Churn should be a whole-company issue, not just the domain of your customer happiness or account management team.
That includes – nay, starts with – your sales reps.
After all, for venture-backed Software-as-a-Service (SaaS) companies, churn is an absolutely vital measure, the one SaaS metric that could make or break your success. If you’re working toward an IPO, you have to get your monthly recurring revenue (MRR) run rate had better be high. And if you want to improve that number, it starts with decreasing your churn rate.
And, as we mentioned above, that starts with your sales reps, before trickling down to your account managers, your customer service team, your marketers and every other department.
Every individual at your company must be on the same page when it comes to churn.
What Churn Rate Responsibility means for Sales Reps
A ‘good’ customer means you’ve created a partnership, more so than a buyer-seller relationship.Quite simply, it means developing better sales relationships with prospects – especially those who are likely to convert to customers downstream – from Day 1. After all, customers who end up churning are typically those who never got much value from your product or are unhappy with your onboarding and after-the-deal service. The sales rep who works the lead and closes the opportunity can play an integral role in this.
- Daisuke Yasutake, InsightSquared Account Executive
“Good” customers don’t churn. Your sales rep helped them understand your product and the value that they can immediately achieve by using your product. Their unique business use cases and pain points were helpfully diagnosed by your rep. In short, your rep viewed this customer as more than just another step on the way to achieving their quota; your rep actually believed that this customer needs your product, and they helped the customer come to that understanding as well.
“A ‘good’ customer means you’ve created a partnership, more so than a buyer-seller relationship,” said Daisuke Yasutake, an Account Executive at InsightSquared. “If you sign a ‘good’ customer, that means you have a really good understanding of their needs and business pain. When you develop this early in the selling process, it becomes less transactional and more of a real relationship.”
The more “good” customers you sign – and the fewer “bad” deals – it stands to reason that your churn rate will go down. For sales reps – especially veteran ones who largely operate on autopilot – this ownership of the churn rate SaaS metric requires a mindset shift. They need to migrate their thinking from one of “Let’s sell software to every potential customer we can,” to one of “Let’s sell software to customers who truly need our product and will derive real value from actively using it.”
Not only will this mindset shift result in a decreased churn rate, but should also see your sales reps closing more deals in the long run. Sales is still as much about emotions as it is facts and data – appeal to those emotions by actually caring about the happiness and success of your customers, starting from Day 1.
But What Does This Mean for Sales Managers?
It isn’t just sales reps who have to adjust to this different mindset, where there isn’t just one goal; your quota. Sales VPs and Directors want their team to hit the number, but within the context of a team-first mentality. SaaS sales and company success is most definitely a team sport. It’s great if you hit this month’s number…but at what cost?
You have to weigh the risks associated with each opportunity that you have the potential to Closed-Won and ask yourself, “Will this deal be worth it?” If the customer will require a great deal of customized technical configuration, has a more complicated onboarding process or has his arm twisted before reluctantly buying, will the high churn risks later be worth dealing with? If you book 10% more new business this month but have a 20% higher churn rate, you’re essentially taking one step forward and two steps back.
If sales leaders want their reps to be more diligent about identifying “good” customers and signing only the right deals, they have to emphasize that mindset from the top down. Then, they have to provide the training necessary to help achieve that. Finally, they have to develop metrics and measure their reps against these churn goals:
- Churn rate by salesperson – The tricky thing about churn is that if your customers are signing a one-year contract, the consequences of that churn won’t be felt until that point when they are up for renewal. Nevertheless, you want to keep an eye on your churn rate as broken down by individual sales rep. If one rep in particular has seen the churn rate on his customers increase month-over-month as the rest of the team’s has decreased, you should spend more of your sales coaching time with that rep.
In this example above, it looks like Eric Bledsoe has been signing mostly bad deals for the past two years and as a result, he sees his churn rate spiking from month to month. Meanwhile, Alex Len focuses on only customers that are the right fit, and as such, his churn rate remains relatively even across the board. You’re never going to fully eliminate churn as a problem; companies churn for all sorts of reasons, which takes us to the next SaaS metric to measure…
- Churn rate by reason – Knowing why your accounts are churning is the very first step toward solving your churn issues. You can then shift your resources and efforts toward tackling those top churn reasons, the ones that are happening most frequently. For this company here, their great product simply isn’t being used enough by their customers. Both their sales reps who closed the deal and the customer success manager in charge of onboarding have to do a better job of communicating unique value and uses to that individual customer. This is actually a great churn reason – it’s the one that you can have the most impact on solving. Losing a champion, or having a customer go bankrupt or having run out of budget are things beyond your control, so focus on working the most common churn reasons and shoring those up. If Poor Adoption and Poor Qualification are cited most commonly, those are things you can work on coaching your reps with.
Booking new business is great, but the twin pillars of any successful SaaS venture has to include retention and keeping your churn rate manageable as well as booking new business. This must be a company-wide mindset, and that starts with you and your sales reps.