The Art of Client Retention: Reducing Churn in B2B Sales

Fear and Anger

If you sell subscriptions, you must know how to control customer churn. Provoking fear is a poor choice.

At the peak of the film A Few Good Men¹ , Tom Cruise’s character Lieutenant Kaffee questions Colonel Nathan R. Jessop, played by Jack Nicholson. Kaffee is defending two marines accused of killing a colleague. Their defence is that a senior officer ordered them to discipline the man.

Col. Jessep: You want answers?

Kaffee: I WANT THE TRUTH!

Col. Jessup: YOU CAN’T HANDLE THE TRUTH!

The power struggle plays out as each throws questions at the other. Questions are the way to control communications, whether managing, selling, or getting to the truth in a courtroom. The first to answer surrenders the advantage.

Jessop is roused to anger and cracks. He claims the world needs people like him to be able to live in freedom.

Kaffee: Did you order the code red?

Col. Jessup: I did the job I…

Kaffee: [interrupts him] Did you order the Code Red?

Col. Jessup: You’re God damn right I did!

Anger is an easy emotion to generate. Politicians provoke outrage with wild accusations against rivals. People rail against poor service from call centres. The media shouts at everything. Anger causes system one impulse behaviour that we later regret.

Selling is about changing an emotional state. Buyers must be moved from their comfort zones if a sale is to progress. But generating anger is not an option for salespeople.

Fear is the closest comparison. Marketing and sales advice is often to generate fear of missing out. It recommends highlighting competitors’ successes and promoting scarcity with last minute offers. This creates problems in the B2B sales process.

Most business relationships are longer term partnerships. Subscriptions are sold and renewals sought. It’s five times cheaper to sell more to existing clients than to find new ones. Customer churn devastates profitability.

Buying on an impulse makes a product nice-to-have. The chocolate is by the checkout for a reason. Amazon promotes what others also bought whenever you select an item. If moved to buy, we often regret it later.

When clients regret a subscription they cancel. Some may try and wriggle out of contracts early. Prudent budgeting must take account of churn, while service teams work hard to prevent it.

Learning a Lesson

OTAS Technologies was incubated in a stock brokerage. I ran customer service before becoming COO. We were forever fighting churn, which rose to over 20%.

Clients often asked “What’s it for?” The sales team demonstrated a hedge fund workflow, or how investors used the software. Tracking short interest was popular. Professional investors could be convinced this was need-to-know information.

Where short interest was part of a client’s investment process, our subscriptions renewed. Analysis was easy and fast on our app. We also sold to those who aspired to new insights.

The problem is that large institutions have set ways of working. Successful sales are focused on services that make it simpler to do what they already do. Selling a workflow they might use, often sees enthusiasm fade and usage stall. These clients do not renew.

How to beat churn

Serving and selling is about asking the right questions. Be comfortable in silence awaiting answers. Sell a service people will use and follow up to make sure they do.

We spent more at OTAS servicing clients than we did selling to them. We monitored daily usage and called clients when it fell. We had not budgeted for this expense but it was cheaper than losing clients. Churn returned to a more normal 5%. Cashflow recovered to the point where the business became an attractive investment and we sold it.

The lesson is to beware of chasing sales targets without calculating the full cost of retaining clients.

Questions to Ask

1. Do we win clients with one-off offers that lead to churn?

2. Do we sell more efficient workflows or new ways of working?

3. Are customer service costs included in cost of customer acquisition?

I’m Simon Maughan and I write The Profit Elevator as advice from experience for B2B firms seeking faster growth.

“Budgeting for churn” is included in The Cashflow Calculator as part of my Business Accelerator Community for busy executives.

If you’d like to know more, please reply to this email. If you found this letter valuable, please share it with a friend and a colleague.

1 https://scrapsfromtheloft.com/movies/few-good-men-you-cant-handle-truth-transcript/