One of the most powerful concepts I’ve ever come across in business is the idea of the customer’s Desired Outcome.
And if you’re thinking “one of the most powerful concepts in business” seems like a pretty hefty charge, you’re right; this concept has transformational properties.
When I first introduced Desired Outcome, I explained that this idea came about as a simple replacement for “what does Success mean to your customer?”
But it’s SO MUCH MORE than that… let’s dig in.
“The Seeds of Churn are Planted Early” is a phrase I came up with in early 2013, published shortly thereafter, and have said and used many times since.
I wanted to go on record with that – BTW, if you see the term’s use outside of my work or that of Gainsight’s, maybe send them this link – but I also wanted to give the origin story of this powerful Customer Success concept.
It was late December 2012 when the CEO of a startup that had a major churn problem contacted me.
They were losing far more customers than they were bringing in – and they were bringing in a lot of customers – and he knew this was clearly not sustainable; I could tell he was worried.
The mantra of “grow at all costs” – that seems to include acquiring wrong-fit customers (those who aren’t your Ideal Customers), churn be damned – has popped up several times lately and my reaction to it is two-fold.
First, I immediately thought how stupid this is and how it flies in the face of everything that has to do with customer success and what I’ve been preaching for the last few years, but also goes against the core fundamentals of building a high-growth business (of which not losing more customers than you bring in is kind of important).
But then I thought maybe this could be a fun thought experiment where we can explore five situations where having high churn is actually just fine… in fact, it’s totally acceptable.
Cool, let’s do this.
The common refrain by SaaS experts that think business is just a math problem is that if a customer stays long enough to pay back the cost to acquire them (the metric is called Customer Acquisition Cost or CAC), they became a “profitable” customer (“unit economics” don’tcha know) and everything is great.
Just do more of that and you’ll be a unicorn.
But the fact that your customers churned out – even after becoming “profitable” – likely means you didn’t get all the value you could from them and they definitely didn’t get all the value they should have from their relationship with you (you didn’t help them achieve their Desired Outcome).
Those customers you paid to acquire – that your company put time, energy, resources, and money into acquiring – are leaving, and there’s a cost that comes along with that that you might not have considered.
Let’s explore this, shall we?
How do you define success for your SaaS customers?
While it sounds simple, it’s not.
Success is only achieved when your customers reach their Desired Outcome by their interactions with your company.
But first, you have to understand what it is that your customers want to achieve — and that can take some work.
I was recently a guest on the business analytics podcast, Million Dollar Insights, and I spoke with host Cara Hogan about how SaaS companies can begin to define and invest in customer success, from identifying an Ideal Customer Profile to reducing churn.
If you want happy, engaged customers who rave about your product, you should take a listen.
A few months back an article was published that talked about how this popular brain training game (I can’t remember what it’s called) made their onboarding process MORE complex – not less – and increased their active users by 10%.
While the article was very clear on when to add friction, most of the discussion around the article that I saw fell into the category of “yes, that’s brilliant! I hate my users and customers anyway, so I’ll add MORE friction to our onboarding and we’ll improve like crazy!”
Crazy is the right word… but the context is wrong.
What they should have said was “I’d be crazy to simply add friction and think for a second that the outcome would be in some way positive.”
Unfortunately, this idea of adding friction has come up a few times recently on a few Clarity calls, so I feel the need to dig into why adding friction all willy nilly is simply one of the stupidest things you could do.