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Budget Isn't The Problem: Mistaking Churn Triggers for Churn Reasons

At Eigenworks our views are always evolving, always growing, as we come to understand churn more deeply than we did before and how it affects your business. Today we want to talk about churn triggers and reasons for churn - what they are, why they differ, and why it is so important that you can tell the difference between them. Let’s start with an example:

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Essentially Inessential

Come renewal time your contact was cancelled by your client. There was a round of budget cuts, and as a cost-saving measure your services were jettisoned. That client, however, didn’t go out of business. They didn’t cut all their employees, or their internet bill, or heating for their headquarters - but they did cut you. When it came time to make cuts, they prioritized, and anything under a certain level of value was deemed expendable. Your loss, it seems, was acceptable. Your utility wasn’t important enough to keep paying for - and so they didn’t. “Budget cuts” is a churn trigger - it is the inciting incident that started a churn scenario. The budget cuts aren’t the churn reason, however - the reason you churned, at least in this scenario, was that your client had to pare down to essentials - and your services were not essential.

Knowing how to find the churn trigger and to work-out the underlying reasons behind it are the true keys to understanding churn.

You Feeling Lucky, Punk?

Churn triggers are upheaval events that bring about change in a client. We started with budgets cuts, one of the most common of churn triggers, but there are a multitude: reorganization, a new CEO, a change in a company’s perspective or priorities as a company evolves. Sometimes an internal upheaval can produce a lot of churn. The unexpected failure of a new product, for example, can send a company into a panic searching for a scapegoat - they might even blame you (although it’s a poor workman who blames their tools.)

Most companies, when they study churn, tend to stop with the trigger - “the lost client said we were axed for budget cuts, so that’s the explanation.” That’s ends up being unsatisfying, and can feel a little arbitrary - more than one churned company has found itself muttering ‘why me, though’ while musing on the unfairness of it all. Unless a budget committee is throwing darts at a dartboard made of vendor names, however, that choice is almost never random. Which is why you can’t stop at the churn trigger, you have to go deeper into the reasons for churn.

It’s Never Personal

With the trigger understood it’s time to try and understand what the real reason is behind the churn. A trigger created a state of change - but why did that change affect your company specifically? This is where the insights only a churn interview can provide come in - this is where an interview with probing questions uncovers the real insights into a problem. For some companies, the insights into the reasons for churn may be uncomfortable. They may learn, for example, that their company never got out of the gate - that what was to them a strong relationship with a client was, on the client’s end, nothing special, something that could be terminated without much thought. They may learn that they never made their company an essential part of their client’s life - and that’s the real goal here. The only way to avoid any churn outside of a client collapsing is to become such an essential tool that the client cannot survive without you. It’s not always possible, of course - some churn reasons may well be arbitrary. A new CEO with a deep-seated grudge against you company will use any excuse to ditch you - but those scenarios are thankfully rare.

Most of the time knowledge of a reason for churn can give you time to start to thinking about churn reactions: getting  out in front of a reason in the future, taking steps when a trigger occurs - or, better yet, when one sees a trigger on the horizon - to keep a company’s business.

Who Needs Luck When You’ve Got Insight?

How have you treated churn in the past? Have you conflated churn triggers with churn reasons - taken a churn trigger at face value and called it a day? Have you told yourself “we lost because of budget cuts,” when what you really should have been thinking was “we lost because we failed to make ourselves essential”? Look back at your churned account, and your reaction to that loss, and think about that all-important necessity. If you’ve been experiencing a lot of churn, or even just a little, have you considered if your product is the most important tool in your clients’ toolbox? If it’s not - and you’re not even trying to be - maybe it’s time to reconsider how you’re going about this. Otherwise, things are just going to keep churning - because to your clients, your product doesn’t really matter.

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