Identifying customers at risk of churn
In order to monitor for churn, we must have two systems in place. A system for tracking customer KPIs and a system for regularly engaging with customers in a two-way conversation.
In terms of the types of KPIs you need to track, the number of tickets can be a good indicator—either a sudden drop or sudden increase in ticket volume can mean that something significant has changed. You should also track revenue—a sudden reduction in a customer’s spend can also indicate a change in sentiment towards the MSP.
On top of this, you need a consistent way of getting feedback from your customers. This can be automated through the use of NPS scores collected with every ticket closed, but should also be done with phone calls from the account manager and quarterly business reviews with clients. This will hopefully allow you to see if things are starting to go wrong.
What are the red flags you should look for?
First and foremost, a change in your net promoter score (NPS) is your best indication that something has changed in the client’s attitude or status. If you are not familiar with NPS, it revolves around one simple question asked of your customers: “How likely would you be to recommend our service to a friend or colleague?” The answer is on a scale of 0 – 10. Promoters are defined as anyone who answers 9 or 10, passives are 7 or 8, and detractors are anyone who answers 0 to 6. If a customer’s average NPS response starts dropping, that is a big red flag that there might be a problem that could lead to churn. (If you want to know more about NPS, read this blog.)
The next obvious red flag is a sudden drop in ticket volume. This could indicate a variety of issues, but the bottom line is they are using your services less and therefore are poised to churn. A surge in ticket volume could also indicate an increase in issues, which in turn could cause an increase in dissatisfaction and eventually a churn event.
Beyond the data you collect from NPS surveys and ticket data, any serious problems are likely to be revealed before or during a quarterly business review. For example, if they reschedule indefinitely or cancel the meeting entirely, this is a big warning that they are at best not engaged and at worst shopping around for a new provider. If you do get to a meeting, look for engagement and conversations that indicate future work or projects. If those are absent, it may be a red flag that the customer does not consider your relationship long term.
Churn has become a serious problem for IT service providers across the board. As the market continues to mature and more private equity money flows into the market, sales and marketing budgets will rise, and your customers are going to be exposed to more competitors than ever. Collecting data, having conversations, and recognizing the red flags can help you salvage a customer relationship before they become at risk of churning to a competitor.
Eric Anthony is the Head Operations Nerd at SolarWinds MSP. Before joining SolarWinds, Eric ran his own managed services provider business for over six years.
You can follow Eric on Twitter at @operations_nerd