I was lucky enough to spend some time with Monica Adractas, a former McKinsey partner who is now Churn Czar at Box. She and I chatted about the challenges in managing churn and her view on how to handle it. I thought she had some terrific insights and a clear understanding of the methods to reduce churn from her experiences. These are my notes from that conversation:
Managing churn is a complicated problem because everyone in the company can impact it. The product and engineering teams must build a product that meets customer needs. Sales must find and close the right kinds of customers. Support must educate, inform and cross-sell customers properly, and marketing must price and message the product effectively. If any one of these teams makes a misstep, churn rises.
To materially reduce churn, the company must appoint someone who has the data access and the mandate within the organization to search for and identify causes of churn and the influence to enact change. This person is often the first cross-functional hire for a startup, the first person whose job is exclusively to work with all the different teams.
Often this person is called the head of customer success. Initially, the head of customer success is charged with churn mitigation, i.e. retaining customers for longer periods of time. But over time, the customer success role evolves to maximizing lifetime-value of a customer. The difference between the two is the addition of cross-sell/up-sell, selling more of the same product or selling adjacent products to increase the revenue per customer. This transition is of course contingent upon the company building additional products and features that can command additional revenue in the market.
The key initial steps for the head of customer success are: First, to instrument the company to understand customer pathways, points of interaction and the customer perception of the company’s value proposition. Second, to analyze and develop a system-level understanding of the state of churn. Third, champion and effect change in each of the relevant functional groups to reduce churn.
By having one person own the churn number figure and prosecute the tactics to reduce it, the head of customer success can materially change the financial profile of the company.
Monica’s view of her role at Box provided me with a really clear understanding of how the head of customer success ought to pursue their role and also the right background for a person to succeed in this role: empathy for customers, data-driven decision making, systems thinking and an ability to coordinate many different decision makers in an organization.