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Benefits of Churn: The Good in Saying Goodbye to Customers

Think losing clients is bad for business? Think again! Find out how strategic customer churn can be a game-changer for your business growth.
The Upside of Churn

Have you ever quietly celebrated losing a client? Even felt a wave of relief when one moved on? If yes, then you are not alone.

Many successful businesses strategically let go of specific customers.

Counterintuitive? Absolutely.

But pandering to the demands of mismatched clients drains resources (and revenue) fast.

Now, imagine you could detect those troublesome clients early. You’re ready to tell them it’s time to go elsewhere, opening up space for ideal customers. Seem too good to be true? It’s not.

Forward-thinking companies embrace selective churn to drive growth. This guide shows you how you can profitably clean house by:

  • Identify customers better off served elsewhere
  • Professionally communicate the decision
  • Seize opportunities from reallocated resources

Are you ready to turn client spring cleaning into business growth? Read on!

Table of Contents

Rethinking the Customer Churn Narrative

Most of us think losing a customer is a defeat. But there’s another way to look at this situation, known as “strategic churn.” It’s about letting go of certain customers… on purpose!

So why would you want to show a hard-won client the door? Because not every customer is the right fit for your business in the long run.

Is Customer Churn Good or Bad?

Churn is the rate at which clients stop doing business with you. But let’s break it down further into the two types of churn:

Bad Churn

  • Happens due to issues like poor service or product problems.
  • We lose customers who were otherwise happy and profitable.
  • It’s a sign that something needs fixing in our business.

Good Churn

  • Occurs when we choose to part ways with customers who don’t fit well with our services or values.
  • These customers might require too much effort for too little return.
  • They could be constantly unhappy or don’t appreciate the value of our services.

Why Choose Strategic Churn?

  • Focus on Fit: When you let go of mismatched clients, you focus more on those who enjoy and value what we offer.
  • Resource Management: It frees up resources – time, money, and energy. You can put those resources to better use to serve and attract ideal customers.
  • Business Health: In a garden, removing weeds helps healthy plants thrive. Strategic churn leads to a healthier, more focused business.

A Balanced Approach to Churn

Now, this doesn’t mean we should give every challenging client the boot. It’s about being thoughtful and selective. Not all problematic customers are a lost cause. Some might need more understanding or a different approach.

But other customers drain resources, money and energy without enough return. They hold your business back rather than push it forward.

Identifying The Right Customers to Let Go

Key Account Managers have good instincts. So, no doubt you already have a list of clients you’d rather not deal with.

But hold your horses before you start thinking about saying goodbye. It’s crucial to double-check your gut feelings with some hard facts.

Using Data to Guide Decisions

Accurate data analysis helps identify which clients are most beneficial for the business. Go beyond revenue. Is there an efficient allocation of resources and strategic growth opportunities?

  • Sales vs. Support Time: Look at how much you sell to a client compared to how much time you spend helping them. If a client takes up 30% of your time but only contributes to 5% of sales—that’s a red flag.
  • Profit Margins: Check out how much money you make from each client. Sometimes, a big buyer might not be as profitable as a smaller one who pays better.
  • Payment Patterns: Keep an eye on who pays on time and who doesn’t. Regular late payers? That’s a problem waiting to happen.

Recognizing Red Flags

Identify specific behaviors or patterns that signal a client may be bad for business. Recognizing these signs gives you a chance to intercept them and get back on course.

Chronic Dissatisfaction

You know those clients who are never happy, no matter what you do? They can find a problem with anything and usually blow it out of proportion.

  • Example: A client who always complains about packaging standards, even though it’s fine. They demand custom solutions that drive up costs and complexity but don’t want to pay for it.

High Maintenance

Some clients need far too much attention—beyond what they’re actually worth or paid for. There are no boundaries, and everything is ‘urgent’. That means less time building profitable cooperative relationships with your other clients.

  • Example: A retailer who wants fancy, customized promotional material for every little campaign. Not even your biggest customers ask for this. That’s a lot of work for little gain.

Price Obsession

Watch out for clients who only care about getting the cheapest deal. No fee is too small to bargain over. They ignore the real value of what you offer, so they will never be happy. And neither will you when giving in to their price demands eats into profits.

  • Example: Let me tell you about a time with a client obsessed over price. They were about to renew their contract but got stuck on the cost of after-hours support calls. I decided to check the numbers. You know what I found? They made only 11 calls after hours in the whole of last year. We were going back and forth over something that barely even happened.

Negative Impact

Some clients can be very tough to work with, causing stress for you and your teams. The extra demands and challenging interactions suck all the joy out of your job.

Working with these clients discourages you, leading you to dodge their tasks. When you do take them on, the results often fall short of your typical quality. And this negativity spills over into your other relationships – internal and external.

  • Example: Think about a client who’s always tough to talk to. Their communications are pretty harsh, and it’s starting to stress everyone out. Your service team keeps calling you, upset about how this client talks to them. It puts you in a tough spot. If you bring it up with the client, you might be on the receiving end of their harsh words. But your team might think you don’t have their back if you don’t say anything. You’re caught between a rock and a hard place, and it’s really cranking up your anxiety.

Non-Aligned Goals

Clients whose objectives or demands conflict with your company’s mission and values. Clients who expect things that don’t match your goals risk jeopardizing your integrity.

  • Example: A major client pushing for product enhancements that don’t align with your company’s sustainability initiatives. Agreeing could hurt your company’s brand reputation and long-term strategic goals.

Differentiating Between Red Flags and Personality Conflicts

Not every challenging interaction is a red flag for a problematic client relationship. Sometimes, what seems like a red flag might just be a personality clash.

To be professional means working effectively with various personality styles. Here are some tips to help you adapt your approach to overcome conflict.

  • Self-Reflection: Before labeling a client interaction as a red flag, take a step back and reflect on your behavior. Could your communication style or approach be contributing to the tension?
  • Adaptability: Adapt your communication style to better fit with the client’s. This doesn’t mean changing who you are but finding common ground where your styles can overlap effectively.
  • Set Clear Boundaries: Setting boundaries in a professional relationship is okay. Clearly communicate your expectations and limits in a respectful way.
  • Seek Feedback: Don’t hesitate to seek feedback from colleagues or supervisors. They might offer a different perspective or advice on handling the situation.
  • Stay Professional, Not Personal: You don’t have to be friends with your clients. But you do need to maintain a friendly, professional relationship. Focus on the business aspects rather than personal differences.
  • Conflict Resolution Skills: If conflicts arise, use effective conflict resolution strategies. Sometimes, a straightforward, calm conversation can clear up misunderstandings.

Getting Over the Emotional Barrier of Firing Clients

Letting go of a client tugs at the heartstrings, even when we know it makes good business sense. I understand that feeling, and no one enjoys firing customers.

Here are some ideas to help get over that emotional barrier:

  • It’s Not Personal, It’s Business: Remember that this decision is based on business priorities, not personal relationships. Frame the conversation around misaligned business needs rather than personal incompatibility.
  • Lean on Data for Clarity: If emotions cloud your judgment, let data guide the decision. The numbers don’t lie. Analysis of resources allocated versus value delivered gives you a more objective perspective. Then, you can better evaluate if the relationship still makes business sense.
  • Focus on the Big Picture: Consider long-term vision versus short-term discomfort. Losing some customers enables growth opportunities with those better suited to your offerings. It’s for the greater good of the whole company. Keep your eyes on the prize.
  • Plan Transition Steps: Design a transition plan addressing the client’s needs during offboarding. Offer references to alternate vendors. Drawing up contingencies eases your mind about possible consequences.
  • Reprioritize Freed-Up Resources: Visualize how you can use the freed-up time and money towards growth goals. This gives a positive purpose to the churn. See it as a strategic investment decision empowering your business.

Churn decisions are always tough calls. To get past the emotional barriers, keep the big-picture perspective in mind.

Strategies for Letting Go of Clients Gracefully

You’ve given it your all. You adjusted to your client’s expectations, tweaked the pricing, and tried to change their behaviour.

And now you’ve hit a wall.

You realize even after you’ve pulled out all the stops, it’s just not working.

That moment of truth hits: “I can’t turn this client relationship, no matter how hard I try.”

It’s tough, but recognizing that both sides should go their separate ways is part of the job. It’s not just about ending things; it’s about how you end them.

Here’s how to navigate this tricky part of the journey so you part ways on good terms:

Face the Fear of Difficult Conversations

  • Mindset Matters: For some key account managers, it’s not the decision to fire a client that creates anxiety. It’s the looming final conversation. Telling a client “it’s not working out” triggers confrontation fears. But avoiding or delaying that talk due to discomfort helps no one.
  • Practice with a Mentor: Schedule a session with a mentor or colleague to roleplay the conversation. Walk through your talking points out loud. Ask them to provide constructive feedback on areas to improve — what you say and how you say it. They may spot potential landmines you missed or have advice on body language. Practicing builds confidence through experience before the real thing. You’ll face fears, prepare effectively, and replace fear with confidence. You’ve got this!

Proactive Management

  • Anticipate and Prepare: Before the situation deteriorates, recognize the signs. Can you resolve them, or do you need to prepare for a conversation about the future of your partnership? This gives you control over the process.
  • Document Everything: Record all interactions, issues, and efforts to resolve them. This documentation can be helpful if you need to explain your decision.

Clear and Respectful Communication

  • Set clear expectations: Give a respectful heads-up that the agenda involves evaluating the partnership fit. Phrase it as “a discussion on aligning priorities” versus something threatening like “we need to talk.” Be transparent so both sides can prepare for a thoughtful conversation.
  • Be Honest but Tactful: Explain the reasons for ending the relationship. Share the facts and specific issues and why they’re no longer sustainable. Avoid personal criticisms.
  • Mind the Delivery: It’s not what you say but how you say it. Channel compassion, keep an even tone and maintain eye contact. Don’t let emotions hijack the exchange, even if provoked.
  • Focus on Listening: After delivering the core message, it’s time to listen. Don’t re-explain the rationale. Let your client share their thoughts without interruption and resist the temptation to fill silences.
  • Wrap with Next Steps: Close by expressing appreciation for the opportunities to work together. Shift the tone to a forward-looking one by discussing the transition plan and outstanding items.

Offering Alternatives

  • Suggest Other Options: Offer alternatives such as a different service level. The client may be more open to change when faced with ending the relationship. Or recommend another provider who better meets their needs.
  • Don’t Rush: Give enough time for everyone to get organized for the termination. 3 to 6 months should be plenty of notice to minimize disruption.
  • Help with Transition: Offer to help with transitioning to a new provider. Show your commitment to their success, even if it’s not with your company.

Maintaining Professionalism

  • Stay Calm and Courteous: No matter how the client reacts, remain calm and professional. This reflects well on you and your company.
  • Follow-Up: After the initial conversation, send a formal letter or email summarizing the discussion. Outline the next steps and dates to ensure clarity and professionalism.

Learning from the Experience

  • Reflect on the Relationship: After the client leaves, consider what went wrong. How can you prevent similar situations or better deal with them in the future?
  • Share Insights with Your Team: Discuss the situation with your team. Share insights and learning points. This can be a valuable learning experience for everyone.

Strategic churn is about closing one chapter so you can open new ones with more aligned clients.

Key Takeaways: The Benefits of the Right Kind of Customer Churn

You might have guessed by now, but I believe bad-fit customer churn is actually good for your business. Here are some key reasons why:

  • Frees Up Resources: Saying goodbye to high-maintenance or unprofitable clients frees up time. This lets you focus on clients who bring more value to your business.
  • Improves Team Morale: Clients that churn who are a constant source of stress can boost morale. A happier team often leads to increased productivity and better service.
  • Enhances Client Quality: The quality of your partnerships improves when clients align with your business values and goals. When your clients are better, so are you.
  • Encourages Business Growth: Profitable and harmonious client relationships create a healthier working environment. Business growth and innovation are just the start.
  • Sharpens Business Focus: Letting go of mismatched clients helps clarify your business focus. You know what you want and what you don’t want. You can refine your strategies and offerings to attract (and keep) the right kind of clients.
  • Builds Brand Integrity: Clients who reflect and respect your company values strengthen your brand’s reputation and integrity.
  • Learning Opportunities: Each churned relationship provides valuable insights. It helps you understand what works and what doesn’t and how to refine your approach to client management.

Next Steps: The Power of Positive Churn

Remember, not all churn is bad. Smart churn can lead to a stronger, more focused, and more profitable business in the long run. My advice is you should embrace it as an opportunity for growth and greater impact on your client relationships.

Get Started Now: Six Actionable Steps

  1. Review Your Client List: Take a quick look through your client list. Identify any who consistently demand more resources than they return in value.
  2. Evaluate Communication Patterns: Reflect on recent interactions. Are there clients who always leave you feeling drained or frustrated? Make a note of them for further review.
  3. Check the Numbers: Do a basic profit check. Which clients contribute the least to your bottom line relative to the time and resources they use?
  4. Seek Team Feedback: Ask your team for their input on client relationships. They might have insights on client interactions that you need to be aware of.
  5. Plan Your Conversations: Prepare for potential conversations with clients you might consider letting go. Draft a brief outline of how you might approach these discussions.
  6. Consult with Your Manager: After gathering your initial findings and insights, discuss them with your manager. This is often the most challenging step, but it’s essential. Present your insights and see if they’re open to exploring the idea of strategic churn. Your manager’s support is vital to move forward with any changes to your client portfolio.

If you take these steps right now, you can begin to harness the strategic benefits of customer churn.

So what are you waiting for? Go turn those challenges into valuable opportunities for your business.

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