What do you REALLY know about your customers? We know what lies within your answer to this key question is the solution to your renewal problems. And we know that what you learn when you begin probing deeper into your customers’ lived experience with you may be hard to receive. But if you’re willing to go there, the truths you’ll uncover will benefit all your customers and boost your renewals like never before.
If your renewal rate isn’t up to your standards and renewals aren’t an automatic layup for you, it’s a great time to approach your customer base for feedback and insights and to re-evaluate your strategies at every stage of the customer lifecycle. Only then can you home in on what plagues your renewal rate and remedy the root causes.
Assess Your Current State
A healthy renewal rate is a sign of your growth prospects. It’s also a key measure of how well you’re able to create long-term value for your customers. According to the Corporate Finance Institute, a healthy renewal rate is 80% or above.
It’s true that some customer loss is unavoidable. For a clear, inclusive view of your renewal situation, you need to benchmark your retention, renewal, and churn rates. From there, you can set realistic goals.
Unlike retention, which refers to when you keep a customer even though they’re eligible to end their contract with you, renewals focus on those customers who actively, intentionally renew their contract with you. Use this formula to calculate your renewal rate:
Source: Corporate Finance Institute
A customer experience dashboard is a great way to benchmark, track, and assess your renewal rate. You can do this in a CRM or similar tool. Include each customer’s history, level of use of and satisfaction with your product, how and how often they engage with customer support, how often and what problems they’ve reported, how quickly and well your team resolved those issues, how likely they are to leave, and why.
Create service-level agreements (SLAs) around core functions impacting customer experience, such as response times, issue resolution times and satisfaction, support best practices, and Customer Health Scores. Make it highly visible to all team members to keep it top of mind. Call out improvements in a bold way to draw attention to successes and encourage continued efforts to drive renewals.
Confront Artificial Harmony
Now that you know where you stand, turn your attention to understanding why you are where you are. After all, it’s hard to fix what you haven’t diagnosed. To do that, reflect on how your customers feel about you.
Are you and your customers 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 there seems to be 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.
Be Open to Learning from Your Customers
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?
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 of issues that can have the most significant impact for the greatest number of customers.
Rally Around Renewals
A successful renewal strategy demands all-hands buy-in and cross-departmental alignment. Achieve that by creating organization-wide awareness of your retention imperative and goals. Train your teams to consider the customer in every decision they make, and assign team members to resolve every customer problem you identify. Consider setting up tiger teams to tackle priority issues that are impacting multiple customers and contributing to churn. Assign them time-bound KPIs.
Every team has the chance to impact your customers’ experience and your bottom line, so aligning them around retention is critical. Pinpoint and assess your personnel, process, and infrastructure gaps that contribute to churn, such as broken feedback loops, customer response service-level agreements, or training for customer-facing staff. Identify short- and long-term goals and prioritize remedying those that are most achievable and will have the greatest impact.
Make sure each team knows their responsibilities and their opportunity to influence whether your customers renew with you or not. Assign each one renewal-related metrics. Don’t be afraid to establish new positions or teams, such as sales positions that focus just on cross- and upselling to existing clients or champions who shepherd customer feedback from receipt to resolution. Incentivize them as you would for acquiring a new customer (if not more).
Build a web of support around your customers, and you’ll not only capture those at-risk before they reach the point of no return but improve their experience so they find it hard to leave.
Become An Indispensable Member of Their Team
If you demonstrate and communicate their value to your company, you’ll build an enduring, mutually beneficial relationship. How do you live that out?
- Under promise and over deliver on their expectations—for your product, their engagement with you, their goals, and your relationship.
- Deliver bad news as early as possible, and conservatively estimate ROI and the likelihood of reaching their goals.
- Prioritize customer-centricity over revenue or profits by making decisions based on what’s best for the customer rather than for your organization.
- Be transparent (about what you’re charging, your business practices, and your organization’s challenges as they pertain to your customer).
- Respond to all inquiries—including complaints—in a timely, complete, and thoughtful manner. Work to communicate in a way that conveys that their issues matter to you as if they were your own.
- Become their strategic advisor on things that go beyond the scope of your engagement.
- Monitor and pass along information and insights on what’s happening in and shaping their industry.
- Offer to guide them in their budgeting and planning for the upcoming fiscal year and assist them with staffing projections (which skills they should be hiring for) and staff development (where leveling up skills could be beneficial and talent gaps exist).
- Demonstrate that you understand and are intimately tied to their goals and their success, and they’ll come to trust you as a member of their team.
Your team should feel like an extension of your customers’ team. These steps will help you become just that and foster an enduring relationship.
Blow Their Minds
Customer experience doesn’t just matter—it’s a key driver of renewals. 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.
Customer expectations for your product matter. They shape their experience. Does your product live up to its promises? Can they realistically realize the outcomes they want from it? Is it priced to convey its value? Are you leaving product or service value on the table?
Customers are usually willing to pay more for a product with more features and better service. Evaluate your pricing strategy and make sure it’s in tune with and aligned to industry trends, the competitive landscape, customer demands, and the economic climate.
Be Their Advocate
A core role of Customer Success is to advocate for your customer. The most constructive way to build actionable advocacy on behalf of your customers is to organize and flag categories of common requests, issues, challenges, and wins in a spreadsheet, your CRM, or a Customer Success platform. Next, prioritize and rank your organization’s resources and activities available to address each of these by cost, strategic accounts, value, and results. By attaching quantitative data to subjective customer feedback, you can both get deeper insights and compartmentalize qualitative input and emotional bias that might hinder progress.
Secure executive leadership buy-in and sponsorship for recognizing and incorporating customer feedback. You’ll need internal cross-functional feedback channels to process positive and negative feedback, which will require periodic meetings between departmental stakeholders. A shared technology platform or tool can help keep internal stakeholders on the same page.
Create a Voice of the Customer program with a feedback loop. Synthesize the feedback, document it, and map out all the ways you can both address it and drive additional customer value. From this, create a collaborative developmental plan that includes a roadmap of how you’ll implement improvements.
For more mature Customer Success programs, formal customer advocacy boards or groups can be effective tools and a natural next step in building and maintaining your Voice of the Customer program.
Find Right-Fit Customers
Your retention reality is being shaped before you gain a single customer. Look at, and if needed, realign. Examine your customer acquisition strategies for opportunities to minimize attracting customers who might not be a good fit. Are you screening prospects by the right criteria at the top of the funnel? Are you asking them the right questions? Marketing your product use cases rather than features is one way to give them a realistic view of your product and decide whether it’s right for them.
It may seem counterintuitive, but customers may be leaving because you were never suited for each other. Perhaps your product has changed but your target customer never did. Re-examine your ideal customer profile. Update it to reflect both major product changes and the feedback you’ve collected from departed customers.
If customer + product or customer + provider mismatches aren’t big problems for you, look at the feedback your exit interviews surface (for tips on building an effective offboarding process, read our blog, 10 Steps to Drive More Customer Renewals. Track and tally the issues so you can see how frequent each issue is and determine whether simple procedural fixes will address them or if you have a more systemic problem that’s hurting many relationships.
If the latter, designate tiger teams and a point person to tackle each issue. Product-related issues are probably best addressed by the product team; infrastructure issues by operations or IT; personnel or training issues by the sales team; support issues by customer success or customer support. Set KPIs for each team and incentivize them to create a plan and to resolve their issues. Hold regular, cross-departmental report-ins for each team to share their progress and communicate how the changes will impact other teams and the broader organization.
Be Honest About Engagement
If you construct them carefully, customer health scores can provide meaningful insight into how likely your customers are to renew. There is no set formula but plan to use no more than five metrics, such as frequency (how often users are in the product), breadth (how many users in each account are using the product), and depth (how many of the product’s features the account is using) so you don’t dilute the value and vision behind the issue(s) and create a false sense of the customer’s health and status.
Some customer success platforms are overly prescriptive about how to calculate a customer health score. If you use an out-of-the-box health score aggregator, make sure it allows you the flexibility to iterate and evolve it over time. And make sure it’s actionable. Draw a line from the metrics that comprise the score to actions that are relevant to and drive value for your customers.
In addition to health scores, look at how and how often they reach out through direct channels like your customer support functions—live chat, help desk emails or calls, and support tickets. Look at the number of times and how often they’ve logged in to your customer portal and/or training platforms. Be sure to include indirect channels, such as commentary on social media platforms and customer reviews. Chances are you’ll come across unfiltered feedback you might not otherwise gain. Log the data in a simple spreadsheet or your CRM.
From there, enter the scores into your customer experience dashboard, and make it visible across your organization. Next, funnel the actions into playbooks that trigger certain actions if a customer’s health score changes.
Bring Your A-Team from the Get-Go
Some customer loss is inevitable, but a significant portion is preventable. Rather than waiting until customers are on their way out, why not pour your resources and energies into giving them such a stellar experience that they can’t pry themselves away from you? Rally your organization around helping your clients win, and suddenly, high renewals become possible.
Well before customers get to the point of no (or unlikely) return, assign your A-team and bring your A-game. Become part of their team. Be so tuned in to them that you know when they’re unhappy or whether it’s time to offer them other products or services that might benefit them. Learn how they’re using your product, and which features matter to them most.
Learn where your product can solve their problems and guide them to use it in those ways. Take time to ask about their goals and dreams, their most stubborn pain points, and what keeps them up at night. Anticipate their needs and wants. Constantly seek their feedback, be as transparent as possible, and try to close every loop with every issue they raise. Become a trusted advisor who offers them support and insights they can’t easily get anywhere else.
Our blog, Your Ultimate Tool to Improve Renewals: The Four Pillars of Customer Success, offers insights into how to build or shore up your customer success program and help your customers win.