As a SaaS business you have an advantage over traditional businesses in that costs for revenue are front loaded into the first year of a contract and profits in years 2, 3, 4+ more than make up for those up front costs. Assuming you've got a sticky product that people like you can count on that recurring revenue to scale more quickly than the sales team considering it costs $1.13 to acquire $1 of ACV compared to $0.13 to retain $1.
However, when you've been enjoying the benefits of having happy customers it's not uncommon to become complacent. Your reps are likely managing quite a few unhappy customers that may churn and, as they say, the squeaky wheel gets the grease, which leads to keeping some customers on autopilot who end up getting no attention.
The best companies recognize that while they are selling technology, the ultimate decisions to renew or cancel the service are driven by people. Enterprise-focused companies need to ensure they know who the executive sponsor is and take action if that sponsor leaves. - Ajay Agarwal
As we all know, purchases are most often made by a committee and renewals are no different. You'll be in for a rude awakening if you assume that your champion will be able to get a renewal knocked out without friction just because renewals have been smooth in the past.
Let's say the company you're about to renew has been a customer for five years, according to HBR there will be 5.4 people involved in the decision to renew. You AM, at best, is talking to two of them but you figure, this shouldn't be an issue because they're happy.
The average employee tenure in the US is right around 4 years which means that on each renewal at least one of those stakeholders is will be new. Every renewal for them is essentially a new sale and, unfortunately, most AMs don't find out about the new stakeholder until it's too late. This new stakeholder could be a fan of your competitor or simply not know anything about you. Because AMs have to focus so much energy on unhappy customer these happy ones fall into a blind spot where your chances of identifying thse new risky stakeholders is essentially nill.
Like every good problem there has to be a solution and, unfortunately, that solution has historically required a lot of manual effort. AMs are expected to check in with stakeholders regularly, handle QBRs, negotiate renewals, deal with bugs, communicate product enhancements, track usage/adoption, etc., all of which can help identify potential churn risks. That said, they're all manual and require AMs to be perfect.
Instead of requiring more work for your renewals team, you could automate tracking the movement of key executives and store that information in Salesforce. With that intel you could flag accounts as potential churn risks if a stakeholder has left in the past 90 days or use this as a cue to your AM to better understand the health of the customer. This intel will give your AMs the space they need to focus on everything else they do in their day to day and make them even better at finding accounts hiding in their blind spot.
- Date- Aug. 16, 2017, 2:49 p.m.
- Tag- Churn