Retention increases the risk of churn if customers don't see value with each renewal. Do you agree?

Vijaya Vardhan P
Vijaya Vardhan P Member Posts: 13 Contributor

 

Comments

  • Kevin Mitchell Leonor
    Kevin Mitchell Leonor Member Posts: 249 Expert
    100 Comments Second Anniversary Name Dropper
    edited May 2020

    Can you clarify the question? To me retaining a customer is the opposite of churn so I am struggling to see a linear correlation on how retention increases risk of churn. Can you explain the question?

  • Vijaya Vardhan P
    Vijaya Vardhan P Member Posts: 13 Contributor
    edited May 2020

    Sure @Kevin Mitchell Leonor . I've seen this first hand in my earlier company.

    1. You on boarded a customer. Got to initial time to value within a month.
    2. They renewed 3 more times
    3. During the 4th renewal, you noticed that the customer health score was lower than usual.
    4. You got on call and determined the pain points - support delays, new users on the customer side, couple of feature requests etc - a mix of both your's and customer items.
    5. You fixed these items and the customer renewed for the 5th time.
    6. By the 6th renewal, they felt that
      • Either the product has less to offer going forward
      • The CSM is turning out more of a "support ticket chaser" than a value provider
      • They think: "If we ask for more, the only option is to buy more from them."

     And, I have experienced it as a subscriber myself. 

    How do you utilize 'retention over x renewals' (with decreasing value) as a leading indicator for churn? How do you continue to provide value with each renewal? (up sell may not be seen as value unless you make sure they understand it is value). 

  • Kevin Mitchell Leonor
    Kevin Mitchell Leonor Member Posts: 249 Expert
    100 Comments Second Anniversary Name Dropper
    edited May 2020

    looks like we have maxed out perceived value. we have to strategically look at a new value proposition and possibly consider complimentary products or integrations to provide further value.

    So in this case I fully agree. Unless you have found a way to be fully embedded into their systems. Even then, you are at risk of losing to an innovator. Many of us don't use Microsoft Word despite being the industry standard for decades because they have not found ways to provide us more value.

  • Vijaya Vardhan P
    Vijaya Vardhan P Member Posts: 13 Contributor
    edited May 2020

    Very good points @Kevin Mitchell Leonor . In such cases, I feel the value of product, relationships and customer experience should provide a moat in terms of the switching costs.