If a company is expecting 30% churn in the next 90 days

Kevin Mitchell Leonor

you were coming in as a CS Leader with a team of 4 CSMs with no formal processes, and the CEO wants to reduce that churn rate, what would you set as your mutually agreed measurable goal that sets the tone as your first quarter as the CS leader?

Some background:
30% churn expected in the next 90 days.
60% customers are on month to month plans.
40% of customers are undersold (likely due to budget)

Amandeep B

Hello Kevin,

Sounds like a tough challenge but I am sure with the right tools and the mindset, it can be turned around. A few questions to consider before mutually agreeing on the goals:

1. What are some of the biggest reasons for the churn? (understanding what areas need to be tackled internally, and then how quickly those can be worked on)
2. Do customers have the option to switch to a yearly plan (likely with some concession in form of a discount, try to switch customers to yearly plans)?
3. What is the churn rate for the previous two quarters? (is 30% realistic for this quarter? If there is huge spike expected this quarter, what is causing that?)
4. Of the 30% expected to churn, are there strategic customers that the company would/should absolutely try to retain? (focus the resources on the ones that are crucial from a partnership front, cut your losses with the rest - worst-case scenario)

These are some of the things that come to mind immediately but I am sure the rest of the members will have a lot of valuable input.

Please let me know if you have any other questions based on what I suggested.

Kevin Mitchell Leonor

1) the top reasons for churn are 1) single project customers, 2) disappointment in their assigned developer 3) undersold, customer needed a higher tier but couldnt afford due to budget (working with preseed customers) or were given unrealistic targets by sales

2) yes they do but the reasons some go to annual is because their project is a year long project. There are no cost differences in annual or monthly contract currently. But monthly customers have been subject to changing prices.

3) this quarters churn seems to be because of sales beingf heavy in previous quarters and this quarter is the heaviest for risk. They had 10% last quarter.

4) majority would be a firefighting/recovery engagement that would require confidence in the competence of the assigned developer

Mark Flanagan

The primary reason for churn is that the customer isn't receiving the value that they expected from the investment they made in your product or service.... full stop.

Kevin Mitchell Leonor

While the primary reason, it is not the only reason. Another reason, which this company is experiencing, is that they have an expiring use case. They permanently solved the problem and gave the proper ROI. However, they did not give any plan or case for continued business.

Amandeep B

I would agree with Mark to an extent - especially for the scenarios related to the customer not being happy with the work the developers are doing for them. And for those scenarios, Customer Success needs to be the advocate internally to surface the pain points, and achieve alignment at the leadership level so that the necessary changes can be made.

For the single project customers, if that is a known fact, it should not come as a surprise that the customer is not renewing. But maybe during the development/implementation, your developers or the implementation consultants can act as lead generators since they will be deep in the details and could see other opportunities that your company can help the customer with. Get a head start so you are not waiting till the very end and getting hit with a churn.....instead vet these customers for potential opportunities. But this will bring us back to the "were they happy with the developer/work done by the developer" if that is such a common pain point with the other churning customers. And if it does, it will reinforce the idea that changes are needed.

Hello Kevin,

Sounds like a tough challenge but I am sure with the right tools and the mindset, it can be turned around. A few questions to consider before mutually agreeing on the goals:

1. What are some of the biggest reasons for the churn? (understanding what areas need to be tackled internally, and then how quickly those can be worked on)
2. Do customers have the option to switch to a yearly plan (likely with some concession in form of a discount, try to switch customers to yearly plans)?
3. What is the churn rate for the previous two quarters? (is 30% realistic for this quarter? If there is huge spike expected this quarter, what is causing that?)
4. Of the 30% expected to churn, are there strategic customers that the company would/should absolutely try to retain? (focus the resources on the ones that are crucial from a partnership front, cut your losses with the rest - worst-case scenario)

These are some of the things that come to mind immediately but I am sure the rest of the members will have a lot of valuable input.

Please let me know if you have any other questions based on what I suggested.

Kevin Mitchell Leonor

Yes. I agree and this is strongly being advocated internally. The difficulty is not solving these issues, the difficulty lies in agreement on a reasonable amount of churn reduction in 90 days. I believe we could have the right plays to reduce churn. The ask of this post was how would leaders decide on a forecasted churn given the timeline, risk, length of time to implement, and time to value of those processes. Much of this is forecastable, but when combined, it creates too many variables that make it harder to commit to a quarterly goal.