Nearly all companies say that they are customer-centric. But this simply can’t be true. In spite of often high NPS scores and other customer satisfaction indicators, far too many companies are stuck in a cycle of tepid growth and unsustainable levels of customer churn. If being customer centric isn’t about making your customers happy, then what is it about?
The confusion stems from a simple error in how we frame the key questions of growth. In our quest for growth we commonly ask two fundamental questions: “Why do customers join?”, and “Why do customers leave?” Both questions are completely logical and intuitive. We expect that answering these questions – by working to maximize sales and minimize churn – will lead to durable growth. But it’s a trap.
The economics of SaaS is brutal, and growth stagnation is inevitable. The pattern is virtually universal: After a period of initial exponential growth, sales eventually slows while at the same time churn increases. This is the Growth Trap from which very few companies emerge. Attempts to address both issues separately wastes precious time and resources, while invariably producing little or no improvement.
In fact, applying conventional methods to the problem usually makes the problems worse. Customer attrition nearly always gets progressively more severe as improvements are made to the customer experience – and even as customer satisfaction rises. This counter-intuitive result should be taken as a clear signal that there are more fundamental underlying causes driving both customer churn and slowing sales.
The solution begins with the one simple question that lies at the heart of reigniting growth: Why do customers stay? Growth in any subscription/recurring business model depends primarily on answering this question. It explains how a company can have high customer satisfaction and churn at the same time. And it immediately gets to the true underlying cause of both rising churn and slowing sales. Seriously seeking an answer to this vital question is the foundation of a durable and endlessly renewable growth strategy.