TLDR: Ask a B2B customer success leader how they track their reasons for churn, and they’ll generally have 4-8 reason codes. “Sponsor loss” is almost always one of them. But is sponsor loss really a valid reason?
A tale of 2 scenarios
Imagine that Sally is the newly hired manager of a team that subscribes to a SaaS product. Her team has fully adopted the product and is getting the expected business value from it.
Given the adoption and business value, why in the world would she cancel their subscription? Is another product really that much better?
Now let’s imagine the opposite scenario. James arrives as a new manager of a team that subscribes to a SaaS product but they haven’t fully adopted it. James decides to turf it.
Why was that an easy decision for James? First, he’s objective because he is new and dispassionate about the SaaS product. Perhaps more importantly, he doesn’t bear any accountability for the decision to buy the failed product.
James’ behavior gets to the heart of the reason why sponsor loss can be a devastating event. It’s because you have unsuccessful customers that keep your product anyway.
A change in sponsor is the “day of reckoning” for what was already a problem. The problem was masked by the fact that prior sponsors who bought a product might keep it, because they would lose face if they declared the purchase to be a failure.
What to track instead?
I propose that we get rid of “sponsor loss” as a churn reason. Instead, let’s track the reasons why you’re vulnerable to sponsor loss in the first place:
- User adoption: High adoption = retention. Low adoption = churn.
- Business value: High business value delivered = retention. Low value = churn.
- Product fit: High product fit = retention. Low product fit = churn.
These reason codes point you towards operational improvements that can help reduce high churn rates.
Other churn reason codes
While we’re on the topic of reason codes, let’s visit the rest.
Generally, you want reason codes that are actionable; things that you can control and improve upon. More examples are:
- Sales process: You sold your product to a customer who didn’t fit. Or, a customer who wasn’t prepared to invest the resources to make it work
- Implementation process: You had a well-qualified customer but the implementation went poorly
- Customer support: The service experience(s) did not meet the customer’s expectations
You might ask, “aren’t there churn reasons beyond our control?” If a customer goes out of business, of course it’s a valid reason. There isn’t much that you can do to stave that one off.
But even a merger event can be an opportunity. Two merging companies will often standardize on one product if they have two or more similar products in use. This “winner take all” decision can be incredibly lucrative if your implementation was a success and you pursue the new deal with extreme vigor.
Getting your reason codes to work will take time. You’ll have many constituents to satisfy along the way. Start by tracking what your company could have done better, versus the customer. After all, your own company is what you can improve.
Don MacLennan | High Tech Yankee 
Don,
Thanks for the post.
What suggestions so you have for quantitatively assessing Product Fit and Business Value? These seem closely tied to Product Adoption.
Ora,
Product fit and business value are indeed tied to adoption.
There’s no quantitative measure of product fit but there are many proxies, including adoption measures (such as recency and frequency and perhaps breadth of features used). You could also consider NPS scores as a proxy for product fit.
Business value can be quantified. Any measure of business value is probably in one of three areas: increased revenue, decreased costs and avoided/reduced risks. Think of these as the top nodes of value metrics in a hierarchy, with lots of child nodes that could apply.
For example, increased revenue can be affected by several supporting measures, such as new lead volume, sales rep close rates, customer referrals, etc.
What if your sponsor is the user and bought one seat with your SaaS product and leaves the company? There is literally no one else in the company who can really use your product? That would be sponsor loss, correct?
Yes indeed! One would hope you could diversify adoption beyond one person, at least over time.
Yes, for larger customers that’s definitely the case but for our smaller customers, they usually only have one person or two at most. Do you find that it’s common to have different sets of churn reasons for different customer segments or is it best practice to have one set fit across the board?
Hi Loni, I’d try to stick with one set of reasons, and between 5-8 total reason codes, for all situations. Too many reason codes and each code loses its “weight” in terms of prevalence; a code with very few occurrences tend to get overlooked. Same for too few reason codes, I suppose. People will discount something that’s a catch-all category, as not being actionable.
One of the ways to tune your codes over time is to process customer comments. See if they reveal meaningful new categories of codes, as evidenced by a number of comments not fitting any existing codes. Say, 5-10% of all comments not fitting an existing code. The comments can come from emails your CSM’s get in reply to a cancellation, or live conversations that the CSM’s document in Salesforce or CSM tool, or even NPS survey responses from a churned customer.