Yesterday’s Reasons are Today’s Indicators
By Russell Bourne
Customer health scores are a key component of a high-functioning CS program; there’s a reason why all the major CS tool players put them front and center in their offerings, and creating one is often one of the first decisions new CS tool customers need to make.
Unfortunately, that’s where our common experience ends, because there are differing questions and opinions about which factors to include and how heavily to weigh each one. The correct answer is the all-too-often refrain, “It depends”. Fret not; there’s structure to be had among the chaos. In fact, the choices are finite and easy to find. Assuming you use opportunities to manage your renewal and expansion cycles, the choices are simply your opportunity win and loss reasons.
LEARNING FROM THE BAD: CHURN
If you’re trying to create a health score that predicts churn risk, it’s dangerously easy to brainstorm all kinds of possible red flags. Too many support tickets, loss of a key contact, poor adoption, lack of trained customer end-users, and on and on. You’ll certainly come up with a long and scary list, but how many of the items are truly factors in your case? Did they actually cause churn in the past, or are they just scary-sounding things that could happen in theory?
Instead of brainstorming from the bottom up, how would it look if you lean on the information you already have, via a report on the reason field of your Closed/Lost renewal opportunities?
Before we go further, it’s worth talking about how to build good hygiene on opportunity loss reasons. If you haven’t built a reason field yet, you could start by creating a single free-form notes field in the opportunity object where a CSM must enter a text reason for the win or loss. Once you have enough of a sample size, read through the reasons and categorize them into buckets; you’re likely to see common issues emerge - perhaps along the 80/20 rule - like “platform isn’t intuitive enough”, “took too long to install”, “company went out of business”, “customer didn’t get what they thought they bought”, and so on.
As you iterate and scale, you can create a drop-down list of the most common buckets, to make it fast for CSMs to pick them and make it so you don’t have to read and interpret each reason like you did in the building stage. Add a choice for “Other” and maintain the free-form notes field, making it a requirement that if a CSM chooses “Other” they must fill in the field. If your customers’ churn reasons shift over time, the other-plus-notes method will allow you to notice and track a new or newly-trending reason.
One other note: try to avoid offering price as one of the drop-down choices. Wins and losses are almost never because of price. When someone tells you the price is too high, they’re really saying the value was too low, and you need to discover what value you fell short on delivering.
Now, remember the final step to close the loop: when you know your most common churn reasons, make those the highest-weighted factors that would turn a health score yellow or red!
LEARNING FROM THE GOOD: RETENTION AND EXPANSION
In the same way we identified our biggest risk factors, we can identify positive leading indicators. Build a closed/won opportunity reason list in the same way you built the closed/lost one. It may make sense to track reasons separately for flat renewals versus expansion sales. Among expansion sales it may also make sense to track upsell (more of an existing product) separately from cross-sell (a new product to an existing customer).
As you look for closed/won and closed/lost reasons, keep a special eye out for reasons that have to do with you as a vendor versus reasons that are about the customer.
For example, a common win reason that may emerge might be something like “met all goals from the joint success plan”. That’s about something you do as a vendor and is a good sign that your success planning process is driving business results. In that case, make sure success planning is a centerpiece of your account planning, and consider expanding it to any segments where it isn’t happening.
On the other hand, you may notice a common loss reason is “company was acquired” or “company went out of business”. These reasons don’t have anything to do with you as a vendor; they’re customer traits, but they’re still actionable by you. If you consistently lose customers who were acquired, you may create a play for quickly getting to key contacts at the new parent company. If you consistently lose customers who go out of business, that’s information you can use to potentially shift away from a target market.
Just like with the closed/lost reasons, when you see a pattern of consistent closed/win reasons, make sure to include those reasons in your health score and give them heavy weight toward a green score. As an added bonus, when customers have strong indicators of renewal and expansion in play, you can more confidently forecast individual deals and your pipeline overall.
The bottom line is, we all intuitively know the best way to learn is from the past, but we don’t always think to do it. If you…
Keep track of reasons for wins and losses
Stay attentive to reasons that are about you versus about your customer
Use common reasons as the biggest health score factors
Iterate by following where the data leads you, knowing it’s never a finished product
… then you’re making your lessons actionable.
The Success League is a customer success consulting firm that offers coaching, consulting, and certification training for both CS leaders and CS professionals. Visit TheSuccessLeague.io for our a listing of our full offerings or contact us.
Russell Bourne - Russell is a Customer Success Leader, Coach, Writer, and Consultant. In a Customer Success career spanning well over a decade, his human-first approaches to leadership and program management have consistently delivered overachievement on expansion sales and revenue goals, alongside much friendship and laughter. Russell serves on the Board of Gain Grow Retain as co-lead for Content Creation. He is passionate about equipping individual contributors and business leaders alike to lean on their Success practices to grow their careers and help their companies thrive. He holds a BA from UCLA, and in his free time plays guitar semi-professionally.
