SaaS, Churn and ReSelling The Sale

The SaaS & Support Project research into the common causes of lost customer relationships showed that the most commonly identified “departure driver” was Divorce.  Either the management of the customer company had changed, resulting in the loss of the internal champion, or the relationship had become distant.  One SaaS company CEO described this scenario as a loss of contact ‘at the top’ of the food chain, with upper management either leaving or forgetting why the system was implemented.  Three significant questions come immediately to mind: 1) Why are SaaS vendors being taken by surprise?  2) What can be done to save the relationships? 3) How can CEOs stop setting their companies up for churn?

Why are SaaS Vendors Being Taken by Surprise?

It’s a widely accepted business and leadership premise that in general, you get what you pay for or reward people to do.  While in theory, everyone in the SaaS vendor organization should be focused on preserving customer relationships, the actuality can be quite different.  The “relationship” may have many definitions.  To the Support and/or Training personnel, whose job performance metrics tend to be very specific and incident/result related, the relationship that counts is the human connection between individuals rather than the economic one between the companies.  This can easily result in a scenario where the employees of the customer company are very pleased with the day to day relationship they’re receiving from their SaaS vendor even as their senior management is making the decision to end it.  How did this happen?  Assumptions were made, went unquestioned and the result was neglect.  The only people that had a connection to the customer’s senior management were the Sales team — who have long since turned their attention elsewhere in pursuit of new sales.

But isn’t Sales measured on renewals, and therefore incented to keep relationships fresh in anticipation of the day when the contract comes up again?  Although technically correct in theory, in actuality there is often an assumption that Support will be looking after the customer from day to day and that all Sales will have to do is to come back into the picture to finalize the renewal.  The stage is set for failure, because the crucial message to the customer’s Management about the value they are receiving from their relationship with the SaaS vendor is simply not being addressed.  When the anticipated renewal doesn’t happen, when the customer declares their intention to leave, the pressure is suddenly on to Re-Sell The Sale.  And, of course, to pay the Customer Acquisition Cost all over again.

Is this happening in your company?  Are you sure?  How much are you willing to bet on your answer?

What Can Be Done to Save the Relationships?

When the customer’s intention/decision to leave has been announced or discovered, it’s necessarily time to play catch-up, with all of the increased customer re-acquisition costs of that game.  Send in the Sales pros, perhaps assigning talent by amount of revenue potential, and hope for the best — while watching very closely to learn every possible lesson you can from the exercise.

Don’t, however, let a disaster take you by surprise by assuming that it can’t happen to you — it can.  It will.  The sooner you design and implement corrective action, the less it will cost and the more effective it may be.  The first step is to identify the at-risk companies and relationships.  For each and every customer on your list, ask yourself: “If a renewal contract was submitted today, how likely would they be to sign it?”  Pay close attention to how the answer is justified.  How do you know that the customer’s senior management is clear about the value they are receiving from their relationship with you?  Are you giving that information to them on a regular basis, making sure that it’s appreciated and understood, or are you hoping that they’ll realize it on their own?

For each at-risk customer, develop a specific action plan for improving the relationship and the likelihood of renewal of the contract when it comes due.  Track the accomplishment of the objectives, and have a designated & accountable owner for the goal.

The CEO’s Role in Reducing Churn

The roots of churn are systemic; to address them effectively requires access to the authority of the CEO to re-structure across the organization.  The SaaS & Support Project research strongly indicated that SaaS companies are frankly lax when it comes to accountability for the ownership of the ongoing customer relationships.  There is no connection between the supposedly designated “owners” (where they even exist!) and the metrics used to measure the performance of individuals and departments.   This lack sets the stage for increased levels of churn and failure.

The key factor is the awareness of the customer of the level of value they are receiving from their relationship with you as a SaaS solution/vendor.  If that information is not readily available to the decision makers, the result may be a perception that the relationship represents a cost that can be cut. This is the vital aspect of ReSelling The Sale, that it needs to be a regular and on-going activity rather than a tactic used only in desperation.  With that in mind, ask yourself who in your organization is specifically responsible for developing that value information, and for consistently reinforcing that message in the customers’ minds?  How would you prove your answer?

“It’s what you don’t know about your customer relationships that can cause you to lose them.”

–The SaaS Customer Retention QuickStat