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Is Customer Retention Sexy? You bet it is!



Bringing on new customers is cause for celebration. There’s the glory of the hunt and the thrill of the capture. Like most companies, your business devotes an incredible amount of time, money, and focus into attracting new customers and signing deals. Closing new deals is sexy.

While it’s exhilarating to win significant logos and to hit your numbers at the end of the month, quarter, and year; all those new bookings don’t automatically translate into profits for your business. New customers you work so hard to secure could be slipping out the back door when you focus on new logos to the detriment of new and existing customers. Read on to learn three common and very unsexy challenges: the special snowflake syndrome, the trough of disillusionment, and reactive heroics.

Challenge 1: The Special Snowflake Syndrome

Do your sales teams close accounts that may not the best fit for your product? If they do, you likely end up treating every new customer as a “special snowflake.” All that new revenue that sales and marketing teams fought to acquire, gets eaten up by endless hours of handling customers with special care as you attempt to implement your product. You face eroding margins, frustrated customers, frustrated employees, and increased churn. From both customers and employees.

All that special snowflake treatment cost a software company with whom I worked upwards of a half million dollars a year. Implementations of their medical practice software were long and delayed because every new customer had unique needs. The result: paused and cancelled deployments that ate into their bookings numbers. And they couldn’t recognize revenue until the system went live.


Challenge 2: The Trough of Disillusionment

Are your new customers falling into the trough of disillusionment? The trough of disillusionment is based on the Gartner Hype cycle for new innovations, where you start with high expectations, which are quickly followed by deflated interest as the new technology fails to deliver. The same thing happens when you sell to customers. They have high expectations when they purchase your product, then fall into the trough when deployments are long and delayed; see the image below. Customers don’t want to dwell in disillusionment. They are most excited to be successful with your product at the very beginning.


Baremetrics B2B software trough of disillusionment


I worked with a company that provides a marketing platform for real estate agents. Their customers quickly became frustrated, overwhelmed, and disengaged when the deployment was delayed. They paused and cancelled payments in the first 30 days, costing the company hundreds of thousands of dollars a year. When customers did stick around, customer success managers (CSMs) struggled to win back each customer’s trust and confidence. That’s no way to start a new relationship.


Challenge 3: Reactive Heroics

I worked at a company where we parachuted in teams of expensive technical experts to save accounts just before they were up for renewal. While charging in to rescue customers felt good for a time, with the rush of adrenaline and high fives from colleagues and executives, exhaustion eventually set in. Experts across the company were drained, morale dropped, and burned-out professionals headed off to calmer climates. Does this sound familiar?

Consider the overhead you spend to save accounts at all costs. I realized we spent triple the license value trying to recover these accounts in the eleventh hour. Of course, the assumption is when you fix problem customers, those customers will stick around. However, Customer Success expert Greg Daines finds reactive heroics rarely work. His data from thousands of companies shows that saved accounts are 50 percent less likely to renew than customers who never needed rescuing in the first place.


Customer retention is sexy

With customer acquisition costs (CAC) you can’t afford to not onboard and engage your customers. Driving adoption up front is critical because first year churn is often due to failure to launch, costing businesses $136 billion a year, in the USA alone. No matter how great your sales team is, no matter how sexy it is to close new deals, you can’t acquire accounts at a pace that makes up for all that loss in the long term.

What’s truly sexy is when customers quickly gain value from your product. What’s appealing is satisfied and loyal customers that keep renewing month after month and year after year leading to compounding revenue and huge profits for your company. Here are three ways customer onboarding and retention is sexy.


First value is sexy

In today’s quick moving world, customers want fast results. They are no longer tolerant of the trough of disillusionment. Since they invest less initial time and money up front, you don’t have a customer’s full commitment until you prove value in your product. Just like you have only one chance to make a first impression, you have only one chance to guide customers to first value—the moment when customers first realize the benefits of using your product.

Working with that real estate marketing platform company we moved from frustrated and cancelling customers to delivering value on day one. In our work together we uncovered what sets this company apart from their competitors: their thought leadership, their exclusive community, and the strategic coaching they receive; not their software alone. So, we moved CSM engagement to the moment the contract is signed rather than waiting until their product goes live for each new customer. Now, new customers gain strategic skills during that crucial first 30 days and are prepared for success the moment the platform is ready to use. No trough to fall into here!


Value drip is sexy

Every time you deliver value to customers, they get an endorphin hit. They celebrate rather than curse their new relationship with you. Consider this: rather than pushing for an all-encompassing go live, move to phased deployments, which generate momentum, rather than kill it.

While the first value approach was helpful for a CRM company with whom I worked, the real change came when the company moved away from selling and implementing their infinitely adaptable platform to distinct products. Customers now reach value in a few weeks rather than several months. The company now has infinite opportunities to increase customer value along the journey by selling additional products. How can you start simple and build momentum?


Growth is sexy

Growth is usually attributed to the sales and marketing engine. But consulting powerhouse McKinsey finds existing customers account for between a third to half of total revenue growth, even at start-ups. Some companies even find their customer installed base brings in up to 80 percent of their revenue. All that attractive revenue from new sales is really the icing on the cake when it comes to your company’s growth. The image below shows how your success is built on retention more than initial sales because growth happens from existing customers.


The takeaway

In practice, it’s the unsexy work that keeps customers sticking around for the long term. Tyler Hakes of Optimist shares, "Achieving growth is more about doing the boring work — getting the nuts and bolts right, automating the time-consuming tasks, and scaling processes." It may feel tedious to create scalable and proactive processes to drive customers to value. It’s challenging to break down silos across customer facing teams to deliver a seamless journey. But believe me, your customers find value sexy. Your board finds compounding net revenue retention (NRR) sexy. When you quickly drive customers to first value and then continue to drip value along the customer journey, you’ll have a lot to celebrate for a long time to come.


DONNA WEBER is the world’s leading expert in customer onboarding. For more than two decades, she has helped high-growth startups and established enterprises create customers for life. Her award-winning book is Onboarding Matters: How Successful Companies Transform New Customers Into Loyal Champions. Learn more at donnaweber.com.


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