How to identify churn risk (and save at-risk customers)

The fear of a big customer churning can keep revenue leaders up at night.

Losing a customer is even more painful when you know you could have saved the account had you only done that little extra. Like the one that got away…

But what if you could identify at-risk customers early and save them from leaving?

With health scoring, survey data, product usage metrics, and frequent customer engagements, you can start predicting churn and identifying at-risk customers.

In this article, we discuss quantitative and qualitative churn analysis, how to proactively avoid churn, and share tips for saving at-risk customers — including tips from our own Customer Success Lead, Madison Kochenderfer, on how we track churn risk at Dock.

What makes a customer a churn risk?

Churn risk refers to the probability a customer will stop paying for a product or service within a specific period—either by canceling a recurring subscription or not renewing their contract.

Churn risk is most closely tracked at SaaS companies with high annual contract values (ACV), but it’s a critical signal to track for any company with recurring revenue.

Companies that manage churn risk effectively are more likely to grow their customer base, improve customer satisfaction, and increase profitability.

But the big question is: what makes a customer a churn risk?

Pinpointing customers with a high risk of churning looks different from company to company, but any of these scenarios can cause a customer to be at risk:

• A stalled or failed implementation
• Low product usage
• Only using a single product feature
• Loss of the product champion
• Unidentified decision maker
• Single-threaded relationship (i.e. only one key contact)

But here’s the pro tip from Madison, Dock’s Customer Success Lead: every customer is a churn risk until you get renewal confirmation:

“The conservative philosophy here is that if you don't have a verbal ‘Yes, I plan to renew,’ then the company should be flagged as a churn risk.

Companies shouldn't be a ‘likely renew’ based on a gut feeling—even if they have high product usage. You need to get the verbal.” - Madison Kochenderfer, Customer Success Lead at Dock

How to identify a churn risk

Identifying at-risk customers requires a mix of analyzing customer data and proactively collecting insights.

To identify churn, you can leverage both qualitative and quantitative methods. The best approach is usually to combine both.

Quantitative churn analysis

Quantitative churn analysis relies on hard data to understand customer behaviors, such as product usage, purchase history, and other metrics.

Here are some ways you can predict churn quantitatively:

• Track product usage and login frequency over time: Low or declining product usage is a simple way to identify at-risk customers. Whatever the cause, it’s a signal of decreasing enthusiasm about your product.
• Bug reports or “deal breaker” feature requests: A customer who submits many support tickets probably uses the product quite often. It could be a positive sign of engagement. But if they have a lot of tickets reporting bugs or high-priority feature requests that they’re waiting on, they might seek an alternative solution and eventually churn.
• NPS / CSAT survey responses: Surveys never tell the full story, but they’re a useful data point. A customer who submits low NPS (Net Promoter Score) or CSAT (Customer Satisfaction) scores could be at risk of churning due to low satisfaction with the product or customer service.
• Low health score: Many businesses create a unique health scoring model to aggregate various metrics and behaviors into a single score. Health scores can be hard to get right, but as long as the health score calculation is accurate and data is current, a low (or decreasing) health score likely indicates an at-risk customer.

Quantitative churn analysis is precise and scalable. However, it requires a lot of data and complex systems to compute and calculate the churn risk.

💡 Pro tip: Take a “crawl, walk, run” approach to start. The possibilities of leveraging data for churn analysis are endless and can quickly become overwhelming. Start with a small data set — two or three key data points — and scale your tracking strategy over time as you learn more.

Qualitative churn analysis

Qualitative churn analysis leverages non-numerical data, such as customer feedback and support conversations, to get deeper insights into how they feel about your product and your company.

Here are some ways you can analyze churn qualitatively:

• Customer interviews: Conduct in-depth interviews with existing customers and customers who have already churned. Use QBRs to ask customers how likely they are to renew — ideally well ahead of their actual renewal date.
• Surveys and questionnaires: Develop surveys with open-ended questions for customers to answer. This allows customers to express their thoughts and feelings in an unbiased way, and you can analyze the results to understand customer sentiment.
• Customer feedback and complaints: Use various channels, such as support tickets, social media comments, and public reviews, to tap into how customers feel about your product or service.

Qualitative churn analysis provides rich insights into customer emotions and intentions and helps strengthen customer relationships; however, it is extremely time-consuming.

💡 Tactical tip: Qualitative churn analysis can consume a lot of time. Use text analysis software like Kapiche or MonkeyLearn to extract insights from customer feedback more efficiently.

Personnel & company changes

Using data and customer insights to identify churn risk is a must, but you should be aware of other scenarios that can correlate to churn risk, such as personnel and business changes.

• Company-level changes like acquisitions, mergers, layoffs, and hiring/firing can massively impact churn.
  
  
• If your customer champion gets let go, the customer could be at risk of churning because no one is there to protect your relationship and explain the value your product brings. Losing a customer champion means starting fresh with a new contact at the company — and that new contact brings a whole different set of priorities and experiences to the table.
  
  
• New leadership hires can also put a customer at risk of churning. For example, a new leader might come in and completely shift the business strategy, making your product or service irrelevant and unnecessary.

Designating a customer as a churn risk

You’ll need a system for flagging at-risk customers internally so that customer success managers and leadership are aware of the risk.

Companies flag at-risk customers differently. There are two popular methods:

• Health score: Sometimes, the churn risk is assumed based on a low health score. A bunch of numbers are crunched into one health score, which determines the churn risk level (e.g., below a certain threshold).
  
  
• Traffic light system: Other times, you might have a dedicated way to indicate churn risk in your CRM using a modified traffic light system.

For example, Madison has a spreadsheet where she labels Dock customers as:

• Will renew (green)
• Likely renew
• Neutral
• Churn risk (yellow)
• Will churn (red)

That list is manually updated on a regular basis as new information about each customer comes in.

How to proactively avoid customer churn

Every company experiences churn, but there are plenty of ways to combat it and increase customer retention.

You need an intentional plan to pick up on churn warning signs and to re-engage your at-risk customers.

1. Avoid bad-fit customers with a clear ICP

Let’s start at the beginning. Bad-fit customers are less likely to be successful with your product or service.

In order to avoid bad-fit customers, you need a clear ideal customer profile (ICP).

Your sales team needs to know what problems your product solves, what types of customers are a good fit, and how to set up those customers for success from the very beginning.

What characteristics do your best customers have in common? What problems do these dream customers have? What size and industry are they in?

Document this and make it a part of your sales enablement process.

You can also use a digital sales room like Dock to set clear expectations with prospects during the sales process. By pulling prospective customers into a shared workspace, you can share relevant content, track engagement, and make it clear what your product does — and does not — solve for.  

Bad-fit customers are more likely to churn, and they’re often “squeaky wheels” that drain your resources, costing you time and money. Avoid ‘em wherever possible.

2. Segment customers

A one-size-fits-all approach to serving customers might work in the early days, but as your business grows, you need to segment customers so that everyone receives the appropriate attention and relevant communication.

Gillian Heltai, Chief Customer Officer at Lattice, put it this way when we interviewed her on Grow & Tell:

“When you've got all the accounts co-mingled in one big bucket, it means that smaller accounts end up neglected." - Gillian Heltai, CCO at Lattice

Larger customers are often louder and need more attention. When they’re spending big bucks with you, it’s only natural to focus on them.

But with proper segmentation and the right customer success team structure, you’re able to give your long tail of smaller customers the attention they need, too.

3. Overinvest in onboarding

The customer onboarding process is the most critical part of the customer journey. It’s almost impossible to over-prioritize.

Create a mutual success plan for your customers during the onboarding process. Success plans help align goals and expectations, allowing the customer success team to ensure they’re driving value in the right areas.

“That go-live really, really matters,” explained Gillian. “And if you goof on that, you're digging out of that hole forever.”

“If you don’t deliver a great onboarding, it’s like a trough of disillusionment. You need to do a great job with getting time to value and keeping the onboarding experience the same as they experienced in the sales process."

A good onboarding plan ensures you start a relationship with a new customer on the right foot. Effective customer onboarding provides customers with the necessary action items, training, and support so they can quickly see the value your product brings.

We’ve got a great customer onboarding template built into Dock that our customers use to seamlessly transition their new customers from the sales process, through implementation, into ongoing success.

💡 Pro tip: If you’ve identified an at-risk customer who’s lost key personnel—like your product champion—lead your new contact(s) through a modified onboarding process that helps them keep using your product effectively.

4. Drive and measure adoption

After onboarding formally ends, you still need to keep driving adoption — both at the account and user level. It’s how you proactively help customers stay engaged and continue to unlock value with your product or service.

On the Grow & Tell podcast, Loom’s Onboarding Lead, Brittany Soinski, recommended measuring utilization rate as an adoption metric:

"If they purchased 100 [seats], and they've allocated 73, they have 73% of their licenses allocated. Then the next thing that we look at is activation of those licenses month over month, day over day. That's of course, the activation number.”

"Those numbers are a good thing to start with, but when they really tell you a story is when you compare those against a point in time. We call this utilization rate," explained Birttany. "It's a simple calculation where you take percent allocation, and you divide it by the percent through time. Let's call it 0.8."

"And if you could set what good looks like at your organization, you draw a line in the sand. Anyone above this utilization rate is pacing ahead. They're looking good for expansion, upsell, and renewal. Anyone pacing below this or pacing low, may churn or contract," Brittany continued.

"By being able to just look at a single number—it changes day to day as the contract length goes on—this has been the most helpful thing for me in CS to understand my book."

A simple way to drive adoption is to bring personalized recommendations to your product champion and other users on the account. As new features are added to your product, or as you notice features that aren’t being used, reach out with tailored recommendations showing why adopting those features will unlock new value.

Don’t assume customers will see your product as indispensable. Show them why it is.

5. Don’t skip the QBR

Quarterly business reviews are a great way to build and maintain customer relationships.

But please don’t just “touch base” with customers.

Customer success managers should be strategic about QBRs, making sure they have a plan for delivering value in those meetings. These engagements are great opportunities to get customer feedback, drive excitement about new functionality, and realign goals so you can help your customers continue to achieve their desired outcomes with your product.

These QBRs are the best time to get verbal confirmation of renewals.

6. Get feedback and act on it

Feedback is a gift (it’s cliché, but true). So, seek out and listen to customer feedback, then act on it.

It can be hard to track feedback from specific customers and close the feedback loop. But there are few ways to show your customer you appreciate them more than by listening to them, taking good notes, and following up — even if it’s months later — and showing them their input led to releasing a key new product feature.

7. Create a repeatable renewal process

A standardized and consistent renewal process helps you run your business like a well-oiled machine.

On the other hand, a sloppy renewal process makes your company look unprofessional and wastes time and effort.

Consider creating a dedicated client portal with Dock to make your renewal process repeatable. It’s the best way to build an efficient customer success or renewal team and create a consistently great customer experience.

For example, if every CSM conducts renewals differently, you will see different levels of success, and it will be hard to attribute what leads to a successful renewal and what doesn’t. Having a consistent and repeatable renewal process gives CSMs a road map as they approach the renewal conversation.

Also, keep in mind that you may want to adopt different approaches for each segment of customers.

For large enterprise accounts, you might kick off the renewal process six months out and share a lot more information regarding usage data, reviewing goals, and a more extensive roadmap presentation, whereas smaller accounts may only need two months' notice and less of a white-glove approach.

Saving at-risk customers

By the time you recognize a customer is at risk, chances are they’re already considering leaving and seeking alternative solutions (like your competitors).

That means time is of the essence, and you need to act immediately to retain their business.

Here are some tips from Madison, Dock’s Customer Success Lead, for saving an at-risk customer:

1. Invest in multi-threaded relationships

If you only have one key point of contact at a customer account, your relationship is fragile.

Madison recommends multithreading into every account as proactively as possible—starting with company leaders:

“My order of importance here is champion, then department manager/execs, then power users. See if any of your execs have connections to their execs and ask them to reach out to engage. If the top-down approach doesn't work, go bottom-up and find those individual contributors.”

2. Share new product features

Don’t just rely on your product marketing team to share broadly about new features. Leverage what you know about each account to update them when key features come out.

“Share new features that are applicable to the account and give them personalized recommendations for how they can utilize them,” says Madison.

3. Share product usage metrics

Show champions and executives exactly how much value users are getting from your product today by showing them product usage metrics.

Then, coach them through ways they can realize even more value from their existing investment.

For our own customers at Dock, Madison will embed an analytics screenshot to show how actively the customer’s team is using Dock.

4. Close the feedback loop

Understand what your customers are asking for. Don’t just encourage them to submit a feature request and then forget about it.

Advocate on behalf of customers and, most importantly, close the loop when a decision is made about a request.

If a feature is shipped or a bug is fixed, update the customer(s) who raised them.

5. Share your roadmap

Sharing your product roadmap is a great way to get customers engaged and excited about your product or service.

But again, you can’t just assume they’ll care about your world-changing roadmap.

Tailor your communication to highlight areas that will resonate with each specific customer. The more you know about the customer, their use case, pain points, and requests, the more effectively you can deliver an impactful and personalized roadmap presentation.

6. Offer a complementary re-implementation

Sometimes, you need to start from ground zero. Life happens. Strategies shifts. Objectives change…

Madison recommends offering churn risks a free re-implementation:

“Reference their initial goals and reasons for purchasing your product, but also have a reset conversation to understand what the business’s goals are today and tie your product value to those.”

If implementation didn’t go smoothly the first time, try using Dock’s onboarding workspaces to add more structure to your onboarding process.

Reducing customer churn changes everything

It’s impossible to prevent churn altogether, but learning how to identify at-risk customers and create a plan for reducing churn is absolutely vital.

Your game plan for avoiding and reducing churn risk will continually evolve, but as you test out new tactics and proactively work to drive adoption and high renewal rates, your business growth will skyrocket.

There’s no room for leaky buckets anymore.

To learn more about using Dock to prevent customer churn, check out our client portals or try Dock for free.