Dan Martell - Why Customers Leave (And How to Fix It)

00:00:00.000 Your customers are leaving and you don't know why.

00:00:02.220 Or worse, you think you know why,

00:00:03.960 but you keep making changes and it's actually not having an impact.

00:00:07.020 You know, I've been building software now for 25 years,

00:00:10.120 helping my clients retain their customers.

00:00:13.120 It is the number one thing.

00:00:14.260 When they come in, there's two moves.

00:00:16.120 We fix the pricing strategy and we work on retention.

00:00:19.000 Why?

00:00:19.680 You cannot outgrow a bad product.

00:00:22.460 You'll get to a point where you hit what's called the churn ceiling

00:00:24.720 and it takes more customers every month to replenish,

00:00:27.960 to just even go sideways.

00:00:29.320 So if you're there, here's what you need to understand.

00:00:32.020 If you're dealing with this problem,

00:00:33.540 these are the five things to consider to fix it

00:00:36.220 so that you can get back to growth mode.

00:00:40.640 Number one is they oversold the fit.

00:00:43.140 You know, I get the call because I coach a ton

00:00:45.400 of software entrepreneurs in the real estate space.

00:00:47.540 And oftentimes at the low end of their product,

00:00:50.240 they're selling a business opportunity.

00:00:51.880 They're selling a bit of a dream, right?

00:00:53.520 Where they're like, hey, you can get into real estate.

00:00:55.400 Here's the tool to help you come on in.

00:00:58.000 The problem is, is the fit of the customer's wrong?

00:01:00.800 The other challenge is when you might have

00:01:02.420 the right customer,

00:01:03.840 but your sales team is overselling your product.

00:01:06.740 Meaning that they're just saying,

00:01:08.000 hey, what are your challenges?

00:01:09.660 What are your needs?

00:01:10.500 And then they're like, yeah, we need it to do this.

00:01:12.380 We need to integrate with that.

00:01:13.420 And we need it to have this workflow.

00:01:14.700 And the sales person's like, amazing.

00:01:16.660 That's what we do.

00:01:17.540 This is great.

00:01:18.740 Sign the contract.

00:01:19.820 Let's get you onboarded, no problem. 0.95

00:01:21.860 And then your customer success team,

00:01:23.400 your onboarding team, they're freaking out

00:01:24.880 because they're getting 20, 30% churn or cancellation 0.58

00:01:27.860 because of your crazy salespeople. 1.00

00:01:30.040 Overselling the fit is the reason why 0.77

00:01:33.000 you will not be able to break through the churn sealant,

00:01:35.340 and it takes courage,

00:01:36.980 because it takes you to slow down,

00:01:38.500 to say, you know what?

00:01:39.960 Those marketing funnels,

00:01:41.320 they're not getting the right people.

00:01:43.000 Or that partnership, they send us a bunch of duds. 1.00

00:01:45.860 50, 60% of the people cancel or churn.

00:01:48.920 Or, you know what?

00:01:49.840 We gotta stop saying, who's saying this?

00:01:51.760 Let's audit the sales calls, let's fix the language,

00:01:54.140 so that we don't oversell the fit.

00:01:56.100 Fix that and that will begin the upward momentum. 0.97

00:01:59.060 Number two is the product quality sucks.

00:02:01.180 And this one's funny, 0.79

00:02:02.600 because I have founders all the time,

00:02:03.660 I was like, how's the product?

00:02:04.580 I always ask, like, how does your product,

00:02:06.060 do you use your product?

00:02:07.340 Like, it's great, everybody tells us it's awesome,

00:02:09.720 like literally the best product in our space.

00:02:12.140 And then I call some customers.

00:02:14.300 I said, hey, do you use the product?

00:02:15.660 What do you think?

00:02:16.500 I literally, the other day I was at a guy's company

00:02:19.060 and I was talking about his software

00:02:20.900 and he was, this is the most innovative thing,

00:02:23.100 nobody else is using it, et cetera.

00:02:25.100 I went to another company and I said,

00:02:26.980 hey, do you know about their business?

00:02:29.120 Like, yeah, I go, do you use their product?

00:02:30.620 Yeah, we use their product.

00:02:31.460 What do you think?

00:02:32.300 Man, I get what they're saying, but it's buggy.

00:02:35.580 It's not easy to use.

00:02:37.100 My customers don't like it.

00:02:38.260 I just got back from the car dealership

00:02:40.160 and they migrated their whole platform

00:02:42.820 from one company to another.

00:02:44.500 And this guy, it was so bad.

00:02:46.980 The product quality of the new software is so bad

00:02:49.500 that his own team refused to come to work.

00:02:52.900 You gotta understand this.

00:02:53.980 When your team says we won't work in this environment

00:02:57.060 because you're paying me for these kind of results,

00:02:59.380 I can't hit those results if you force me

00:03:01.340 to use this software.

00:03:02.480 So they started using the old one

00:03:04.160 and they refused to go back to the,

00:03:05.840 because they were running in parallel

00:03:07.360 while they were deploying the software.

00:03:08.720 And they said, look, we're just gonna keep logging in this

00:03:10.420 because I know how to do my job here.

00:03:12.040 This is the problem.

00:03:12.940 So oftentimes there's a few things

00:03:14.740 that I tell people to monitor.

00:03:16.480 Look at the amount of error rates, okay?

00:03:18.660 So there's different software you can install

00:03:20.680 to figure out how many bugs,

00:03:22.300 not the ones that are reported,

00:03:24.080 but the ones that your software reports itself.

00:03:27.120 There's actually an application error rate

00:03:29.300 that kicks off on your production server, wherever,

00:03:31.900 and you can have software to collect these errors

00:03:35.380 that your customers are experiencing,

00:03:37.100 because the product wouldn't error

00:03:38.680 unless somebody clicks something.

00:03:40.000 And then you can then look at who the customer was

00:03:42.820 and check this out, be proactive about not only fixing it,

00:03:46.700 but telling the customers.

00:03:47.920 Okay, you can pull a report and say,

00:03:49.480 here are all the people that experienced this bug.

00:03:52.160 We fixed it.

00:03:53.060 Let's go email them all and let them know that it's fixed

00:03:55.540 because you don't wanna have that perception

00:03:57.580 of buggy software be there if you fix the problem

00:03:59.760 but you never told them that you fixed it.

00:04:01.820 Product quality is a major area for you to evaluate,

00:04:05.260 to monitor, to improve,

00:04:06.660 to make sure you keep your customers.

00:04:08.220 Number four is you price yourself out of the market.

00:04:10.720 You're too expensive.

00:04:12.380 And maybe back in the day you could do that

00:04:14.300 because you were the only cat in town,

00:04:16.840 but today with different APIs and no code software,

00:04:21.160 I mean, it's literally hard to build a competitive solution

00:04:24.540 that somebody can't look at

00:04:25.800 and just immediately go build themselves

00:04:28.100 on some existing platform.

00:04:29.680 Like you used to be able to be expensive

00:04:33.660 and proprietary and have all these features,

00:04:36.120 but now what happens is if you had a platform,

00:04:38.860 the customer's going, well, CRM, I'm gonna use this software.

00:04:42.280 Zoho, it's free.

00:04:44.040 Email sending, boom, I'm gonna go over and use this software.

00:04:47.100 Oh, we used to do all of our quoting there.

00:04:49.500 No, I'm gonna use this software.

00:04:50.660 and they essentially can dismantle your software

00:04:54.520 into individual pieces.

00:04:56.820 And when you do that, that product can be a lot cheaper

00:04:59.740 because you think, well, this is a big company

00:05:01.700 and they should pay us a lot of money

00:05:02.960 and we're doing three year contracts

00:05:05.200 and it's tens of thousands of dollars.

00:05:07.220 Well, companies are starting to look

00:05:08.540 at their subscription billing and they're like,

00:05:10.400 you know what, it's death

00:05:12.120 by a thousand subscription SaaS products.

00:05:14.300 Like, I think it's time that we start figuring out,

00:05:16.240 is there a cheaper option?

00:05:17.900 And they'll start doing that.

00:05:18.920 So if you haven't done a pricing analysis

00:05:21.460 of what the market, the competitive set,

00:05:23.900 what literally your customer is assigned to do

00:05:25.820 instead of buying your software,

00:05:27.880 then you might be overpriced

00:05:29.620 and that's why customers are leaving.

00:05:31.380 Number five is you're missing a customer retention strategy.

00:05:34.680 This for me, this is gold.

00:05:37.160 Like people are like, oh, I have a churn problem.

00:05:38.840 Perfect, go here.

00:05:40.140 And the there is your customer cancellation survey.

00:05:43.820 Every customer that's left in the last 90 days,

00:05:46.700 I'm hoping that you've asked them to tell you why.

00:05:50.520 And if you haven't collected that information,

00:05:52.760 pull at least the customer list and call them,

00:05:56.120 talk to them, find out, why did you leave?

00:05:59.460 What did we miss?

00:06:00.760 Apologize, literally the calls,

00:06:02.340 when anytime this happens in my conversation is,

00:06:04.860 first off, I wanna apologize.

00:06:06.340 I clearly let you down.

00:06:07.960 We missed the mark.

00:06:09.100 Maybe we oversold the product,

00:06:10.600 maybe we didn't deliver on our promise.

00:06:12.440 My fault, I'm the CEO, I'm sorry.

00:06:15.480 but what would be really valuable

00:06:17.240 if you would please honor me with your time

00:06:19.820 is to let me know where we missed the mark.

00:06:22.160 How could we have better met your needs?

00:06:23.860 What was missing for you to stick around?

00:06:26.700 That information, invaluable.

00:06:29.340 Why?

00:06:30.160 Because if you understand why people leave,

00:06:32.280 then you can figure out within your product experience

00:06:34.720 how to fix the holes.

00:06:36.320 Better yet, create a customer health index, okay?

00:06:39.960 It's called a CHI, customer health index.

00:06:42.600 some kind of equation that's based

00:06:45.160 on your best customer's average usage

00:06:47.240 and say, if a customer does this, this, and this,

00:06:49.620 it means they're green.

00:06:50.980 If they do these, these, and these,

00:06:52.620 but they miss this, maybe they're yellow.

00:06:54.600 If they haven't logged into your product

00:06:56.520 in the last 25 days, guess what?

00:06:58.740 They're red.

00:06:59.780 60 days, dark red, right?

00:07:02.320 And maybe they use it every day 0.98

00:07:03.560 with their whole freaking team. 0.93

00:07:04.640 They're purple, they're referenceable customers, 0.98

00:07:06.500 and there's color codes.

00:07:07.740 And what's great about it is if you have a team

00:07:09.860 or anybody, literally, you can dole this out

00:07:11.780 to your engineering team, to your support team,

00:07:14.020 even your finance team.

00:07:15.460 I don't care, social media person, get on the phone.

00:07:18.260 Let's talk to these customers,

00:07:19.860 because they're the one that allow us

00:07:20.920 to come to work every day and just say,

00:07:22.920 hey, I noticed you haven't logged into the product

00:07:24.600 in 25 days, I'm just curious, what's going on?

00:07:27.140 You might find out the person that bought your software

00:07:29.060 took another job.

00:07:30.460 Well, here's what I know is you're only about 60 days away

00:07:33.560 from somebody realizing they're paying for something

00:07:35.300 that they're not using and they're gonna cancel your product

00:07:37.680 versus find out who took their job

00:07:39.900 and get on a call proactively

00:07:41.540 to try to get them back into using the software.

00:07:43.800 There's so many different strategies

00:07:45.960 if you just take the approach of it's my responsibility

00:07:49.200 to monitor my customers.

00:07:50.980 And based on who's doing great,

00:07:53.020 I wanna collect some testimonials.

00:07:54.500 The purple customers,

00:07:55.800 I'm asking them if I can use them on sales calls,

00:07:57.840 I'm asking them for testimonials,

00:07:59.160 inviting them to speak at our customer conference,

00:08:01.200 I'm saying, hey, do you wanna come on my podcast?

00:08:03.280 I'm saying, can we do a case study?

00:08:04.660 I'm using the purple customers, they're royal, okay? 0.94

00:08:07.980 And the ones that are yellow and red,

00:08:10.420 I'm trying to figure out what are they missing?

00:08:12.220 What's going on?

00:08:13.100 And how do I move them back up into being green?

00:08:16.180 If you have a culture of helping your customers

00:08:19.440 navigate their way into active customers on your product,

00:08:22.760 you won't lose them.

00:08:23.820 And if you keep most of the customers,

00:08:26.360 then every incremental new customer

00:08:28.500 hits the bottom line in profit.

00:08:30.280 Software is cool because on average, 87% gross margin.

00:08:33.700 Winning, if you have those kinds of margins,

00:08:35.380 you add a new customer, boom, profit.

00:08:37.720 You wanna make more money?

00:08:38.980 Get your whole team on board in keeping them.

00:08:41.100 Build a retention strategy.

00:08:42.540 So those are the five strategies to retain your customers.

00:08:45.260 Be sure to monitor and reach out and talk to them

00:08:48.100 and get the product quality.

00:08:49.400 All that stuff matters.

00:08:50.500 But here's the big idea, is you actually need to care.

00:08:54.080 See, it's too easy with software

00:08:55.800 to kind of hide behind your desk

00:08:57.480 because there's no in-person relationship.

00:08:59.700 If somebody's coming into your dealership

00:09:01.680 or to your retail store, to your office,

00:09:05.080 you would see them as a person.

00:09:06.800 And right now, a lot of your team, maybe yourself,

00:09:08.840 you're looking at them as email addresses,

00:09:11.240 or accounts, or customer IDs.

00:09:13.760 And I really wanna encourage you to change it

00:09:16.100 into a person's face, to their name, to reach out to them,

00:09:19.740 to find out what's going on in their life.

00:09:21.660 Did you have a kid?

00:09:22.500 Are you training for an Ironman?

00:09:23.860 What are you doing?

00:09:25.260 What's important to you?

00:09:26.160 What are your personal goals?

00:09:27.540 I know we're B2B software, but if you can make it

00:09:30.400 not B2B, but H2H, human to human,

00:09:33.960 that will be your competitive advantage,

00:09:35.960 and that will allow you to be the top in your space.

00:09:38.460 So as per usual, take these ideas, implement them,

00:09:41.660 get incredible results, but most importantly,

00:09:44.000 I wanna challenge you to live a bigger life

00:09:45.940 and a bigger business, and I'll see you next Monday.

Dan Martell - June 26, 2023

Why Customers Leave (And How to Fix It)

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