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To Win in SaaS, Uncover Customer Problems Before You Get Dumped
Look to analytics to reduce customer churn.
Posted Oct 3, 2014
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In 2011, Marc Andreessen famously said, "Software is eating the world." Today, most new software comes from cloud-based SaaS companies that sell on a subscription basis. They're dominating the tech market, yet customers can come and go at any point, which is why SaaS companies have to be able to uncover customer problems before they get dumped.

Compared with prior software models, which collected all payments up front, subscription-based companies are higher-risk endeavors. Customers choose to have a relationship with a company, and, as in most relationships, they have the option to stay or go. Whether they pay monthly, semiannually, or annually, customers always have the right and ability to leave—usually with one simple click.

And make no mistake—a customer leaving you is bad. Most companies spend the first 12 to 18 months of projected revenue acquiring a customer, and make their profit after that initial customer acquisition cost (CAC) has been paid off. If a customer leaves in month six, the company has lost money. This is why SaaS businesses often include a team, known as either customer success, customer marketing, or retention marketing, that is responsible for keeping customer relationships going strong.

To have a strong relationship, businesses need to get to know their partners (i.e., customers), and this can happen in two main ways.

First, you can learn from what customers say. Customers might tell you when things are wrong, or they may simply suffer in silence. They may scream over a small problem and go cold after a large one. They may be very honest, or they may just tell you what you want to hear because they're busy and don't want to take the time to discuss a situation. You can never be sure if people are sharing the whole story.

Most account managers spend the majority of their time on customers who scream the loudest. With overloaded account managers, the squeaky wheel will typically get the grease. This could be counterproductive if the majority of unhealthy customers are the "suffer in silence" type.

When I look at customer analytics from a typical company, I usually see a set of customers who show a pattern of behavior indicating that the relationship is at risk, even when the account manager is adamant that the relationship is fine. Under some pressure, the account manager usually calls the customer and presses for the truth, only to find out that the decision to leave was made long ago.

This brings us to the second source of customer knowledge: what they do. Actions really do speak louder than words. In a typical business, customers never go from highly engaged to leaving overnight. As with all relationships in trouble, there is usually a period of 


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