Let’s get straight to the point: what’s your rate of customer churn? Are you happy with it? Keep in mind that the cost of replacing every lost customer is much higher than just keeping them in the first place.
When you lose a customer, do you know why it happened? Ideally, you’d be able to carry out an exit interview, where the customer could pour their heart out to you and give you the truth as to why they are going. In other words, a type of ‘it’s not you, it’s us’ response.
Trying to minimize churn by finding out why customers are leaving is probably too late. They are already part of the churn: they have gone, and you are panicking as you attempt to replace them with new customers. Yet, if you still don’t know why the old ones left, what’s to guarantee the new ones will stay?
Time for a long, hard look in the mirror
Let’s start with considering the age-old sales guidance to under promise and overdeliver. It’s pretty simple in what it’s trying to say, but also pretty deep when you dig into it.
The ‘under promise’ side of things is the one where most sellers struggle. If you are a managed service provider (MSP) with a direct sales force, it is far more likely that this will be broken than if you are website-driven sales. Direct sales representatives who are often driven by sales commissions can become less transparent when getting close to the end of a sales period. When talking to a prospect where that one deal will get them over the line, there is pressure to agree to pretty much anything the prospect wants. “Can your service do this?” “Oh, yes, of course it can.” “Can I have a unicorn with gold adornments?” “Definitely…”.
When these promises don’t come true, you start off with a disgruntled customer, which is not a good start. As an MSP with a direct sales force, you must keep tabs on what each salesperson is doing, who excels at maintaining customer loyalty and who is directing customer churn. The churners are revenue burners, and they are unlikely to produce much or any profit. It’s important to identify how top-performing salespeople with the lowest churn rates are successfully engaging with customers and reward them accordingly. Document their strategies and actively share them across the entire sales force to strengthen overall customer retention.
Promises matter
When you rely on your website instead of a direct sales force, make sure it drives sales with clarity and honesty. Therefore, this must be checked to see what is explicitly being promised and what is being implicitly stated. There is a real need for the website to be honest about what your services do – unhappy customers can all too easily provide the proof of the disconnect between what the website said and what they actually received.
However, prospects are unlikely to go for providers who cannot demonstrate some level of future vision. This is where the difference between a promise and an outlook comes in. After you have detailed (and hopefully demonstrated) what your service does today, tell the prospect what else is in the pipeline. Place capabilities that have already completed development and testing under the label ‘soon to be delivered.’ Approach this thoughtfully. List early-stage developments as ‘in the pipeline’, and categorize those that are further out as ‘proposed ideas’.
Not only does this then allow prospects and customers to have a better idea of what you are planning, it also allows them a chance to comment on the ideas and have a say in the future. This has a dual benefit: prospects and customers beginning to feel that they have more of a say in what they are paying for, and you, as the supplier, end up with a service that more closely aligns with what the market is looking for.
Turning feedback into innovation
Opening up a channel where customers, and to some extent prospects, can ask for specific functionality further down the line can often bring in ideas that your own MSP has not thought of in its own internal discussions. Some ideas won’t be feasible short-term; others may be too costly to implement. You need to explain as openly as possible to those who requested them why their ideas didn’t make the cut.
Other ideas may be things that can be dealt with as custom projects for customers who are willing to pay extra to receive functionalities that they see as providing them with distinct and a valuable advantage in their market. As such, this could represent an additional revenue stream with strong potential.
Overall, customer churn can be highly detrimental to managed service providers. To mitigate this, it’s important to proactively address client issues before they escalate. This approach helps ensure that only unavoidable losses, such as acquisitions or business closures, impact retention. To build a loyal customer base, MSPs must meet their promises and deliver at least what customers expected and, ideally, even more.
Photo: designer491 / Shutterstock
This post originally appeared on Smarter MSP.