It’s well-known: acquiring a new customer costs more than keeping an existing one. Indeed, the median cost for a B2B SaaS company to acquire $1 of new customer revenue is $1.18*, so seeing the impact of a new customer account on MRR can take years. That’s why it’s crucial for SaaS CS teams to do everything they can to retain customers in the long term.
Furthermore, an at-risk customer is a threat to the company’s revenue, valuation, and ability to grow. It should be taken seriously, and recognizing and solving high-risk customers’ accounts should be an integral part of the CS team’s role.
So in order to keep a low churn rate, CSMs have to be proactive in flagging and managing high-risk accounts, so it’s important for them to have a system in place that both identifies customers who are likely to leave the solution and that suggests specific strategies to resolve each situation.
What is a high-risk account?
For B2B SaaS companies, a high-risk account is one whose users are showing warning signs: low regular engagement with the solution, negative reviews, emails from the CS team that remain not opened, etc.
Yet, some CS teams have neither the time nor the tools needed to flag these warning signs and manage all their customer accounts. In many SaaS companies, CS agents only reach out to a customer account a month or so before the client’s renewal date.
This can lead to higher churn rates because customers who have stopped using the solution months ago may now not be interested anymore when it comes to renewing their subscriptions. And since we are talking about churn rates, it’s interesting to note that a net revenue churn above 2% monthly indicates that something is wrong with the business and its ability to grow in the future.
Therefore, it’s imperative for CS teams to flag those warning signs early and to resolve the issue before the customer decides to leave. CSMs’ ability to retain customer accounts will improve the company’s total revenue, growth, and profitability, leading to an expected 74% increase in enterprise value in 5 years (SaaS Capital).
How to identify a high-risk account?
Most B2B SaaS companies use one of four solutions to identify their high-risk accounts:
- CSMs call the client 2 or 3 months before their renewal date and ask them about their experience, if they are satisfied and if they intend on renewing.
- With high-touch CS teams especially, CSMs do a quarterly business review, reaching out to each of their customer accounts every 4 months to keep the customer engaged.
- With an internal health score tool that measure customer accounts’ health. This can be very hard to build internally since customer health metrics are usually spread out across multiple customer systems.
- Within more established CS teams with many years of experience managing customer accounts, agents understand the main reasons clients leave the solution, and they can recognize a user’s behavior to know when to reach out.
Unfortunately, all these options are band-aids and don’t fix the actual problem of CSMs not having enough data and visibility on their customers’ behaviors. The ideal solution is to have an early warning system and health score solution built by experts, that allow CS agents to get real-time alerts on issues a certain user may face. By identifying these risks as soon as they arise, CSMs can ensure their clients’ satisfaction and receive solutions to their problems in a timely manner.
How to anticipate customers’ needs and improve your retention rate?
There is always a pattern as to why customers are leaving your solution. Usually, it can be related to one of three things:
- Relationship: The customer is not getting the support they need or had a bad experience with a CS agent, which impacts their decision not to renew.
- Adoption: The customer is not using the product regularly, probably because they’re not getting the solution they expected.
- Value: The customer doesn’t feel that the solution is solving their problem. It’s important to understand customers’ expectations and how your solution responds to their requirements.
So once their early warning system has sent them an alert, CS agents must dig to understand which pattern the warning signs follow: relationship, adoption, or value. This way, CSMs are going to be able to understand where the issue was created and why.
Let’s take an example. Say your CSM received a warning sign about a customer who unsubscribed from emails. The CSM logs into the system and sees that the customer had actually received 15 emails in the past 3 weeks. This way, the CSM will be able to (a.) go find a solution with the marketing team to avoid this issue in the future and (b.) reach out to the client and try to repair their relationship. If done quickly enough, CSMs can prevent a warning sign from becoming a high-risk account.
How to adapt your CS strategy based on warning signs?
The early warning system should be at the heart of CS strategy. If CSMs want to be more proactive, they have to be able to correctly interpret their health score and early warnings. This implies that they adapt their strategy and implement a daily routine to investigate each alert quickly and efficiently. If they get alerts but do nothing about them, the problem won’t be solved and the at-risk client might leave the solution.
Dig deeper. Just getting these weak warnings (e.g. ‘customer hasn’t opened an email in 30 days) without going further to understand the pattern behind the signal will not achieve anything either.
Focus on the alerts. Low-touch CSMs don’t have to focus on their whole portfolio but only on customers that need them. They can take one hour each day to review the alerts sent by their early warning tool, investigate which pattern they’re related to and then create a plan of action to mitigate the risk and solve the customer’s issue.
So why the hesitation?
CS tools can help CSMs be more proactive in identifying and prioritizing at-risk accounts, anticipating problems before the customer may even realize it, and retain those accounts, bringing in revenue for years to come.