"Fool me once shame on you, fool me twice shame on me, fool me thrice well there's still hope but we got some work to do."
That's pretty much what it looks like for many organisations who don't value the metric of customer churn. They get fooled by the numbers and they've really got some work to do.
Its the negative growth equation where the number of customers you lose x your average customer spend - new customer acquisition revenue gives you one indication of your actual growth numbers.
Lets take an example: You start the year with 100 customers you win 100 new customers but lose 30 existing customers. You now have 270 customers.
- You've lose 30% of your existing customers (that's a lot)
- It costs you 2 weeks of man power to win one new prospect to generate average of £10,000 in sales.
- Your average existing customer spend is £30,000 x 30 customers (£900,000)
You made £1 million in new business on 100 new customers but you lost £900,000 in customer retention sales. It looks like you've grown significantly from the outside but because the churn was so high you've hardly grown at all.
There are other factors to consider in this equation but I've seen companies literally double and triple in size simply by choosing to reduce their customer churn year on year.
There are many reasons for customer churn, some are unavoidable but most reasons for customers leaving are solvable. With clear retention strategies and customer fulfillment practices you can see amazing results in your business.
Here is the challenge when you're growing no one really watches who's leaving unless the person leaving has enough of an imprint to make a sales revenue dent in your business.
Just imagine if customer churn was a financial line in your CFO and CEO's weekly financial report. How would that change the way you looked after your customers, ran your account management team or collaborated with internal departments and stakeholders?
We all know keeping our existing customers delivers 5-10X more sales results than spending the same or more trying to attract and win new business. That doesn't make new business less important but it does offer a serious question:
Why isn't customer retention a standard sales metric in the sales industry?
The reality is for all sales leaders. Unless you really know that Churn number and are cognizant about the signs of customer churn within your team you'll continue to be slave to negative growth (growth results that a.
The industry doesn't help much when it comes to real data on B2B customer churn as most of the information is based around SaaS companies. Whatever business you're in you can gauge some helpful insights for churn averages and measurement from this article HERE from Sixteen Ventures.
I want to focus on one thing in this post and that's raising awareness of potential customer churn indicators you can observe and respond to in your customer conversations, weekly sales meetings or coaching moments.
After surveying over 150 Key Account Managers and managers of account management teams here are 6 customer churn indicators that came up in 74% of the B2B cases where clients had left or spent significantly less.
- They noticed their client had gradually become more distant and had almost stopped replying to or answer their emails for an extended period of time.
- Their main customer contacts had left and there were non replacements or other really established relationships in their business to speak with.
- They noticed their client had started projects with more than one supplier that they had the capability of delivering but didn’t come to them first.
- They were slave to re-structure and an RFP for consolidating suppliers.
- Their contact couldn't comment on what work they could do together for that year and the following.
- Their customer questioned the value of service and began asking for further discounts.
How to respond if you see these signs
Get creative and honest in your communication. Where possible speak with a team member from your contact just in case something specific has happened. Be persistent and preserve.
Start communicating with managers of the end users of your product and service. Understand their challenges or concerns. Compile this into a summary proposal you can share back with them and the potential new person so you demonstrate value and position yourself as a partner to their business.
It sucks they’re using another provider. This may not be the easiest conversation to have but go in, be open and honest. Tell your client you’d like to explore ways in which they can benefit even more from your products and services, There are a number of services that they haven’t yet taken advantage of.
This may sound crazy but its great news. This is the time to go in and shape this RFP by using the insight you know of your clients business. If they’re consolidating this is not just about price but about differentiated value and a demonstrated understanding of their business. Get prepared, start speaking with contacts in your clients business. Personal testimonials. Go back with a set of questions they may have missed important to them with personal testimonials. This may go out to other potential companies. The immediate result is you become instantly memorable. In many cases I’ve experienced clients of mine fast tracking me to the final stage of their RFP before working with them again.
Get creative and a measure of vulnerability will be needed. Questions like “what would be most helpful for me to know now while you consider your internal needs?” What would you say would be the mosthelpful action we could take for you and the business today?” craft questions that help you get in
- In this situation you want to be strong and listening carefully. Not all discount conversations are there because of perceived drop in value sometimes its internal pressure. If it is a pressure based scenarios then you may need to be prepared to get creative with your customer around services and potential fee structures that still allow your customer to win internally but maintain value and margin.
If you're a key account manager, sales leader of consultant responsible for and concerned with existing customer retention and growth Send me a LinkedIn request and get connected to my customer growth email series and mailing list HERE. You can start the process of learning a new framework of thinking to growth. www.jermaineedwards.com
Founder of the Key Account Hack System - New Key Account thinking that transforms customer relationships and creates predictable sales growth.