What Causes B2B Customers to Churn? Three Things, and “Price” Isn’t One of Them

Why do enterprises abandon a vendor’s product after investing so much time and resources in selecting and validating the solution? Even after training employees and integrating the product into the broader environment, enterprises will abandon it. This is puzzling because most B2B enterprise purchases are not done on a whim; there’s a clear outcome that needs to be achieved. Yet large and small businesses often change the products, hard and soft, to the bewilderment of the vendor’s sales, marketing, and customer success teams.

As the vendor’s team “What happened?” and you’ll hear that customer defections are due to missing product features, performance or roadmap issues, infrequent or incorrect product usage, a change in customer strategy, a competitor has “one upped” them, or price. From my experience, in an overwhelming majority of cases it’s none of these reasons.

Unfortunately, by the time vendors realize their customer will churn, the relationship is beyond salvage. Equally unfortunate is that most customers aren’t transparent about the real reason for churn. Not wanting to deal with the onslaught of emails, phone calls, or visits by ever higher levels of vendor executives in an attempt to salvage the account, customers gives the vendor a palatable excuse.

Yes, customers leave because of poor experiences but it’s not that black and white. What I hear from B2B end-customers — from small businesses to Fortune 100 — the number one reason for defection is lack of enough “value.” Period.

It doesn’t matter if it’s a $10,000 SaaS subscription or $500,000 piece of equipment; it all comes down to value.

“Value,” as uniquely defined by each customer, is contextual and multi-faceted, and changes over the relationship lifecycle. There is no single, commonly held definition of “value” for each industry, a market or customer segment. In other words, “value” is not solely in the product but in what surrounds it.

Three Dimensions of Value

In virtually every end-customer interview I’ve conducted, “value” was defined along three dimensions: Outcomes, Trust, and Relevance:

1. Outcomes

Contrary to popular belief, customers do not purchase to solve a problem, they purchase to achieve an outcome. The problem statement is simply how they articulate the desired outcome.

One client’s customers articulated the problem as needing a better way to engage customers. The outcome they wanted was to reduce inbound contact center calls volume. It wasn’t until after they realized their cost savings from deflected calls that their real target outcomes was revealed. From lessons learned to date, the real target outcome was to enable them to influence end buyer behavior and preferences.

The vendor was expected to act as a change catalyst. The definition of “value” changed from number of calls deflected (avoided) to how effective the vendor was in guiding the customer through change management to realize the new outcome. The vendor, however, wasn’t tuned into the value shift (or that this shift was happening widely within their customer base) and had essentially “checked out” once the initial ROI was achieved. The vendor thought they were done, yet their customer thought they were just beginning and perceived the vendor’s dis-engagement as a failure of customer service.

Outcomes change over time; vendors need to understand how, why, and what triggers the change.

2. Trust

At the core of customer loyalty is a trusted, human-to-human relationship — one based on transparency, honesty, and having the customer’s “back.”

For the Fortune 500 customers of a mobile security client, keeping company data, trade secrets and communications away from prying eyes was considered business critical. Security and IT teams expected vendors to honor all commitments and be full transparency; their jobs depended on it.

The vendor repeatedly missed product roadmap delivery dates. Without advance notice of the slippage, customers were often caught by surprise. Meanwhile, the sales team made promises that it “won’t happen again” coupled with deep discounts to keep the pipeline moving. Trouble tickets remained open and escalation processes didn’t seems to make a difference. Customers vocalized their frustration to executive management and engineering at annual customer advisory meetings but nothing changed.

The customers I interviewed felt betrayed, confused, and had lost confidence in the vendor. Many felt the vendor’s actions had put their own jobs at risk. What was happening within the vendor was a deep commitment to the product roadmap and to each customer’s success but the company had encountered some internal issues. Consumed with internal politics and resource shortages, the customers’ concerns were downplayed. Customers started to churn and the vendor’s sales pipeline weakened as word got out about the roadmap delivery issues.

Trust doesn’t come with the purchase order, it needs to be constantly earned.

3. Relevance

In today’s world, it takes an ecosystem to keep a company relevant and vendors play a key role.

The SMB customers of a Human Resources SaaS client are challenged daily to find, recruit, and keep talent. Armed with knowing which jobs are trending toward labor shortages is vital information for HR managers who can make sure compensation is competitive, work environments are healthy.

Customers wanted to work with the same vendor team throughout the lifecycle of the relationship. Not because customers expected to talk to vendor personnel frequently, but because over time the same team would develop a deep understanding of the customer, their business, and labor needs. That knowledge would translate into more relevant advice, product usage training, sharing of industry information and better support.

Value was defined as receiving relevant, proactive advice based on the customer’s environment, their product usage, and new upcoming features that would make the users’ work easier. Customers wanted access to industry studies and domain experts that could counsel them on how to best address emerging labor and economic trends in their industry and geography. To customer this value enabled them to be more competitive.

This scope of interaction was well beyond what the vendor thought customers needed or wanted. And the vendor’s processes, systems, and organization were not structured to deliver this level of personalized value. With some organization and process changes the vendor found that delivering more relevant, information at each customer interaction resulted in a higher renewal and up-/cross-sell rates.

Ongoing relevance is a key driver of vendor stickiness and customer experience.

Once a vendor delivers the initial expected outcome, customers’ attention shift to other ways a vendor can help them. In my experience, most B2B vendors have 90 days from the point of onboarding to begin delivering the initial expected outcome. If successful, the customer redefines what “value” means going forward. If unsuccessful, the customer may continue to use the product but the decision is made to either churn at some convenient future point in time or reposition the product as a tactical, non-critical solution.

During onboarding, implementation and initial adoption, it’s all about the outcome. Trust begins becoming important in the middle of the sales cycle and lasts well past implementation into day-to-day operations. Trust takes a step back from importance when the vendor has consistently demonstrated trustworthiness, transparency and accuracy. Outcomes remain key until the customers’ needs and expectations change and a new definition of value replaces the initial target outcome sought. Then it’s all about relevance – which is what makes a vendor sticky.

During onboarding, implementation and initial adoption, it’s all about the outcome. Trust begins becoming important in the middle of the sales cycle and lasts well past implementation into day-to-day operations. Trust takes a step back from importance when the vendor has consistently demonstrated trustworthiness, transparency and accuracy. Outcomes remain key until the customers’ needs and expectations change and the definition of value replaces the initial target outcome sought. Then it’s all about relevance.

Vendors looking to align their marketing, sales, customer success and professional services to deliver a stream of ‘Value’ need to undergo a mindset shift. In Part Two of this article, I’ll share best practices for turning churn into loyalty. Until then, to determine your stage of customer alignment,contact us for a free comprehensive assessment and 30 minute blueprinting call.

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