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Uncategorized
May 10, 2016
Do You Really Know Why Your Customers are Churning?

In previous posts I’ve written about the critical value of “customer success” for technology companies—tracking, retaining and upselling existing customers. Plenty of vendors are now offering sophisticated technologies in this area, allowing companies to get up-to-the-minute data and advanced analytics detailing which customers are happy and engaged with their products, and which are not. Those that are not, of course, are in danger of defecting to competitors.

But sometimes, data doesn’t tell the whole story. When it comes to customer success, I think there is also room for qualitative measurements and feedback that can provide more “color” and details around why specific customers are unhappy and churning. I also believe this feedback is best coming from an unbiased third party.

Think about it: Companies often have a specific viewpoint, or narrative about why certain customers buy a product, and others don’t; they also often have firm viewpoints about the merits of their product. (My product wins sales because it’s technologically superior to the competition, for instance, or it’s the easiest to use.)

These biases often surface when sales deals go south. The company is convinced it knows why a particular customer churned away. But does it really?

In many cases, the answer is no. Lately, some companies in my portfolio have been working with third-party services firms to help them get past these biases and glean real insights about their products, sales processes and even individual sales reps. Ultimately, this process can boost sales and revenue.

These services firms specialize in conducting actual human interviews with technology buyers to figure out why these customers are not buying a product or service. Through this process, companies are often able to elicit feedback that a customer wouldn’t give directly to a company or its sales rep—or feedback that might be filtered through the lens of a biased sales rep who thinks he or she knows what happened in a particular customer situation, but really doesn’t.

Surprisingly, most customers are willing to talk. Alan Armstrong, a former software executive who runs Eigenworks, a Toronto firm that conducts these analyses based on real human feedback, says his firm has a 75% “hit rate” with potential interviewees. Interviews generally take 30 to 45 minutes, and many of the subjects even enjoy the process. “It’s almost like we’ve helped the vendor unburden himself,” he joked. In that way, Eigenworks is part psychologist, part data analyst and part business anthropologist.

In one recent case, Eigenworks helped a public software company increase its customer win rate to 60%, from 40% in six months after interviewing scores of customers and evaluating their feedback, according to Armstrong. The company thought it was winning because of superior product features. But it turned out that customers were buying for very different reasons. The market had matured, and buyers were looking for a broader relationship with the vendor, beyond just better features. Once Eigenworks gathered this feedback, the company re-trained its sales reps to be better listeners, and to tailor sales pitches to specific customer pain points. The company also expanded some of the services it offered to instill confidence in companies that they would have a successful deployment.

In other cases, these types of interviews produce valuable product feedback that might prompt a company to tweak or re-design a product to add features or improve usability. The interviews can also cause companies to re-train a specific sales rep, or even let him or her go, if the feedback indicates the rep is ineffective.

“Once you are in-market with a product, you can begin to lose quality and depth of insights from buyers. It’s just the nature of selling,” says Nick Mehta, CEO of technology-software company Gainsight*.

Mehta says he’s used Eigenworks to conduct customer interviews at two different companies, mainly “to make sure we are hearing the real story.” Early on, Mehta says he listened to a recording of every single customer interview. After his companies began to scale, he used the service in a bigger-picture way to glean “competitive intel and sales feedback that cut right through the noise.”

Here are some examples of the kind of candid feedback customers can get in their reports from these services firms:

Interview focused on a lost customer:

“We expected more help, more education, to help us learn and see the direction we needed to head. (The vendor) really did that at the outset, but it was short-lived. The lack of support made us feel like they are just a technology company, and we needed a more than that. We needed someone to help us grow the concept. Unfortunately, they were much more of a technology player to us than they were an idea partner.”

Interview with a customer who churned:

“It felt like they took their position for granted. Of all the vendors we considered, they were the least prepared. Based on presentation, they were one of the lowest in the pack. The sales team even admitted to us that they had thrown (the presentation) together at 10PM the night before! It was kind of half baked.

In their session, instead of a proof-of-concept, we wound up white-boarding and we were still kind of stuck in concepts.”

Renewal (“save”) interview:

“They gave us an alternate solution but it honestly was the proof-of-concept that really turned it. They were like, ‘We do not have this stuff natively, but here is another way to look at it.’ Once they proved out that it was possible and we kind of stacked that up with some of the other benefits that we talked about, we said, ‘OK we feel comfortable enough going this route.’ ”

Win interview:

“The other vendors were just showing off their size and scale. We knew we would need the scalability and growth in the long term, but for now we didn’t need all that. And your guys just gave us everything that we wanted today. Plus, it’s a lot easier to manage. We don’t need to be so big. We just need to be big enough.”

These are just tidbits that tell part of the story of each customer interviewed. I have seen first-hand the elements of a more-complete narrative that emerges from a post-decision interview, most of which are far too sensitive and proprietary to share even as an anonymized example. This is the key – getting the complete story of why a customer did what they did, and not just the CEO’s or sales rep’s version. It’s a very easy, simple thing for a company to do—and proves that even in today’s data-driven business environment, there’s a place for the human touch.

 

*For a full list of all Battery investments and exits, please click here.

 

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