00:00 Hey everyone, e-read e-zips here for CSM practice, we're at another episode. Today, we're going to talk about how to battle churn, and you must have seen a bunch of videos about the topic and read a bunch of blogs about it.
00:14 Well, since I've been in customer success in 2013, that I've seen a lot about this topic, and yet March, 2023, when I was at customer conference in Tel Aviv, I sat down to a presentation and done by Valdatilosh, who is the chief customer officer at a company called Optimove.
00:37 And she shared a different perspective on the topic. And I thought, wow, this is so brilliant. I got to get her on the podcast for you guys to hear it from her.
00:49 And I think you're going to learn a lot about it. So if you have any kind of churn issue and looking for something that's a little different perspective that might help you validate in a much more optimized manner.
01:01 This is the episode to listen to. Now with that, Valda, welcome to the podcast. Thank you so much for having me.
01:08 It's happy to meet you. Before we start, maybe you can tell us a little bit about the company currently work for what kind of customers do you work with, what kind of companies do you work with, how many customers and success managers do you currently have?
01:22 I've been an opportunity for or a decade and I've been the Chief Customer Office or in the company basically in leading the entire customer organization, which includes all the cost sale activities with the customers.
01:33 One of those is obviously customer success. I have a team of 35 CSMs globally. And we work with different plans from different verticals, anywhere from the market to enterprise.
01:44 We work with retail, equalers, vintage services, some travel, gaming. So like a wide variety of industries in verticals, large clients, small clients.
01:56 So anywhere from mid-market to all the way to the mid-market enterprise accounts. So hundreds of customers, so that landed self to either a higher touch or a mid-touch approach would that be fair to me?
02:08 We have customers with a very high touch that are large enterprise. And we have more small mid-market customers that just require some hand-holding at the beginning, but then later on they become pretty independent.
02:20 And they will need as much support. This conversation is about sure, and I would say turn is one of those topics that are not as comfortable to talk about.
02:29 Would you be comfortable to say you years ago when you started to deal with this and before you implemented the framework that we're going to share today, what was the situation like?
02:39 Every company has church, but nothing any company has 100% retention rates and it's always a topic that I had in line and we've always had a lot of discussions around this and basically the CSTing thing I want to do to find church, but I didn't feel like our processes and our learning process from churn
02:58 was good enough, we did post more terms and we had a lot of variety of discussions about this and we had like a code read forums and stuff but it was never that structure.
03:08 The conversations were more, and that was taught we need more like specific client topics and it wasn't like something you can conclude in life.
03:16 So I started to look for some stuff and see how other companies are approaching this and what would be the right way to classify a churn, which could present the board that would be meaningful.
03:28 So all kinds of thoughts that led me to the realization that I need to do some structure, I need to add some processes in most importantly, the good learning.
03:36 So, a lot of I was thinking about it and started to analyze past children that we have and try to put it into buckets.
03:44 And myself and the CEO, we spent a lot of time together thinking about like, what would those buckets look like?
03:50 From high levels, strategic perspective, getting to the real bottom of every client you had some Chinese, just like any other company, but you were struggling presenting it to the board, struggling to find the real core framework that would help you to get proper insights around this.
04:13 So essentially, I could interpret that, maybe you felt like, okay, we have chair and we're doing some things to battle it, but we don't feel like we're making major strides into squashing it or getting proper insights so that we could be way more optimized and properly proactive around.
04:33 Yeah, and get real action items flowing every turn we see. Do you think that if you haven't taken a step back and find a framework that works for you so that you can solve for that, what would have happened to the company two, three years down the road if everything stayed the same?
04:51 Exactly. Things will stay the same. We need, we would still didn't get valuable insights, we would still get churn and not having like clear answers to why we're saying the churn.
05:06 And we would still struggle to report to ourselves and to the board on like why are we seeing churn, one of the reasons for churn, what's the bottom line of all of this?
05:18 And obviously we would continue to see the same churn rates we've been seeing without significantly improvements. When was the first time you introduced this framework to the team or the company?
05:31 It was probably end of last year. When you look at a year ago to now, what was the main thing that changed for you, for the team, companies performance, client interactions?
05:45 Some of the things that I've seen change is like sales processes, so that's one thing that I've seen changing. I think product wise or some insights that led to fuse strategic discussions around the product and focus on the product.
05:58 ICP ideal customer profile changed some product strategic priorities have changed. Our insights in reporting are much more relevant and shared across the organization.
06:10 The way the CS leaders and the CS team are onboarding clients, even there, we've implemented some changes into the type of engagements that we need to have at the beginning of the client onboarding.
06:25 Those are just a few that are changed through the interview. I think a lot of executives sometimes have the misconception that they're going to hire a customer success team.
06:34 The customer success managers are going to do certain things with customers and thereby churn would be diminished. The reality is this is a company wide imperative.
06:46 Usually we change things in sales, sometimes even in marketing and in product, but it's the establishment of customer success and getting these proper insights that could feed the customer success strategies across the company so that we can see this tremendous change.
07:05 I completely agree, and in general, if you ask me, I think churn mostly correlate with the product. So, obviously, the customer success manager is they have a lot of impact on the partnership on the value and the quality of the engagement.
07:23 But at the end of the day, if you have a group of product, it's a sticky product, you'll have very low tone rates.
07:29 If you have a product that is like nice to have, and has lot of complimenting products out there, no matter how amazing your CSC will be, they wouldn't be very confident.
07:44 You implemented this framework about a year ago, maybe you could share what is this framework and I think you have a couple of slides that you could share.
07:51 So the framework was basically around understanding and classifying properly the reasons for churn, and then understand how to know what kind of processes are we having placed, what is hidden for us, and also what are misconceptions around churns.
08:11 And they're quite a few. The first thing I did was internally to understand classification for ourselves, and I used past churn data to analyze and get to those conclusions, but basically I started So it's kind of a two-way two-metric looking at avoidable versus unavoidable, expected versus unexpected
08:32 . So what do we see over here? We see a two-way two-metric unavoidable, unavoidable, unexpected and expected. And you can see the different reasons under each one of those.
08:44 And when we talk about unavoidable and unexpected things that you can do nothing at bound, it's like when a company is shutting down where there's a big M&A and buying companies just getting rid of all the existing technology, things like this, and almost every company handles.
09:00 If you're looking at avoidable and unexpected, this is the worst situation for a CSM team. They didn't expect it, and maybe there could be something that could have been done, like problems in the relationship, lack of transparency, misaligned value perceptions, so we didn't know enough and that's a 
09:18 pretty rough situation for the CSM team. Situation where the churn is unavoidable and expected. So we see this happening and you know that it's coming, that if it's lack of championship, you know you such a platform, wrong expectations, you can try to say that most cases you'll feel, unfortunately, what
09:41 you see those coming. And the last step what we see here is the avoidable and expected and those situations were, in that you didn't where you just didn't succeed if there were pedotechnical issues, overall dissatisfaction.
09:56 If it's not handled correctly, then you'll see nature. Again, this is like something that I did for us internally to try to understand the situation and how the CSM can engage with each one of those and it was very hopeful.
10:10 So bad fit, unavoidable, some would argue it's avoidable. So when you classify something as unavoidable, is it from the perspective of the customer success manager or the company as a whole.
10:23 When a company is closing down, it's very clear that there was nothing you could have done about it. There's just no business.
10:30 So it's a chair that is like happening and there's nothing you could do. If there are like external factors that are leading to chair and that's all of a sudden are coming to the attention of the CSN, there was nothing they could do.
10:43 And we have those M&As, it's something that happened from time to time. We could big companies buying the company and then they're like getting rid of all the technology that exists and things like that, it can be very subjective, but in those cases I think I would agree that it doesn't nothing you can
10:59 do. Maybe just explain from your perspective, bad fit, lack of champions, no usage, wrong expectations, as expected yet unavoidable. Those cases, when you see a curve, you see a client that is just bad fit, they bought the product without understanding exactly what they're buying.
11:21 And it's very clear that the use cases don't match. So you can try, but in many cases it's just not going to work.
11:29 So no matter what the CSM would try to do, the use cases don't match, the client is trying to use the platform for things that are not relevant for what they're trying to do.
11:41 So, and I've seen those type of cases and the CSM team over invested in trying to make it work, but it's not, the use cases don't match, it's a waste of a real stuff.
11:53 Do you care to explain the other three? I'm just curious that I think everybody's looking at this once the dig into your way of thinking about this and how did you determine these particular ones and that's not right.
12:04 So cases like no usage or lack of championship, it's usually happening with a smaller clients. We get a client, they sign the contract with a platform, they want to start using it, and all of a sudden there's a big re-ord, there's no champion for the platform, no one is using it, they're moving, there's
12:26 responsibility for one person to the other, and again it's more with smaller clients, and then nobody's using the platform. And the CSM is chasing it, and trying, and looking for a champion, and talking to the finance team, but time goes by, and no one uses platform, and then the renewals coming, they're
12:43 like, okay, sorry, we don't have the bandwidth, we don't have the right people for this. We can't, maybe sell at the time.
12:50 Great framework. Once you started implementing it, what did you do with this framework? How did you leverage it in your operational, it's all about like operationalize it.
13:01 So we started to build some kind of into our CRM or kinds of churn classification. This was just one part of it.
13:08 I can talk about the second part in a minute. It's like every churn, so there's a like very structural report that the CSB does a feeling the different classifications including this.
13:19 And then it's something that helps us to refine our predictions. So churn prediction for every company is super because you need to come to the board to the management and say this is what we're predicting for this year.
13:32 This is the dollar-churn that we're going to expect, especially accompanying with a hyper-growth stage, importance, to understand, expect a turn for the year, and to refine it.
13:41 This kind of framework up as to much better work with predicting churn when we start to look at things this way.
13:47 So that's one way of using it. That basically helped us with reporting and have a very structured way of showing the board our turn and they love it.
13:57 What did you do about some of these insights what kind of changes have you made to processes or internally to customer success first of all?
14:06 We implemented some changes in our own client rewarding at the beginning. Some of the things that we've added is business understanding and use case discovery meetings as part of the own boarding.
14:16 So we all know it's a lot of buzz around value realization and obviously if customer sees value, their lack of insurance.
14:24 Some of what we've done was like adding those meetings to have a very clear and understanding and outline of what they're trying to achieve in how their use cases looks like.
14:34 And obviously documenting this information is very helpful. And then laser going back to it and say, OK, this is where you guys wanted to achieve these are the milestones around this.
14:43 This is how we're going to get to it. And also say, why we did not achieve some of it. It's been very helpful in those of who meetings that focuses the CSMs or what needs to be done with the account.
14:55 That's important. It helps you change the way you think about things like health score, for example. To be honest, I'm not a great believer of health scores.
15:07 We have them in place. They're not bad. We don't have to say. But there are other indicators that cannot be seen in turn in the whole kind of health scores, just to give you an understanding of some of the things that we're doing in CSM onboarding that is very helpful.
15:26 We said, okay, we need to keep an eye on the company, on the business, know what's going on with it.
15:30 So every CSM, when they get a new customer, they do ugl alert on the company. They follow them a link to it.
15:38 They subscribe to their leaders. This way we're able to be close to the business and understand are they expanding to new markets?
15:48 Are they buying a new company? This is so helpful understanding the overall situation of the company with us. This is even information that we now have more visibility to and it's very helpful in understanding the overall situation and also predicting because when you see a company that is like closing
16:09 down branches, getting huge fines, things like that, you know that it puts the partnership also in the risk. Basically, I think what you're saying is, look at the conventional churn indicators that we all know, like HealthScore don't necessarily work.
16:27 There's all our data that we actually need to pursue. And some of it is not necessarily data that's in our system.
16:33 We actually need to go take a look at actual data. Yeah, it's not just what usage data usage data doesn't tell you everything.
16:40 And again, I'm doing look at usage data. It's important to pick it. It's a big indicator. But I say, it's not the only indicator.
16:47 There are so many other ways of looking at the account for a more strategic perspective to understand whether you're a trist or not.
16:57 When you were doing your churn analysis on your own of clients, did you find any positive correlation between C-SAT, for example, or NPS, and those who left.
17:09 You already did health score as not the most reliable metric. The other one is C-SAT. Did you see anything? I was going to recommend to read the research done by Greg Denison.
17:20 And there, he did a very thorough research on churn, and one of the factors that he found there, that there's no correlation between the NPS and CSATs to churn.
17:31 And at the beginning, I was a bit surprised, but then I was like, I'm not even surprised because when I looked at our stats, I found that only 2% of our churn clients actually answered.
17:41 So it's like the egg in the chicken, like the more engaged clients, they would answer those surveys. And the clients that are in a risk of churn, they wouldn't bother.
17:51 Their engagement may be anyway is not great, so they wouldn't even talk a little bit of those. So I'm all in favor of surveys.
17:59 I think it's important to listen to the voice of the customers. But I think that everyone are seeing like a lower response rates because customers are so fed up with surveys that they're getting from all over.
18:13 They're not replying it. We're seeing it, especially in the U.S. Like response rates are very low. So do look at customer satisfaction surveys, but not as a prediction for a turn.
18:24 What did you find is sort of like the antidote for churn? There's no one answer. There's no one thing that you would do that would just minimize churn.
18:33 It's like such a wide umbrella of reasons and there's so many things to look at. It starts with a product.
18:40 If you have an amazing product, even if you have the most terrible service and the most terrible CSMs clients will still stick around.
18:49 But I think that there's so much a company can do to mitigate the risk of churn with the CSM team, but not only with the CSM team, to getting the right customers with like having an overall positive experience from every possible interaction with the company, but at the end of the day, if the product
19:10 is doing for the company, what it's supposed to do in showing them value, there will stick around. Do you find any positive correlation between Upsell and renewals?
19:22 Yes, very much. Again, going back to the research for Greg Benson, and this is something about we're also seeing very much in Optimus data that I've analyzed customers that buy from you.
19:33 They will stick around because to begin with they wouldn't engage with you to buy something further If they wouldn't like what they've seen so far So it's a good indication and I've seen that this such a higher probability to retain a customer if you were able to do any I'm so I've seen this very screaming
19:55 from the analysis that I do. What about unexpected, Sharon? You talk about customers going behind your back to replace you.
20:04 Clearly you're not going to see like a downward trend on usage. What do you see when customers start fishing around?
20:10 Wow, this is like so disappointing for CSM to discover. And I've had one of those that fear when it was a large enterprise client, we worked with for a long time.
20:21 We faced so much in them. We had so much conversations and positive relationship, but they're detecting, decided that they're going to move to one single platform for all the multiple solutions that they needed.
20:35 And they went on an RFB behind our back saying nothing to us. They never reduced usage. They were continuously talking to us about the future, we didn't see it coming.
20:46 And it was just lack of transparency. Now, not saying couldn't have done things better. I'm sure we could have. This is so painful for the CST, like after we were close to the client.
20:59 And one day they're saying, look, we had an RV, and we chose another platform. That's a, but we're sure we could be well.
21:07 And hence, when you look at a bunch of these cases, are there any kind of red flags that the CSM should keep an eye on?
21:15 If these pop, actually address them with severity versus just brush them off? The red flags that the CSM can identify other than what's the key that you said, health scores, and things like that.
21:28 It's like, what's happening with the engagement from the customer? Are they getting cold enough? Are they canceling meetings? Are the execs are engagement with us.
21:40 We've been able to believe in a concept we call a campfire, meaning our execs stop into the enterprise lines of sex and the CSM is more on the user level, etc.
21:50 So are the execs stop into us? Are they engaging with us? Those can be real flex. When they're getting cold on you, you know that something's happening and the best way is just to ask that record to try to find signs.
22:03 What about when a customer asks or features you don't have? For us, specifically, we're a mature product who've been around for 10 years.
22:12 Our pipeline for requests is like from here to here. So many times clients will ask, hey, I need this. I need this.
22:19 Why don't you develop this? I just need you to add this. And in many cases, yes, I need to come back and say, sorry, it's not a priority for us.
22:28 Now, look, we're trying to be sensitive and understanding for this. If it's something major like regulatory attributes or things that like kinds can not use a platform without Obviously we will treat it differently then if it's just like this is not convenient for me So can you maybe just move it or 
22:47 do something? So have this sensitivity to identify cases where it's a very critical feature for their usage of the plan So you talk about potentially changes in the text stack.
23:00 Might start hearing that I tease looking to make changes in the text stack or consolidating things. You might start getting lower engagement from the champ, maybe because it was replaced or something like that.
23:11 Maybe even mentioning features you know for sure, your competitor has at the be a red flag. What about if they ask for their contract, or they're asking for their pricing structure, all of a sudden?
23:23 It depends on the business model. But for us, like, we have this business model that pricing can change, depends on how the business is doing.
23:31 So if they're growing, they'll pay more. We have some alerts internally that let's know that customers going on the next step of pricing.
23:39 And we're being very sensitive about this our account meant for teams who are closely with this CSM team. To make sure those customers are aware that it's not coming as a surprise.
23:49 But to be honest, when a customer is asking to see the contract, you need to understand what I'm hosting. We can't admit that we need to understand why what is it that we're looking at?
23:59 And if you ask me about pricing, for me, if a client has an issue with pricing, it's always solid, which is needs to be created, not that they're trying to cut costs by 90% okay, maybe it's like a work.
24:11 Usually, because tomorrow comes a hate, I'm struggling, this is expensive, I don't have a budget, it's wonderful. We can't make and find solutions and this is not the worst problem in the world to have, especially if they're engaging and talking about it, then we can find a creative solution that we'll
24:30 work for every week. You talk a lot about data that we do have about the customer, talked about usage data, C-SAD, health scores, survey data, support data.
24:43 You also talk about how that's not enough, but we should also get external data. You mentioned Google alerts. Are there any other tools that you can point, whoever's listening to this, that you would recommend that they sign up for, or just supplement the data about their customers that you found particularly
25:02 useful for your team? There are cool tools out there that will help you get insights about the company that you might not get online.
25:11 So for example, if you want to know financials about the company, you can go to a Zoom info. It's a tool that you can just get some financial data about the company and then follow up on it this way you know that business health of your clients that's like one thing that I would recommend.
25:29 There are tools out there that will let you know of champion movements. So tools like referral AI, champion movements is one of the main reasons for training and sus companies, and I think following up on two inches in staff is like important and it can help you also move to the next company of the person
25:50 that left, so that's something that's our marketing team has been using last. And the last thing is, if you're a tech key product and the tech stick is very relevant with your product, then it would be interesting to see what's the rest of the tech that the client is using.
26:06 So there's a product called a build-in event that can give some information about the text that they're using on their website.
26:13 So on this, it's just an additional information that can give you insights that you just thought necessary. I'm going to add the links to all of these three tools in the description of this podcast.
26:26 If anybody's listening to this conversation and they're like, okay, you know what, we need to up our level on how we get insights around sharing.
26:34 Or be some of the key takeaways from today's call. The most important thing I would start with is sitting down with management and deciding on what's the real essence of the churn reasons that the company is seeing, getting to this strategic understanding of this from analyzing the pasture.
26:57 So I think this is something not just for CS, it's something for the company management to get to this from basically unalising penstone.
27:06 There's so much to learn from this, and I think this would be the first step I would start with. This strategic journey indicators will be the first thing I would do, and then understand under each one of them, what are the actions that the business can take in order to fight each one of them?
27:23 So I deal customer profile and I think customers and things like that. So that will be some action items that are being driven from this discussion.
27:33 Love how you said the business should take versus the customer success manager because I think the number one mistake that most heads of customer success managers do is find a playbook for the customer success manager versus lifting it up to the 20,000 foot level and say how do we as a company change
27:50 should we change the sales process should we change our website and how it was like a cart. So there's a lot of things that we can do about that.
27:58 If somebody wants to learn more about churn and the term framework that you have just shared with us, all would be a good resource.
28:06 You mentioned Greg's research. I'll include the link in the description below. Is there anything else you'd like to recommend? There is a lot of stuff online.
28:16 I think that most of the articles I came across were that deep or thorough, or give me a lot of insights.
28:25 But I took something from each one of those. I also think that you have a lot of material, a lot of interesting interviews, and I think are very valuable around churn.
28:33 One of the things that you mentioned is like the M&A churn reason. I have like a couple of videos around how to create a strong playbook.
28:43 When you do learn that there is an M&A event and what can you do to learn about it faster, one of them is with Christopher Toruso and the other one is with David Yofi.
28:53 So we have actually two videos about that because it's such a difficult event when this happens like what should you do?
28:59 Can you prevent it? They share some significant playbooks that I think would be insightful to watch. SNES is an amazing community talk to your coworkers and different companies, ask them learn from them.
29:11 It's like there's always knowledge to share. You heard the lady go check out Greg Hayes report you're welcome to check out the videos that I recommend and I'll actually include them and more links around the tools you recommended below and without it's a wrap vada thank you so much and everyone big love
29:31 for me subscribe give this video a like if you learned something new and i'll see you at the next video