managers and deployment consultants that speak the native languages of your clients. This is usually a major investment, so make sure that the market will support it before making the move.
Reason 10: Inability to drive the change
Tricky one. You did your job well. Had all the materials and resources. But something didn’t take. For some reason, it just doesn’t work out.
Every single employee of your client should see the value of your product. Change is hard. Really hard. And driving the change is one of the most challenging jobs ever.
How to avoid:
Above all, people must be willing to change. So (and yes, we’re highlighting it again) ask lots of questions. Speak with members of different teams, find out their goals and pain points. Work with each team separately and demonstrate the value of using your product. Align it with their needs — it’s worth your effort.
Developing adoption materials helps too. At Wrike, we delivered several webinars on change management that were a hit with our customers. We also created several PDFs on overcoming the adoption challenges that we send out to our clients. If you have a community or product forum, you can start a conversation on change management and involve as many of your customers as possible.
Some of the major reasons for churn can be addressed directly, while others are out of your control. By taking preemptive steps, you’ve already prepared. And it all comes down to — you guessed it — having regular, deep conversations with your clients.