We have and will continue to discuss how gaining new customers and being able to manage that growth is critical to any business’s growth. But it’s not the only way to grow, and you can do more/different things than investing in marketing and sales to grow your business. And what is the point of adding new revenue through the front door if more revenue leaves out the back door?
The telecoms and other subscription-based companies started using the term “churn” in the 1980’s, and it really took off with the boom of Software-as-a-Service (SaaS) companies in the early 2000’s. A churn rate is defined as a percentage, being the percentage of customers lost from the total number of customers in a period (often a year). You can see the standard calculation below.
Why is it important? Well, in a growth company, churn rate is the brakes applied to your acceleration. In a perfect world, we would only grow and lose no customers, but that rarely happens, and your growth will come at some loss, which of course means the growth is less.
And this works for all businesses, not just tech. If you run a hardware store and a regular customer decides to move across the country, well, you unfortunately lose those sales. Sometimes, like in that example, it’s out of our hands. But there are plenty of things we can do to keep customers.
Firstly, is to recognize how important each and every customer is. Let’s face it, it’s their money that is keeping our business afloat, not our money. The current business jargon for this is being customer-centric, but before we coined that phrase, it simply meant caring about your customer.
Now, let’s not all get twisted into the phrase, “The customer is always right!” We all know, as customers and vendors, no-one is always right, and often, it’s our expertise that the customer is looking for to guide them. Caring about your customer means wanting to step in and guide them to something better when we see them going down a path that leads to failure. Putting the customer first can even mean not selling them something they think they want, if you know they won’t get benefit out of it.
I was once working on a 7-figure deal with an extremely valuable prospect with a huge brand name. We were the only supplier they were talking to, and we’d built a significant internal team to help through the process. We had been negotiating back and forth over a number of months. The customer kept updating the parameters and asking if we could build processes for them that we hadn’t done before. We worked hard at the deal because it would have increased our revenue by 10%! But as time went on, the gap between what the customer was asking for and how we wanted to run the business became wider and wider. Eventually, at an internal meeting, I asked the question, is it still in this customer’s best interest to buy from us? Everyone took a seat: Product, Support, the salesperson (who was due to make a lot of money in commission), and we answered the question carefully and thoughtfully. I’m very proud to say we unanimously said, “not really”, and respectfully informed the client they would be better looking for a closer fit.
Interestingly, the client came back a week later and asked if they could buy just the product from us. I know that we thought we couldn’t help. Because we had put their best interest at heart, they were still willing to do business with us.
Make caring about your customer part of what your business is. Make sure your whole team knows how important it is to put the customer first. Solve business challenges by asking, what is best for the customer in this situation. By continually asking how to put the customer’s best interest at the core of your thinking, you will demonstrate to your customer that you are the best partner for them long-term.
And then, see where you can go above and beyond. One of the best business books I’ve read in the last 5 years is “Unreasonable Hospitality” by Will Guidara. Fans of the TV show “The Bear” already know what I’m talking about. In it, Will talks about having such tight control of his finances that he could allocate budget to simply “wowing” customers. Examples ranged from turning a private party room into a beach, to simply buying hot dogs from a street vendor for a party whose last night it was, and they were overheard saying they never got a hot dog. Look for customers that you can delight, make sure you can afford to do that with the resources you have (Will’s iron fist on budget) and then go ahead and delight them.
Two main things will happen. You’ll earn a customer for life. (that helps reduce churn). And that customer, and every other customer you delight, will tell people, because unfortunately, it’s unusual in this world. And guess what? That means they will convince other people to buy from you, they’ll influence other customers to stay, and your growth and reputation are secured.
So go ahead, think about how you can “Wow” a customer this month. Clearly, within the limits of your resources, and something that will actually impact their customer experience, but try it out. See what a transformative change it can be. (And please, read Will’s book!)
I wish you all great success, and we would love to hear your Customer Wow stories!
by Darryll Gillard