Retaining customers is a complex issue. I worked last week with a client, new to his role. He described how his new firm’s customer retention rate had been on a steady, steep decline for the past few years. His solution to curb churn based on some customer feedback and experience was to change the current sales strategy from product focused/meeting a specific customer need to a relationship and continuous improvement strategy by selling a broader solution. Certainly selling the broader solution to clients that need it is ideal. But as we spoke I recognized two potential problems in this thinking: 1) theassumption that the current sales strategy was the primary reason for the exit of customers (vs. other things that had to be corrected such as a sales process for expanding relationships though cross selling, relationship skills, expertise, leveraging the team, positioning solutions against what customers value, relationship management tools) and 2) the challenges around making selling the broader solution at one fell swoop a primary strategy.
Assumptions around Churn
Clearly, retaining, not only acquiring, customers is critical to achieving goal. Retention is a part of most sales organizations’ business model. Some say it is five times more expensive to gain a new customer than retain a current one. I have always somewhat questioned that figure when I take into account the difference in customers, especially the high level of expectations of all customers today, and shifting customer needs etc. But without a doubt a critical goal is to minimize churn and maximize retention.
To do this many sales organizations focus on data to help them predict and prevent customer loss. Data is invaluable but from my experience it usually results in few insights into the actual reasons customers defect. I often see information such as pricing, switched to competitor, decision to use in-house team, a new decision maker or life cycle of the product. But these tell little. The question is why: why did they choose in-house etc. What was the root of the decision: was it solution dissatisfaction, service issues, the salesperson, culture miss match, the wrong sales strategy? The first step in stopping churn is finding out why your customers are leaving. Dig really, really deeply to truly understand why every customer chooses to end the relationship. Once you understand what impaired the customer experience and why customers are leaving you can begin to make changes in every area you control. If you do that fewer relationships will end.
Selling the Total System
Of course when you have the advantage of the total solution you can benefit both your customer and yourself by presenting the big picture, putting the specific solution in context, and going for the deeper sale to create the best chance of solution success. I fully understand the value of selling the total system. For example, you can enlighten customers who have progressed far through their buying cycle before speaking with salespeople by being the one to add to customers’ perspective to help them achieve their business outcomes or to plant the seed for future modular parts to the solution.
The question is how to sell the total solution so it doesn’t feel like force-feeding to a customer who may need it, but is not ready for it yet and how to play your hand without over playing it.
Preventing customer churn is as much mind-set as sales pitch. When your goal and sales activities are directed to owning all of your customers’ business in your provenance, churn will be much less a problem. In a risk adverse environment it is important to approach customers where they are or where they should be without making the decision bigger or more difficult than it needs to be. Selling the relationship and the total solution does not have to happen in one fell swoop. When the broader solution is needed and can be sold all the better but when it can’t you can make it happen incrementally. Many organizations stop the sales process at the point of negotiation and closing when in fact the business of retaining and expanding relationships demands a defined cross selling process as important as the sales process, along with creativity, a resourceful and committed sales team, and tools.
If you commit to knowing what is going on in your customers’ businesses, industries, and with them personally you will know what they value so you can fulfill their needs and drive demand—often before the need is on their agendas. One of the finest sales leaders I was lucky enough to work with was possessive about customers. He had a steadfast expectation of his sales team: they were to know what their customers valued and always at a minimum be on the short list. Not every deal was won but it was a very big problem if his salespeople learned that their customers were already in the market and much worse if they learned about a customer purchase after the fact. With this mind-set the leader created a proactive customer relationship sales culture that paid off with repeat business year after year. He defined a relationship as a “series of transactions”. Transactions was not the key word—the word series was and it served as the enemy of churn.
The first sale, whether selling the full solution or a small part of it, gives you the opportunity to build trust, strengthen the relationship, bring value through ideas and insights, and expand the relationship. To keep customers listen to them. Care about their businesses and be a part of how they achieve their business goals. Think about each customer. Positioning a total solution strategy can be very effective with some customers but not with others. A defined and implemented cross-selling process should be a part of every plan. Turning churn into earn requires sales leadership and sales force that understands that it takes as much, and sometimes more, to keep a customer as it does to win one.