CS Blueprint w/ Kristi Faltorusso: 10 Common Churn Reasons

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This is a podcast episode titled, CS Blueprint w/ Kristi Faltorusso: 10 Common Churn Reasons. The summary for this episode is: <p>In a weekly segment we've asked <a href="https://www.linkedin.com/in/kristiserrano/" rel="noopener noreferrer" target="_blank">Kristi Faltorusso</a>, VP of Customer Success at <a href="https://intellishift.com/" rel="noopener noreferrer" target="_blank">IntelliShift</a>, to join us as we tackle Q&amp;A that comes Inbound. &nbsp;</p><p>Our goal: to give tactical, direct advice to customer success leaders.&nbsp;</p><p>--</p><p>If you want to join the discussion with thousands of other customer success leaders, join Gain Grow Retain: <a href="http://gaingrowretain.com/" rel="noopener noreferrer" target="_blank">http://gaingrowretain.com/</a></p><p>This podcast is brought to you by Jay Nathan and Jeff Breunsbach...</p><p>Jay Nathan: <a href="https://www.linkedin.com/in/jaynathan/" rel="noopener noreferrer" target="_blank">https://www.linkedin.com/in/jaynathan/</a></p><p>Jeff Breunsbach: <a href="https://www.linkedin.com/in/jeffreybreunsbach" rel="noopener noreferrer" target="_blank">https://www.linkedin.com/in/jeffreybreunsbach</a></p>
Access to Leadership
00:40 MIN
Product as a Common Churn Reason
00:45 MIN
Need as a Churn Reason
00:49 MIN
Everyone is Accountable and Responsible
00:44 MIN

Speaker 1: Welcome to the Gain Grow Retain podcast.

Jeff: We're back with another episode of our CS Blueprint on Wednesdays. This is becoming too much of a standard that one of us is always missing or one of us, mainly Jay or I is missing. So we're going to have to get back on that bandwagon and see what we can do. So, Kristi, good to see you as always how's your week going so far?

Kristi: So far, so good.

Jeff: Awesome. Well, I figured since you've been pumping out such good content and people have been eating it up, that we should dive into a piece that you did recently around churn, which I think is a topic that is talked about a lot in the customer success world. I think there's a couple of areas that people always look at for churn which is what are the right categories? How are we actually looking back at a retrospective to say these are the reasons that people are leaving. I think the second thing is always looking then like, okay, are there ways for us to avoid those? How do we get more proactive? And then I think the third is then what do you do with that? How do you internalize or internally organize around some of those churn reasons to actually go drive impact and change? So, I know with your pieces, you've actually hit the first two of those. So I figure we can kind of dive into the churn reasons that you mentioned how to start categorizing some of those things, how you think about kind of avoidable versus unavoidable. And then the last part maybe we can focus on is just what are the right ways to structure internally. Your 10 common churn reasons you came up with, I'm assuming that this came from previous experiences. You've kind of nailed down this list. So how did you get to this point and maybe what's one of the first ways that when you're inside your company how are you bringing this up or how are you making sure your teams are rallied around making sure that we can look at it in this way?

Kristi: Yeah. So it's definitely a combination of knowledge gained across all of the organizations I've been a part of. Some of these are more prominent risk factors and churn reasons for some companies I've worked for than others. So for example, like need is not something that we run into a ton in my current organization, but it was something that I experienced in others. So I know it to be true as some, as a reason that can be the catalyst there. So these were the 10 that I came up with that I see the most often, right? They're not by any means the only 10 out there. And I'm sure there's a lot of people that would add to this list, but I think even thematically, they do a great job of bucketing things, right? Like lack of value. Everyone talks about okay, well, like what about onboarding and what about this? To me, that falls under that bucket. State of business also is encompassing for me as we navigated COVID. The state of the business, if they weren't doing well during these economic times, then I classified it as state of the business. So I didn't need to... what I found with this list of 10, I never needed to add to it. I just needed to add another sub category as we educated the team on how to classify these properly.

Jeff: Yeah. And I think that's the way we've looked at it as well. I don't know if primary and secondary is the right way to word that, but we also, we kind of have like a major category and a minor category. And that also again, to your point, those categories really just help us make sure that we can report it out in the right way and that we can organize teams around it. And so I think the big thing for me that I noticed about yours, which maybe I haven't seen it worded this way, but I now I've appreciated the way you've worded some of these things. One is access to leadership. I think that is a different way to start looking at maybe relationship and how we're navigating relationships internally at an organization. Because I think sometimes people just put relationship and it's like, well, what does that really mean? So you've kind of broken that down into multiple, which is like access to leadership, no ownership, I think kind of fall into that category for me. And then the other one that I appreciated too was the state of business. I think sometimes people, when you go through... if your customer goes through an acquisition or they're thinking about the state of their business, maybe they go under. Like they don't have funds. I think there's kind of multiple ways that you can look at state of the business. But again, I think sometimes, for instance, especially with COVID and what's happening last year, how do you make sure you can capture that? But at the same time, knowing that there also could be other factors at play there. That's why I liked how you started breaking down into avoidable and unavoidable in your second graphic and started thinking about are we actually looking at the things that we should be looking at impacting? Because some of these things you can't necessarily go impact on a day- to- day basis with the activities and with the ways that you're putting proactive measures in place and the right metrics and kind of predictive measures, you're not always going to be able to avoid churn. So that was the other thing that I started looking down your list is my mind naturally starts gravitating towards, okay, looking at these 10 things, where do we start focusing our energy to make sure that we can go drive proactive engagement before these things happen. And then where is it our energy's almost wasted, right? Like we can't really impact anything here, so the next graphic to me was really impactful too.

Kristi: So, Jeff, let's do this. While I'd like to assume that everyone in the customer success community has seen my beautiful visuals that I've put out on LinkedIn and Pinterest, but let's assume that they haven't. Ah, there we go. Beautiful. I was going to say, let's just talk through the 10 reasons, right? And I think even let's you and I talk through some of the sub reasons that fall under that. So, for price for us, listen, there's a cost of goods sold. There is a market value for every product in every industry. Some competitors will commoditize that value and have a very low price point. Others will have a very high price point. But price is still something that we navigate, right? Unless you are the only person, only solution in your market and in your category where you're controlling the price of that, if you're not a monopoly, there's probably going to be some price conversations at some point in the partnership. So, price is a big one for us. I don't think that there's any customer out there who pays lists for any software that they have. So I'm sure that there's some variability and some wiggle room there as well. The second one product, this is a broad bucket and so I would like to hear your take on this, Jeff. But for this product was everything from product usability, product enhancements, features, our ability to hear the voice of the customer and driving the things that our customers would expect to see in the product. This was all encompassing and because... reliability, stability, right? I've worked for companies where they haven't had a stable product, so a lot of outage will prevent the customer for driving the value there. So product for us was always all encompassing. And then we do require in our CRM and we'll talk about this, capturing the details around the churn reason. And it's in that field that we unpack what this actually means and how do we classify it and how do we address it. So those sub themes help us understand that a bit more. But would love to see or hear from you, Jeff, on how you view product is kind of being a one bucket holder.

Jeff: Yeah. So product is one of our main categories like you have it. And then a couple of things that I think about that fall underneath there would be like, you mentioned like usability. What's your experience in the admin side of our platform that you're using on a regular basis? Integrations. Our product is very, has a ton of integrations that we can go do. Some are out of the box. Some might be more configurable. And so, you're trying to figure out too are integrations a major play? Also under there too is think about because our product is a little bit of a B2B to C. We have an end user at the end of the day. So, are they talking about things that they just needed to get for their end users that weren't possible in the product as well? And then I think about this could fall under different categories, but I also put underneath product right now just education and best practices. Are we... that could be under lack of value I think or-

Kristi: Yeah, I put that under lack of value. So if we've not enabled the customer to use the technology independently and that they really understand the value drivers to get to their outcomes, I had that in lack of value because there's lack of perceived value.

Jeff: Yeah. Yeah, no, I agree with that too. And so those were a couple that I just think about when we think about products for us in terms of our main category. But, I like, I mean, to your point too, I think some of these things you need to have main categories and you'd have sub categories because there has to be a way that we can report on this in the right way to the board, to our executive team versus also digging into the details for the proactive nature of what we might need to go and do with our CSM teams. And so making sure that you can do both, I think is just a big proponent of this. And making sure that as you think about your breakdowns, you can do that and making sure that they all kind of fit in a category and make sure also, I think that helps... this just goes back to your point, is communicating that with your teams. Do your teams effectively understand what these churn reasons are and that they can designate it in the right way inside of the tool that we're using, whether it's Salesforce or Gainsight or wherever. So, product makes a ton of sense.

Kristi: Awesome. I don't think anyone will contest competition. Again, unless you're a monopoly and the only provider of the solution, there's going to be competition. You want competition. I think competition drives growth anyway, but this is something we... I don't know that I've worked for a company where I've not had to combat competitive risk and be proactive in that. State of the business, we talked about this. I think this... M&A was always my biggest driver for this one, at least anywhere where I've worked, it's been the biggest issue. But state of the business also, like I said, it was a great placeholder for COVID as companies were kind of going under. As we talk about like main category, sub category COVID could obviously be a sub of that, but thematically rolls into the state of the business. Bankruptcy has been one, obviously, so there's other elements of that. So, state of the business I think makes a ton of sense. And I think when we get to the avoidable- unavoidable, expected- unexpected, that would make a ton of sense how we've classified that also. Lack of value, this is... I go back to a lack of perceived value here. What is the customer's perception of what we've been able to do? And this goes back to customer success, I think specifically. We can also assign I think functional ownership of each of these, lack of value is as far as I'm concerned through and through and through customer success. We own that. If the customer is not seeing the value, we've not done a great job of understanding how they were defining that and then helping map the product to that outcome. So lack of value, I think, is all encompassing, right? But it's the perception the customer has of the solution you've provided.

Jeff: Yeah. We talk about it sometimes in terms of just business outcome that they are trying to achieve. And so a couple of the things that... or one of the things that I put under there, and you listed it here, but we word it in a little bit different way, but we talk about it as total cost of ownership as well. And we actually put that underneath kind of our business outcome or lack of value because I think sometimes we take for granted that things might take too much time for them. It might take too many resources. It might take... there's other things than monetary. Also, back to your first original point about price that I think sometimes people don't always consider, which is, hey, they have projects they need to work on internally and if they're doing that, then that's taking away resources. If they need to have resources on our integration or implementation as we go through that cycle or with our products. So I think about total cost of ownership inaudible kind of the lack of value, but definitely agree. We've got lack of revenue as well. Member engagement, other things that just might fall underneath that lack of value. You mentioned access to leadership. We talk about relationship a lot and so three things we think about are contract changes, stakeholder change, or even service performance, as well as part of that access to leadership or relationship type category. And it also kind of bleeds into poor experience. The service performance for us... I'm imagining poor experience for you kind of equates to are we checking the right just based boxes, right? Are we just hitting the core things that we need to do in order to have that right experience? Are we having the right touch points with CSN? Are they getting support at the right times? Did we give them a great implementation that was quick and easy for them to get through? So, I like those two a lot. Talk to me about need. How do you think about need in that churn category?

Kristi: So it's interesting because churn to me, doesn't always mean logo churn. Like you've lost the customer altogether, right? So churn can be contraction, right? So moving backwards in a revenue capacity to any extent. So for me need, two companies I've worked at my most current one and then one previously, it was based off of licensing model. Right? But it was based off of end- users. So where I am today, we track assets. So any organization that has assets on the road, we'll say like part of their fleet, but if they sell off those assets for whatever reason, they no longer have a need to track that asset. We can't charge them in good faith. We can't charge them for an asset they don't own. And I guess it could be state of the business, but this really comes down to need because we try to classify it a bit more specifically. At a previous company, it was licensing based on the fact that we sold the software based on number of email addresses because it was like SAS apps management. But if you laid off 100 people in your organization, again, how can we charge you for emails that are no longer being part of that economic model? So need in the two instances as I'm describing, it really came down to real business need. But I've also worked in a place where they've killed off an entire department that used my software. And as a business, they decided this was no longer a priority. So again, they didn't need the software because they eliminated the function that use the technology. So, need could be a whole bunch of things that I think in every industry it's going to look and feel a little differently. But in the three examples I provided, need was definitely the way to classify it in the three examples I provided.

Jeff: Yeah. No, that definitely hits home for me. It's kind of funny. We're both having dog problems right now. My dog is...

Kristi: Well, Charlie's abandoned me so now she's off exploring which could result in a hug and a cuddle.

Jeff: He was just chewing something he wasn't supposed to so this is what you get during live sessions. But yeah, the need part makes sense to me, especially the way you described it. Right? Because you can also look at it, I also sometimes look at it in the reverse. Which is sometimes the churn reason like need, for me is also a way that we can actually provide additional value. So if you think about it in the reverse, that they're going to go acquire more assets or maybe that they're going to expand. Well how can I start preparing them for that too? Hey, here are how other customers are starting to... that we've worked with have started to think about expansion strategies and here's how they start thinking about the timeframe maybe that they're going bring these new assets on board with our system and our tools and how they would roll it out to new employees or whatever it might be. But I also think sometimes I like to think about that when we start thinking about churn reasons as well, because I also think those are great things to try and help prepare for is reverse that happens. Like it's a good way to reinforce the value of the product and what you're doing. So need makes sense. No ownership. I'm imagining that's kind of more internal, again, kind of internally at the stakeholder level. It's you have a champion and maybe they're no longer a champion or they're not really being the champion that you need internally to go drive the right change across multiple parts of the organization. Or, they're not getting the right budget that they might need in terms of, or the right discussions to have the right budget. But no ownership, I imagine relates back to the lack of a champion on their side.

Kristi: Yeah. And I think it also falls under... to your point, it definitely is a relationship element, but you just have nobody to own the product. I've had people like, again, COVID is a great example of this. So when people were furloughed. If you have nobody who is driving the use of the technology anymore, you just have nobody internally that owns it, it's not lack of value. It's not necessarily state of the business. There is still value in having a solution, but when you have no ownership and you're trying to work through a retention play or a growth strategy, it's really difficult to do that because you have nobody to work with. Nobody who wants to say, I'll take that on as my responsibility. So no ownership, again, probably less common, but definitely worth bucketing and classifying it that way. Because I think it's indicative of not necessarily the value you provide to an organization, but just where they are in their journey.

Jeff: Yeah. And then last but not least I love customer fit. Because I think this one is really hard I think for companies and teams to get behind is actually acknowledging when a customer might not be a good fit. I think customer success talks about that all the time, right? Like," Oh my gosh, sales sold a bad deal." Or," We're really marketing to the right people." That's the cliché that people love to throw around. But I think in general, and more and more I keep subscribing to this, which is there has to be a core user, core count profile that we're going after so that we all can start working in operating the same way. That's how we need to go build the right service models and how we start thinking about how we're building success teams and how we're scaling and whatnot. And so we also need to acknowledge when stuff fits outside of that. And I think one having it here kind of on churn lists, but I think also just rallying your teams earlier on around that as well. So like your implementation leaders, how do you get involved in the sales cycle to make sure we can identify these deals before they come across the line and that we can call them out and that we can mitigate any risks. So I appreciate that customer fit one because I think kind of ideal client profile becomes a big or ideal customer profile becomes a big part.

Kristi: Yeah. I would say that one is probably near and dear to most folks in customer success. Especially I think earlier stage organizations where they're trying to find out who they are and who their customers should be. And so, it's not uncommon for sales to sell because they can and in some cases that's okay. And maybe that's how a company is going to start to get off the ground. You need customers, I get it. But at some point you've got to be very methodical about that and understand that if that's a contributing factor, you've got to be proactive in mitigating that risk upstream.

Jeff: So with these churn reasons that you have here, are these captured... these are captured... actually two questions. One, where do you capture them? And then two would be at what stage do you capture them? Is it after the churn's already lost or do you also look at even pre- acknowledging or putting in like pre- risk indicators that say this might be a potential churn reason for this customer. Let's talk about those two things and I think that might answer Camille's question who asked us in the LinkedIn chat.

Kristi: All right. Awesome. So yes, first there are two stages where we use this list. So definitely obviously when a customer has expressed their intention to leave, we indicate that, and that is Salesforce. So that captures it on the opportunity record. So if it's a renewal op or even like an upsell renewal op, we will indicate a close lost reason category is how we flag that. And then we have closed loss reason details. We don't do subcategories right now. I feel like you can almost get lost in the minutiae by having subcategories and categories. So, we keep it high level. It's one of the 10 buckets. I lied. We do have an 11th called other. So if whatever the reason is does not fall into one of these 10, which is very rare, we have an other bucket. And so then we have details. So that's captured again, when we know the intention to not continue the partnership. Now, upstream in Gainsight, we have a risk module that we built out on our customer 360 view, which is basically your customer lens. And there once we identify that a customer is at risk, which happens at any point in the journey, a customer can go at risk, we use the same 10 classifications to also flag why. Because we do hold a... every week we have a risk meeting. Every other week it happens for our two core segments of enterprise and strategic accounts. We use Gainsight to report out on that so we will show number of customers in that segment that are at risk. And then we'll show kind of a bar graph of by what category. And we do have all of our cross- functional stakeholders. So we've got representation from product, our leadership team, finance, sales so that way everyone's on the same page and hearing the narrative behind the risk, but we keep the tracking the same. So it's very thematic. So we can actually say like, great, here is risk categorization that we saw upstream and we were able to mitigate it. Great. And here's how we did that. Versus when we found out too late and this is what happened, we were able to turn it around, right. We're also trying to figure out time in risk, how long in advance, what can we do, what can we not do so there's a lot of learning that happens with this. But I think the biggest thing is capture it somewhere, capture at some state in the journey and then socialize it. I will say the most important thing to do is not keep this to yourself. Everyone in the organization should be accountable for this, right? I always say customer success is accountable for retention and churn, but we're not responsible for retention and churn to some extent, right? If it's the product that's an issue, if it's the state of the business, if it was a poor experience because your invoices were incorrect every time, those are things that can be a bit challenging. And for customer success it's frustrating when especially the organization has rallied around the fact that you are accountable and responsible. So I think this helps keep everyone on the same page. Everyone's accountable. Everyone's responsible. This is a metric we all have to own. And I think it does a great job of telling that story and getting people's buy- in to understanding what's happening.

Jeff: Yeah. I bought into that whole fact too. And the part that I think even more so outside of just churn reasons, the more you start thinking about customer success, really at the end of the day when you get into your reporting and some of the, like the what's happening with the outcomes in our departments, everything should be cross- functional as you start, NPS surveys that we're looking at, churn reasons, retention analysis. All these things really should be socialized so much that it's not a surprise around the organization. Sometimes I think when you talk to some customer success teams or leaders, there's this stance of, oh, we're here and we can't really do anything about it. And then really the first question that I always used to ask when we were in our consulting days was, okay, well, who have you talked to you about this and how have you rallied the teams around it? And the first step is always let them see the same level of information that you're looking at. They need to be able to see this, understand the story, understand how this is happening so that they can also come to the table with potential solutions. It's not just on your plate, but I think socializing it in a way and kind of democratizing data is like the big way that you can start having the right conversations around the organization, to your point. Because again, not all of these things can be solved by customer success, but we can facilitate the right conversations by bringing the data to the table to say, hey, did you know that access to leadership is one of the biggest reasons we have churn and that's because in the sales cycle, we feel like we're not identifying the right people or getting the right access and that handoff. There is a great way for us to go drive a cross functional initiative there. That's one example that I made up, but one that seems to happen a lot. So I like your point. I think more people need to understand how data can go help you around the organization, rally the teams in the right direction and getting the right conversation started. It's something that we're working on right now, too.

Kristi: Yeah. And I think, listen, it's important to also socialize the intention behind categorization and how you use the data. It's easy for folks to get defensive. And I will say that's probably been always my biggest challenge working with cross- functional teams is people take this personal as they should, right? If I designed a product and somebody comes in and tells me my baby's ugly, it's hurtful. It's hard to hear. So I think there's also how you deliver it and making sure that everyone understands the intention behind it. The intention is never to place blame. It's to figure out what do you do to get better. And I think as you work to start to include these motions in your general practice in your day to day, getting people to understand that it's going to be important because there's just no room for egos in order to be successful here.

Jeff: Yeah. Yeah. I agree with that too. Matt Moskowski just wrote in here. He's working, he's doing loads of work on this right now and discuss next week. So, we might have to have Matt on next week. Maybe we'll have a guest star with us, but he asked," Do you to measure account saves?"

Kristi: We look at accounts that were at risk at some point in the journey that are no longer at risk. When it comes down to the actual renewal itself, we're not using that as much. We don't have a barometer that we're really using around that. I think the retention speaks for itself. But we always do indicate if something was at risk, especially if it was competitive or product, or like there's some themes that we dig into, but more where if we were able to turn around and want to hear the story of how we did that and what we did because that's usually a good lesson learned.

Jeff: Yeah. Yeah. The one thing that comes to mind for me too, on that piece is also looking at we do some activities before the renewal period starts, so to speak. We also look at have those activities impacted the renewal as well. So for instance, we started to test a program that we're calling Value Training for customers. What we're trying to do is make sure from an education and training perspective that they feel like they can be successful on our platform. So after we'll say the first six months, we have a reach out that says, hey, wanted to reach out and make sure that you are feeling that you're getting the right support from an education and training perspective to be successful in the platform. Are there things that you need to know more? And so that's not happening for every customer. That's happening based on where your renewal date is and how we can have a good interaction leading into that renewal cycle. And so we're starting to track a couple of things like that to say, hey, if we actually have that extra touch point that we can automate and in some fashions we can automate it. And it's really more around kind of education and our training, are we noticing a higher renewal rate for customers who have that type of experience versus others? We're just doing a test case right now, but it's been interesting so far. I think the early findings for us is that it's something that you would probably already jump to I imagine your mind, is one is we're identifying that we need to go back and reinforce throughout the initial implementation and onboarding cycle that they're in the right training, that they're doing them and that we're actually driving some completion there. That's one thing that we're noticing, because a lot of the things that they're asking for, we're noticing that they could be getting in some of the initial trainings. But the second thing I think is that we're noticing that our customers really enjoy that touch point because they're starting to understand that we're trying to put time and value back into them outside of just our CS team or somebody who an account management team who might be reaching out to them regularly. So they're kind of seeing this as an additional touch point, which I think they've enjoyed too.

Kristi: Awesome. Yeah. I think all of those motions will only help us get better, get ahead of things. And I think that's a big thing. I think the reason why even organizations should be doing this is just to learn and to address what they can. And that's where... I know that we're out of time, but where the quadrant came from because as you tackle these things it's important to understand what are the avoidable and unavoidable elements of churn and making sure that if you could do something about, you are.

Jeff: Yeah. So I'm going to... it's perfect because we can set up the quadrants for next week. And then Matt Moskowski said he's in to come on so we can bring Matt on.

Kristi: Yeah, Matt.

Jeff: And we can get his perspective on what he's doing and then we can talk through the quadrants and incorporate a new voice into this. So, I think it'll be fun. But Kristi, loving the content. I think it was a good, a fun session just to talk through and make sure people understood what you're putting out. So, excited to do this again next week and see your doggy too.

Kristi: Awesome. All right, Jeff. Thanks so much. Talk next week.

Jeff: Hey guys, thanks so much for taking the time to listen to the Gain Grow Retain Podcast. If you liked what you heard, please take a moment and share the podcast with your friends and colleagues and subscribe. We really appreciate it. Talk to you soon.

DESCRIPTION

In a weekly segment we've asked Kristi Faltorusso, VP of Customer Success at IntelliShift, to join us as we tackle Q&A that comes Inbound.  

Our goal: to give tactical, direct advice to customer success leaders. 

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If you want to join the discussion with thousands of other customer success leaders, join Gain Grow Retain: http://gaingrowretain.com/

This podcast is brought to you by Jay Nathan and Jeff Breunsbach...

Jay Nathan: https://www.linkedin.com/in/jaynathan/

Jeff Breunsbach: https://www.linkedin.com/in/jeffreybreunsbach