A healthy renewal rate is a sign of your prognosis for growth. It’s also a key measure of your capacity to create long-term value for your customers. According to the Corporate Finance Institute, a healthy renewal rate is 80% or above. If your renewal rate lacks luster and retention is consuming ever more effort and resources, you may need to look closer at how you’re engaging with your customers.
It may seem obvious, but are you doing everything you can to stay in tune with them, listen to them, learn from them? If not, it’s not too late. If so, you may want to go deeper. These strategies go beyond rote customer retention metrics to help you improve your customer experience and create a flywheel of reliable renewals.
STEP 1: Unmask Artificial Harmony
How do your customers feel about you? If you’re not sure, you could be living in artificial harmony. Patrick Lencioni coined this phrase in his go-to leadership book, The 5 Dysfunctions of a Team. It refers to the state that results when people hold back meaningful thoughts, ideas, or feedback for fear that it would cause them discomfort or not be well-received by others, which creates a false sense of amity and consensus.
How can you tell whether this is happening with your customers? Artificial harmony might be a factor if you see a disconnect between your customers’ apparent contentment and their renewal decisions. Do they indicate that they’re satisfied during most of your interactions, only for you to find out they’re opposed or resistant to renewing? If so, their satisfaction is likely not real. But why?
It could be that you don’t afford them the opportunity or mechanism to communicate their issues and frustrations. Or, it’s possible they hold back for reasons beyond your control. Either way, uncovering and resolving what’s driving artificial harmony is essential if you want to prevent your customers from looking elsewhere.
Surface their true feelings through formal interviews or surveys (live and online). Consider engaging a third party, which allows them to be more forthcoming with and transparent about negative feedback, which they’re less likely to do with customer-facing staff. Create feedback loops to ensure their input goes back into the organization. Use automation to operationalize and streamline this process.
To augment the data, encourage your customer-facing staff to include their subjective views and instincts about the state of the relationship arising from regular customer interactions in your CRM. This ensures a human perspective remains in the relationship and captures nuances data can’t provide.
STEP 2: Ask Your Customers What You’re Doing Wrong
Beyond drawing out unspoken signals, create an “At-Risk” list. The moment you sense that renewal isn’t a sure thing, flag the customer in your CRM and add them to your At-Risk list. Assume everyone on the list is going to leave, no matter what you do. This will give you a posture of learning and reflection, which can only benefit all of your customers—current, departing, and prospective.
Make sure you’re open to receiving and applying their invaluable insights into what it’s like to be your customer. Create a non-judgmental space and mechanism for them to share their lived experiences, and invite them to share the realities of their experience with you and your product. Make it clear that you want to use the opportunity to learn from—not pressure—them. Ask them things like:
- How did we deliver on your expectations of:
- Our product
- Your onboarding processes (training, implementation, etc.)
- Your customer support (accessibility, resolution/response timeliness, anticipating needs)
- What factor(s) is having the strongest impact on your decision whether to renew with us?
- What has been your most pleasant surprise about your relationship with us?
- What has disappointed you the most about your relationship with us?
- On a scale of 0-10, with 10 being the most likely, how likely are you to recommend us to a friend or colleague? Why did you answer as you did?
It’s equally important to gather this information from your departing as from your at-risk customers. They might even be more likely to share openly. Track and analyze the responses you get. Look for patterns across customers. Rank the issues you uncover, prioritizing the most commonly occurring issues that are fixable, and make a plan to systematically address them. Don’t aim to make every customer happy. Focus instead on issues that can have the most significant impact on the greatest number of customers.
STEP 3: Map Your Customer Journey
Now that you have a sense of what’s important to your customers and how they foresee your future relationship, it’s time to chart out your typical customer journey. Salesforce research shows that 80% of customers consider the experience they have with a company as important as the products and services it provides. Therefore, mapping that experience to show where and how customers engage with you is essential to discovering how best to scale Customer Success. You can’t scale if you don’t know where to build, where the volume is with customers at a high range of usage.
The mapping process starts with everyone, including marketing, L&D, sales, revenue, etc., in a room, whiteboarding what it’s like to be a customer—from soup to nuts, recognizing that their journey is not linear.
Some of the overarching components of your map should include:
- Stages of the buying process
- Target customer personas
- User actions and touchpoints
- Emotional milestones
- Obstacles and pain points
After mapping, you can see where customers are in the lifecycle and assess their level of engagement and product usage at each stage. You’ll know how they are responding to Quarterly Business Reviews (QBRs), when they call in to support, and whether they are attending support webinars.
Once you have enough data, then you can decide how to bring them up to the next level; you will know how to operationalize how you support them and how to help them travel smoothly through the sales ecosystem.
STEP 4: Segment Your Customers
The concept of customer segmentation takes its cue from an analogy with handling your kids. You want to get to the bottom of what’s bothering them, but before you can do that, you must know how they are most comfortable communicating with you.
Most B2B companies base how they serve their customers upon which segments make up most of their revenue, as they need to determine how to best serve all their customers effectively with a limited headcount and dollars.
Obviously, a single bucket won’t hold all your customers, and it’s not affordable or sustainable to treat them all the same way or give them the same level of attention (you can’t take them all out to dinner, after all). But you can segment them by revenue, geography, account size, or market share. You could begin segmenting based on industry verticals—whether you’re in telecommunications, automotive, or building materials, for instance. That said, some companies prefer to segment by product or customer size. The most mature Customer Success organizations segment their customers by a) their use cases and b) how customers derive value from the company’s products and services. Steps one and two above can help you decide which segmentation approach makes the most sense for you.
From there, you can further refine the segmentation by where customers are in their journey and the sales lifecycle. Criteria such as new vs. existing customers—whether they are onboarding or terminating—may be a valuable segmentation that would create alignment with the ways in which you’ll treat each segment. With a high-volume customer base, evaluating customer revenue size and headcounts may reveal other segmentation opportunities.
Once you’ve taken a wide view in your segment analysis, proceed to a cohort analysis. For example, you can segment customers with over 5,000 employees who have been with you for a certain length of time, and that ask similar questions or take a certain action at specified points in time. By creating a meaningful segmentation that defines subsets of customers based on relevant characteristics, you’re creating cohorts of customers based on their similar journeys with your products and services. By grouping customers together according to similar criteria, your CS team can determine how they interact most effectively and efficiently with different customer groups.
Once your segmentation is complete, you can look at behavioral characteristics that are common to each segment and that might reveal the need for proactive—or corrective—actions. For example, are customers bogged down by a single issue associated with a product that is strangling potential new revenue? The visibility Customer Success has into account behavior enables it to identify issues like this and find solutions long before they become a systemic problem.
Segmentation also provides unique insights into customer values, enabling it to quickly identify and address potential roadblocks and challenges. This allows you to become customers’ trusted advisor, able to identify potential land mines—the “gotchas”—before they come at you, and to continue to demonstrate the value of their purchase at every turn.
STEP 5: Create a Customer Experience Flywheel
Sales leaders are moving away from marketing and sales funnels. Today, the trend is toward a helical model of marketing, or flywheel, which is a revenue generation engine built entirely around providing a remarkable customer experience.
The customer experience flywheel picks up massive steam once you systematically build customer advocacy into your entire ecosystem. Core to that momentum is your customers’ delight with their experience and deep trust in you. You ultimately want them to regard you as a trusted advisor, a professional guide that can truly help them meet their goals, exceed their KPIs, and create success for their organization. How do you get there?
Deliver Delightful Customer Support
Customer experience doesn’t just matter—it’s a key driver of churn. Data shows that customer dissatisfaction with the service they receive accounts for up to 68% of customer churn. And dissatisfied clients cost you future customers, as they’re certain to share their negative experience with roughly 10 others. Alternatively, 86% say that good service will convert them from one-time buyers into long-term brand ambassadors. We like those odds.
Customer expectations are higher than ever, and poor support that disappoints is easy to find. There is little worse you can do to hurt a relationship than not being accessible when your customers have an issue or making them wait for days for an answer to a question, only for them to realize the response isn’t on point or useful. If adding headcount isn’t an option, you can scale your customer support through automation. Hubspot offers some insight and choices.
The bottom line? Be accurate, timely, and helpful. Lacking any of these qualities is as good as lacking all of them. Be the anomaly. Surprise them. It can make all the difference.
Actively Seek and Apply Their Input
Nothing speaks louder to your customers than applying what you’ve learned from them to your business. Demonstrate that you not only heard them but are making changes to your products, processes, and priorities. Create a customer-centric daily/weekly/monthly email they can subscribe to that’s dedicated solely to updating customers on their impact. Consider creating a customer advisory board where your customers meet regularly (perhaps a mix of virtual and in-person) to serve as a sounding board for proposed changes or new initiatives you’re considering, share candid feedback and insights with you, network, and support each other. These can be very effective, provided you’re strategic about how to leverage this group and that you ensure a feedback loop from these gatherings back into your organization so they know their time and voice are valued and their contributions lead to progress.
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