Understanding Churn & Retention
During an economic downturn companies are looking for ways to cut budgets and many are in survival mode. This makes customer retention difficult but not impossible.
While companies are looking for ways to improve their cash flow in order to survive it makes finding new business far more difficult and as a result customer retention becomes the golden ticket in ensuring your company remains a going concern.
What this also means is that leaders need to start thinking about retention strategies differently. There are a few reasons for this:
The Decision Maker is Now the CFO:
You are not going to be trying to close your renewal to just the business unit leaders any longer. Sure they will continue to be influential and an important stakeholder but the CFO is likely the person you ultimately need to convince.
**Decision Criteria Has Changed: **
Efficiency and productivity gains will no longer be enough. Those will become a nice to have not a need to have. This is in large part because you are now going to need to convince the CFO that it’s in his fiscal best interests to renew.
So what do CFOs care about, especially in a down economy?
- What saves us money?
- What makes us money?
That is what will secure renewals.
Implementing a retention strategy in a down economy is one of those times where it’s important to briefly slow down before you speed up. While time is of the essence, it’s also equally important to use your time wisely. In order to do this you need to understand what clients you should prioritize retaining.
As tempting as it is to just say ‘save all possible customers’ this is ill advised and will waste precious time and resources. Not all retention is created equal, save the customers who will have the biggest economic impact on your business.
How to Prioritize Retention efforts
There are 5 steps you can take to make the most of your retention efforts and maximize the economic impact to your company.
- Identify who your profitable customers are.
- Identify your clients with Product Market Fit.
- Determine which clients can realistically be saved.
- Identify which clients are potentially less vulnerable to the downturn (ie are their customers going to be heavily impacted by layoffs because their revenue is driven by seat based users on their SaaS platform? Or are they a manufacturing company that manufactures a consumer staple).
- Stack rank and prioritize your customer base.
Now that your organization is enabled to focus its retention efforts on clients that are more likely to yield success it’s time to put a tactical plan into action. Some of the tactics to consider employing are different than those you’d put in place when the economy is in a good position so organizations need to think differently about their approach.
10 Tactics for Surviving a Down Economy
Here are 10 tactics you should put in place during a down economy:
1) Leverage All Relationships
This is the time to work together as a team and leverage as many relationships as possible. When creating an engagement plan for a client, map all internal relationships that exist between your organization to those within the client’s organization.
Does anyone have a relationship with a CFO? Does your CEO have a good relationship with an executive within the account? Can that be leveraged to get an introduction to the CFO? Has someone on the product team worked with the client on user groups or to gather feedback on the roadmap?
Collaborate internally and create a groundswell of support within the client account and ensure you are multithreaded in your relationship.
2) Demonstrate Money Saved or Revenue Earned
In the push to survive there is going to be a review of technology and contracts. Anything that is nice to have and that will not create a major disruption to the business if removed is going to be under review.
The two ways to overcome this is to prove that your solution has either saved the clients money or it has helped earn them revenue.
Start working with your Champion / main point of contact now and gather the data needed to prove the positive impact your solution is having on their bottom line.
3) Re-Prioritize Your Calendar
Review the list of clients that are priority to retain and aim to get recurring time with them on your calendar. Work to proactively engage with these clients and allocate time and resources accordingly. During these conversations focus on ensuring the client is maximizing the usage of your solution and achieving their goals.
4) Re-prioritize Your Content
For those companies that have a scaled and 1:many engagement approach for part or all of their customer base, now is the time to get hyper focused on the content you push out.
Target on the customer segments that you can be the most successful with. Share really pointed content and communication that focuses on how clients can leverage your tool even further. What are the use cases that your best customer segments use your solution for? Create material on that.
Your content should focus on increasing adoption and making your solution indispensable to whatever extent possible. Ensure your material centers on delivering tangible value.
5) Get Customers in Onboarding to First and Full Value ASAP
Do a review of your clients in onboarding and identify any clients that are at risk of not completing onboarding or where onboarding is not going well. Now it’s time to get in problem solving mode.
Identify why each client is stalled or failing in onboarding and create a plan to get them back on track. This should be a team effort. Pull in the sales executive who sold the deal or escalate to management for support.
Create a remediation plan and hyper focus on getting clients to adoption. Protect those renewals that are going to be coming up in 12, 9, 6 months (depending on the length of your onboarding).
6) Be Flexible
Get creative on how you can be flexible with clients. Can you offer quarterly payment plans instead of an annual upfront payment?
Are there features that are available at a higher tier but could have a significant impact on the client’s ROI if turned on? If so, turn those features on for a specified period of time. Keep the revenue you have coming in from that client and reassess pricing at the next renewal, just be sure to communicate this and be up front with clients or else you risk degrading your relationship and creating a new churn risk in the future.
7) Be Empathic about Response Times and Communications
Be hyper focused on providing great customer service. Although great customer service should always be a priority, consider creating faster response time goals for clients that have been identified as a priority to retain.
Answer support tickets quickly, increase time to resolution targets, and prioritize emails from these clients when they hit your inbox.
While this alone won’t retain a client during an economic downturn, it won’t make it even easier to switch you off.
8) Leverage your successful clients
Identify your healthy successful clients and determine who you can ask to write reviews and/or provide references. Hearing from other clients can help push another client who is on the fence on reviewing one step closer to signing on the dotted line.
9) Communicate Switching Costs
If you are in a competitive situation and the competitor has cheaper pricing get the client to consider the cost of switching. Be difficult to replace and get the client thinking about the cost of change.
10) Leadership Involvement
This is not a CSM or Account Manager problem. This is a company problem and CSMs or AMs cannot be expected to orchestrate the above on their own.
If you need to redistribute roles and responsibilities so that resources are doubling down on the customer base, then do it.
If you need to get the sales team to re-engage with executives they sold to in order to help close a renewal, then do it. Provide incentives accordingly.
If you need to get on calls with customers then do that too.
This is a team sport and these retention strategies can be the difference between survival and failure. By prioritizing your resources, having a coordinated approach that allows for flexibility, communicating your impact on the bottom line, and being disciplined your organization will be far better positioned to survive the downturn and eventually thrive as we come out on the other side.