I have been thinking a lot about a vendor’s view of the two ends of the buyers’ journey - finding a lead and dealing with churn. On the front end, we focus on marketing messaging, positioning, key differentiators, and Ideal Customer Profiles (ICP). The goal is to find more great leads and increase our conversion rate from leads to customers. On the back end, we fret about churn and down-sell, and we perform churn analysis to determine why accounts fail to renew, or what went wrong.
I am a fan of both of these forms of analysis, and every organization should be all over this. However, lately I have been exploring the connections between the two, and coming to the conclusion that we often miss the opportunity to learn from one and improve the other.
We always hear the same typical rationales from churn analysis:
Bad service
Bad product
Bad product fit / competitive takeaway
Death and marriage (bankruptcy and merger)
Management / strategy change
All of these are legitimate and we have to understand how each plays a role in churn and down-sell. Great - we need to do that analysis and figure out what we can do to improve the results on all fronts. However, what I think is more interesting than churn analysis is ‘Stay Analysis.’ The reasons why customers are staying can tell us much more than the reasons why they are leaving. Understanding customer retention can be the key to future growth.
In an earlier post, I wrote about churn and down-sell as a leaky bucket. Revenue that we worked very hard to secure is leaking away as customer decide to leave. Churn analysis and acting on the findings helps to plug the holes and slow the leaks, but it will not do anything to drive growth. While it is imperative to stop the leaks, the real goal is to grow the business with increased sales. To do that, we have to look at the other end of the journey and hone in on the quality and quantity of leads, and their conversion ratio into closed sales.
I see a ton of tech marketing messaging, and frankly most of it is pretty bad. When I say that, I mean it is lacking clarity and ‘edge’, and it simply is not compelling. On the continuum from hard-sell — ‘buy from me,’ to no-sell — ’thought leadership,’ a lot of marketing messaging leans too far in the direction of no-sell. There is nothing wrong with thought leadership. It has its place in the vendor’s arsenal and the buyer’s journey, but I am an advocate of thought leadership with a purpose - an ‘edge.’ A vendor’s thought leadership message ought to lead shoppers toward the solution that the vendor wants to sell. We should educate the market to understand the ‘right’ way to do things, and, oh by the way, let them know that it is the way we do them. Without edge, a lot of thought pieces just deliver generic, bland messages that could have come from anyone, and generally the most visible market leader reaps the most benefit. We need to say something unique, or present a differentiated point of view if we want to stand out. It does not need to be a hard sell ‘buy from me,’ but at least it ought to imply ‘buy like me.’
When we are fishing in the sea of prospects for a specific Ideal Customer Profile (ICP), we need to use ‘bait’ that will attract more of those prospects, and fewer leads for non-ICP shoppers. A generic message is like casting a big net that does not differentiate what it catches. The result is it takes more sales effort to qualify and find the real ICP buyers. If the solution is easy to buy (low price, low impact), a bland message can entice less than ideal buyers to become customers who then quickly figure out the product was a bad fit and churn.
I suggest the issue starts with marketers that do not really have a deep understanding of their ICP and unique value proposition. If you are unsure of who you are looking for and what they are interested in buying, then you just throw out generic thoughts and hope that something sticks. There is also a sprinkling of marketers that are committed to avoiding being too ‘salesy.’ Their ‘thought leadership’ messages intentionally avoid any whiff of sales, and in the process avoid any competitive differentiation or biased point of view - no ‘edge.’
That takes me back to stay analysis. To really understand our ICP, we have to look at the customers that stay with us. Why are they happy? What unique benefit caused them to buy, and what is contributing to their success with our product? Win analysis may tell us why they made the purchase, but the more interesting information is what is making them happy post-sale and driving their success. It may be completely different from their core reason for buying. One company I work with discovered that companies that stay are nearly all using a module that the vendor thought of as a minor element of the sale. It turned out to be the feature that delivered the stickiest value post-sale, but it rarely came up in win analysis and was not a big part of their marketing and sales messaging.
Stay analysis is a valuable tool for determining our ICP and our unique value proposition. Directing marketers to interview the best customers and personally perform the stay analysis will be eye opening for them. It will improve their understanding of the buyer and enable them to create thought leadership with informed ‘edge.’ It will help them to refine the bait so the quality of leads improves and sales can be more efficient at catching customers that will stay in the boat. There is a virtuous cycle when we market a clear message to our ICP — we attract more ICP shoppers, close more ideal customers, and they stay with us longer without churning. When we start by listening to our customers, good things happen.