Chapter 9

Customer Churn Prediction

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Customer Churn: The Ultimate Guide

Customer Churn Prediction is the act of predicting which customers are most likely to cancel based on their usage of a service. Customer success software is built to solve exactly this need, but an understanding of the underlying reasons a user might churn is imperative to using that software effectively. 

To paraphrase the famous saying, there are only two things that are certain in business: churn and taxes.

While it is impossible to completely avoid either, there is much you can do to limit the impact of both. And, in the case of churn at least, by learning what you can avoid you can prevent yourself from suffering any loss that will do real harm, and could be avoided.

Research by Deloitte shows that personalized customer experience is now just as important to customer decision-making as speed of service and ROI. Beating churn means delivering personalized value at every step of the customer relationship.

If the decision to renew is linked to the customer experience, then you can predict churn by accurately following and working to improve that experience. 

Ways to Predict Customer Churn

The following list of best practices can help you identify potential churn in time to do something about it:

  1. Apply Lessons Learned from Previous Churn Cases
  2. Pay Attention to NPS and Close the Loop
  3. Value Escalation and Support Information
  4. Closely Follow Product Usage
  5. Ensure Customers See Value
  6. Build Relationships with the Entire Organization

These initiatives begin with an honest assessment of past customer lapses.

1. Apply Lessons Learned From Previous Churn Cases

To paraphrase another saying, if you don’t learn from past customer churn, then you are doomed to repeat it. A churn analysis is most effective when considered across customer segments, where patterns can be established and avoided. Commonalities in product version, onboarding practice, industry, rates of escalation response, feature adoption, or expansion attempts can reveal areas for improvement in your customer success approach and give you telltale signs to look for—and seek to resolve—among existing customers.

2. Pay Attention to NPS and Close the Loop

Net promoter scores (NPS) can reveal a customer’s current opinion of your product. A simple ranking of a customer’s likelihood to recommend your product to their peers at that moment in time, this Voice of Customer information is unique in its source and a potential direct call for assistance from your customer. A net promoter score of less than 7 or 8 indicates the need for a solution that will change the customer’s attitude toward your product through means such as a winback campaign or value incentive.

3. Value Escalation and Support Information

Like NPS results, information gathered from customer escalations or support tickets offers an unambiguous message that your customer needs support and lets you know where exactly they need it. A large number of support tickets—or even a single high escalation issue, for that matter—indicates a need for swift intervention and a solution to the issues by your customer support or CS team. Even one high escalation issue is important to let the CSM know. Luckily, customers that receive satisfactory responses to escalations are highly likely to develop loyalty to their provider.

4. Closely Follow Product Usage

Of the many customer success metrics available to help you understand your customer’s day-to-day behavior, product and feature usage measurements are among the most indicative of renewal possibility. It is important to establish acceptable product usage rates for each stage of the customer journey and then act to provide additional growth whenever these rates are low. Predicting churn is also paramount to improving your chances of customer retention—to do this you need to track usage patterns of previously churned customers to identify common behavior and implement appropriate solutions.  

5. Ensure Customers See Value

Customer success planning is as much about aligning your enterprise’s offerings with your customer’s business goals as it is about them achieving these goals. Unrealistic or overly ambitious targets are a forerunner to disappointment. Progress toward these goals will show your customer the value your product can provide, so it is vital they are achievable and logical.

Vigilantly looking for early warning signs of churn is just one part of the equation. To successfully build a lasting customer relationship that promotes mutual growth, you have to be ready to turn data that points to potential churn into effective action. 

6. Build Relationships with the Entire Organization

It is important to build relationships with the entire organization you are working with, not just your direct point of contact (POC). Get to know members of your customer’s organization at all, from key champions to users to executive sponsors. Understanding your customer’s leadership structure and including them in meetings will ensure you are prepared should there be a POC or leadership change at the company.

Identifying At-Risk Customers for Churn Prevention

Identifying customers that might churn helps you forecast net revenue and create a plan for new customer acquisition. Signs to look for when learning how to identify at-risk customers include:

Low Net Promoter Score (NPS): 

By tracking Net Promoter Score (NPS), you create an early warning system that will identify potential at-risk customers. Management teams or other key stakeholders should create these triggers which will send automated notifications to the appropriate team member, and detail next best steps. CS teams will not only be notified of an at-risk customer, but they will know if they should personally follow-up with the customers or if it requires an elevation to a CS Director.

Low license usage: 

If you collect data about how customers are using their licenses, you can track usage rates that fall or stop entirely. Keep an eye on key moments within the customer journey, such as activations, expirations, and renewals. Intervene if you see reduced usage at any point.

Increase in support tickets: 

When customers submit support tickets, they aren’t just telling you that they’re struggling. They’re offering valuable information about why they are struggling. You should collect this data and analyze it for patterns. Do most escalations revolve around a certain feature? Perhaps they happen at a certain time of year. Or maybe they occur during a particular stage of the customer journey? Learn to spot trends within support tickets to pinpoint areas that need improvement. 

Lack of awareness about learning materials: 

When you create training materials to help customers learn how to use your product’s features—such as videos, how-to articles, and webinars—you must make customers aware of those resources. Furthermore, your materials must cover the features customers struggle with most in a clear, easy to understand manner. 

Changes to key stakeholders at organization: 

If a customer has been communicating through a single point of contact and their organization experiences a change in management, that customer may churn. If management shifts, be sure to distribute a new license to the appropriate contact. Meet with the new management to check-in on the customer’s goals, strategies, and any changes in their plans. By reaching out to form a relationship with new management, you can present what they have accomplished with the product and demonstrate your brand’s value.

Once you know how to identify at risk customers, it’s time to engage them.

Engaging At-Risk Customers to Prevent Churn

Sometimes, something goes wrong during the customer journey. Maybe a feature isn’t working correctly. Maybe a request for help went unanswered. Whatever it is, it’s caused the customer to lose faith in your product and brand. 

When this happens, you must show the customer that your product offers value and that your team is committed to their satisfaction. 

Here are some ways to proactively engage at-risk customers:

Deliver an outstanding onboarding experience: 

Optimize onboarding by ensuring your customer sees a fast time-to-value (TTV). Help the customer achieve their business goals by ensuring there is a seamless sales to CS handoff, create personalized milestones, constantly analyze customer data to ensure they are not experiencing any bottlenecks, and teach them how to use all of your product’s features. 

If your at-risk customer is struggling to adopt the product, you can provide educational materials such as emails, welcome messages regarding their new license, how-to videos, informational links, or webinars. 

Utilize triggers to automate tasks when at-risk behavior is detected: 

Since your team can’t be on the lookout for at-risk behavior all the time, you should use automation to monitor customer behavior for you. 

Key stakeholders can determine triggers and next steps for at-risk behavior when it is detected and automatically assign tasks to a CS team member. You can set it up so that campaigns will start based on a reason for risk or a certain lifecycle stage. This ensures no customer goes overlooked and frees your team from the daunting task of monitoring accounts manually.

Start the renewal process early: 

Remind customers of renewal time and of the value your product provides well before the subscription expires. But, in addition to planning early, be proactive with your engagements to solve potential issues quickly, and provide feature updates before a customer knows they need it. 

By staying engaged, you may learn that the customer is planning on switching brands or that their goals have changed since their original purchase and will be prepared to support either situation. Alleviating a customer’s concerns and confirming their decision to renew early will ensure the renewal period goes smoothly.

Provide cohesive communication: 

Whenever you interact with a customer, make sure it’s aligned with the entire enterprise's efforts. CS teams have resources and best practice to manage a drop in feature usage, to contact the product team – CS teams will have best next steps provided by management that will help them to assist an at-risk customer. 

By aligning your teams on one platform, you are able to provide cohesive communication at every stage of the customer journey, as customers expect you to have their history on hand so they won’t have to repeat themselves. 

Make sure everyone within your organization has access to best practice resources, customer data and touchpoints, as well as standardized next steps so they are on the same page and can intelligently engage with customers.

By leveraging these retention strategies, you can establish a positive customer relationship built on the delivery of value, met expectations, and trust.