Let’s say you sell digital marketing services to SMBs. And you sold just a single product to a particular customer. And it’s the wrong product based on their identifiable needs. And it’s the only or one of just a few products that you offer. And you never talked to them or engaged with them until it came time to renew. You know what you can with to that customer? You can kiss that customer goodbye.

This is a gross oversimplification of the very compelling findings of a new report, “Why Your Clients Churn” published by the marketing software company Vendasta. The report is the subject of an “Above the Cloud” podcast interview with Vendasta’s Chief Strategy Officer Jackie Cook.

Cook told us Vendasta began the study with three key principles that they sought to test with data from actual behavior of customers on their platform. Vendasta doesn’t sell directly to SMBs but rather relies on a large network of resellers. The study only looked at 100,000 SMBs that were on the platform for at least two year and that purchased at least one product. That’s a healthy sample.

The three principles Vendasta sought to validate were:

  • Sell customers what they need. Sell a social program to the business that needs a social program. Do not sell them a website just because that is the product you want to sell.
  • Invite customers to participate. Engagement is key. The more quality interactions they have per month, the lower the churn rate.
  • Be the single trusted provider. This is the argument for the full stack. The more items the business buys from you, the less likely they are to churn.

Cook said the data by and large validates the three hypotheses.

On the first principle, Vendasta found that clients sold a product to address a real pain point had a much higher retention rate vs those who were not. Additionally, selling additional relevant products within the first three months post initial sale also had a marked positive impact on retention. For example, 57% of SMBs sold an additional product in the first three months remained on the platform after two years, compared with just 38% of those not upsold within that time frame.

On the second point, where engagement drives retention, Vendasta found a dramatic increase in retention among clients that had meaningful engagements with the platform on a weekly basis. By meaningful, Cook doesn’t mean simply logging in. Here is a video excerpt from the podcast with Jackie, where she explains the impact engagement has on customer retention.

On the third principle about being the single trusted provider, Cook makes the oft cited argument that SMBs want to focus on service delivery, not individual marketing tasks. And they don’t want to go to a different vendor for each function. Vendasta found that just 30% of clients with just one product remained after two years, compared with 78% of those with four or more products.

The LSA’s Tech Adoption Index data shows that 50% of SMBs would prefer to get most or all of their critical business apps from a single source.

“SMBs do not necessarily want a website guy and an SEO gal and so on,” Jackie said. “They want a single trusted provider. They want to hang their hat on the fact that they are the experts in running their businesses and they get to run their businesses. But I get to outsource some of these functions to someone that I trust.”

You can listen to the complete Above the Cloud podcast featuring our interview with Jackie below. The interview with Jackie begins at the 12:37 mark.

You can download the full Vendasta report here. Also, my LSA colleague Greg Sterling offered his take on the report over on the LSA Insider blog earlier this week.

Finally, we want to thank our sponsors for this episode of Above the Cloud: Mono Solutions and Boostability.

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