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10 Recession-Proof Ways to Improve EBITDA: Episode 1: Reducing Customer Churn

Heather Holst-Knudsen
May 22, 2023

Customer churn wreaks havoc on the business and costs substantially more than just the lost revenue.

If you are a CEO, CFO, CRO, or other senior-level executive leading a media, events, and digital information business, you are wrestling with how to meet company goals in an uncertain economic climate alongside a rapidly changing business landscape. 

Inflation, market downturn, increasing pressure to transform and evolve business models, growing a team amid talent shortages, and ensuring operational efficiency and effectiveness are all hot topics on the leadership team's agenda.

Even sales behemoths like Salesforce are facing new economic realities where top-line growth is no longer enough. Marc Benioff is now focused on delivering and excelling at delivering "profitable, efficient growth" in response to pressure from activist investors.

In this series, we'll explore recession-proof strategies that will help you maximize profits while reducing risks. No one likes surprises in the boardroom, and we’re here to help you avoid them, no matter what the economic environment. Each strategy should be part of your operating plan and will have short and long-term benefits — as long as the words "sustainable and scalable" are embedded into the discussion.

10 topics we will cover in this series:

  1. Reducing Customer Churn
  2. Improving Pricing Power
  3. Managing Discounting and Value-Add
  4. Increasing Win Rates
  5. Increasing Expansion and Cross-Sell 
  6. Identifying and Eliminating Revenue Leakage
  7. Tightening up Sales Cycles
  8. Aligning Revenue Critical Teams
  9. Developing Leading KPIs for Growth
  10. Using Predictive Analytics to Control the Business
Growth Priorities from the 2023 State of Data-Driven Revenue Growth in Digital Information, Media, and Events

How to Make Customer Retention a Strategic Imperative

Retention is one of the most significant bell-weathers of business health and value creation. While some customer loss is inevitable due to budget cuts, employee turnover, and acquisitions, high levels of churn are clear indicators of possible issues. Customer churn wreaks havoc on the business and costs substantially more than just the lost revenue. The consequences of churn:

  • Puts pressure on the marketing, business development, and sales teams to replace the revenue and sets them back from hitting quota
  • Distracts customer success teams from focusing on the retainable accounts by trying to come up with a desperate last-minute salvage plan
  • Adds unnecessary workload to advertising, event, and/or lead generation operations as they scramble to save the account with the new salvage measures
  • Turns a customer into a negative referral and can hurt your brand
  • And in some organizations, causes finger-pointing and blame and a toxic, unproductive working environment
Finger-pointing can cause a toxic, unproductive working environment.

Causes of Churn & How to Mitigate Before It's too Late

Everyone hates churn, but in our business, let's be honest, some of it is inevitable. In addition, media, events, and digital information organizations suffer from being the first on the chopping block when the economy turns sour and marketing budgets get cut.

I like to break causes of churn into 3 categories:

I don't know about you, but I like to spend my time focusing on things I can control, which means I am going to focus on Controllable and Our Own Dang Fault columns.

Controlling churn and retention outcomes is tied to a few common threads:
Predictive Data & Analytics > Preemptive Action > Measurement and Accountability > Revenue-Critical Functional Alignment > Leadership & Skills

You should measure your closed/lost deals on the retention side this way. Why? Because knowing what percent falls into what's controllable and what’s not will be very revealing and could give you a clear sense of what you could add to the bottom line if you improved those outcomes.

PS: Don't forget, it's not just enough to retain the logo, you need to also retain and grow the revenue.

Actionable Tips

I could spend days and weeks talking about how to fix customer churn and boost retention. High levels of customer retention not only indicate robust business health, it also is an indicator that the business is able to support the development of new revenue streams.

Here are some proven approaches to boost your customer retention.

Tip #1: Identify the root causes and leading indicators of customer churn. Sometimes these are intuitive but just not very visible due to lack of real-time data transparency. Outside of the things you cannot control, the usual suspects include underperforming products or contracts, price sensitivity, the level of customer service, and ongoing sales engagement.

Tip #2: Create a Retention Working Group. Define retention broadly, assemble a cross functional team with people at different levels of your organization and give them a clear mandate. Areas to focus on can include:

  • Customer experience
  • Demonstrating customer value
  • Upsell, cross-sell and expansion
  • Increasing average contract value
  • Identifying and responding to unmet customer needs

Tip #3: Using predictive analytics and , connect contract performance data with your renewal, upsell and expansion pipeline. When contract obligations are not being met (whether it is quantity and quality of impressions, leads, meetings, and other curated engagements) your team will get alerts to take action.

Tip #4: Create metrics and compensation incentives for all revenue critical teams tied to retention and account expansion.

  • In addition to quota, include retention and expansion KPIs that result in variable compensation.
  • For customer success teams, include bonuses tied to KPIs such as retention, expansion rates, and qualified expansion and upsell leads generated by the CSM team.
  • Measure and evaluate operations teams on customer delivery and satisfaction scores.

Tip #5: Hire and train a ninja Customer Success Team. Customer Success is not to be confused with Customer Service which is really a subset of Customer Success. Develop customer journey plans that include onboarding, training, ongoing  value creation and upsell/cross-sell action plans.

Tip #6: Measure, measure, and measure again. Using data analytics, benchmarking and scorecards, track what’s working and what’s not. Iterate and pivot and share best practices across your organization: all brand portfolios and regions. Break out and roll-up results in meaningful ways, e.g. by division, brand, channel and sector etc.

In this economy in particular, reducing customer churn is critical. It is the number one concern among C-suite executives surveyed in our study, 2023 Data-Driven Revenue Growth in the Media, Digital Information and Events Industry. The report from our study will be available in May, request a copy here.

Do you need to improve retention and reduce churn? Request a meeting with me today.

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