Understanding B2B customer churn and retention for better account management

B2B customer churn is one of the key issues account managers and customer success teams will face when handling customer relationships. However, retaining customers over the long term can be achieved through sensible account management strategies based on data and action, designed to continually improve the customer experience.

Read on to understand more about B2B customer churn, how it differs from the B2C challenge and how to improve your customer retention.

What is B2B customer churn?

When your customers leave your business, the pressure is on to find replacements and stop any other customers from deciding to move on. Your customer churn rate – or how rapidly customers leave – is ideally low to help your growth to flourish.

Find out how to improve B2B customer retention in our Account Management Solutions eBook

How is B2B customer retention different from B2C?

In the business to business space, strategies for retaining customers are often focused on developing long term and close relationships, rather than casting a wide net. Customer success teams are often focused on tailoring solutions to each individual customer to reduce churn, rather than offering blanket promotions to a wide audience.

For B2C, it’s more about applying techniques to the widest possible range of customers to ensure that churn rates are low and engagement remains high.

Measuring B2B customer churn

First, you need to identify how many of your B2B customers have been lost over a set period.

Churn can include when a customer:

•         Closes their account entirely
•         Cancels subscriptions to products or services
•         Does not renew their contractual or service provision agreement
•         Decides to switch provider

To calculate your churn rates, you can examine and contrast a few factors.

You could look at the number of churned customers over your specific period (say, a year) to create a percentage – for example, if you had 100 customers at the beginning of the year but lost 5 over the year, your churn rate would be 5%.

Alternatively, you could consider customer churn based on the revenue lost.

You could use your monthly recurring revenue (MRR) as a baseline, first subtracting the amount of revenue lost due to churn and then any additional revenue brought in by existing customers.

Your final rate is calculated by dividing your final number by your original MRR and finding a positive or a negative percentage to indicate revenue growth or loss.

B2B customer churn statistics

Each industry will have its own B2B customer churn statistics that will form a benchmark for companies in that sector.

Some level of churn is simply unavoidable, as customers’ interest is always subject to many factors outside of a business’ control or subject to forces such as M&A activity. However, no matter the industry or the business, the lower the churn, the better the outcome is likely to be.

To give you an idea of what kind of range a business in B2B markets might expect, below is an example of customer churn statistics across the SaaS industry.

Baremetrics suggests for SaaS businesses that focus on smaller companies as customers, a 3-5% churn monthly is to be expected. For products being served at enterprise level, churn should likely fall under 1% per month. However, they state that early-stage SaaS businesses can often have a churn of up to 15% for the first year as they find their feet.

B2B customer retention strategies

The strongest B2B customer retention strategies are based on a drive to provide value even in the face of serious competition and difficult external situations. Often, successful retention relies on a deep understanding of your customers’ behavior and needs.

To develop your own customer-focused retention strategy, you can try the following:

1. Use feedback to your advantage

Feedback is the simplest way to understand how your customer feels about your product or service. Customer satisfaction and interaction can be benchmarked in a number of ways, including NPS, CSAT and customer effort scores. Getting feedback as early as possible and implementing changes to improve customer experience is a good way to ensure you’re doing your best to meet needs.

2. Adapt to customer needs

For those customers who are at risk of churn, you may need to adapt your offering to meet their needs more effectively. Analyzing why they contact customer support (and how frequently), determining why they use (or don’t use) your products/services and tailoring your offering to them can go a long way to improving your relationships and reducing the risk of churn.

3. Offer longer-term or more flexible plans

If you’re offering services, try offering longer-term plans to ensure that your yearly churn rate is limited. Alternatively, provide more flexible plans that will encourage your customers considering leaving to remain on your books for longer.

4. Reward loyalty

Your biggest customers are likely the ones who continually buy your range of products/services, and are frequently upsold new additions. Make sure to reward their loyalty and demonstrate how your relationship continues to be beneficial to them.

B2B customer retention and account management

Here are a few tips for making sure that your account management reflects your B2B customer retention strategy:

1.  Lower your employee churn rate

High employee turnover at your business can have a negative impact on your relationship with your customers. As customer retention often relies on solid relationship-building from within your account management team, if your employees frequently leave, the relationships that they have with customers can take a hit.

2. Make sure you’ve got the right people

You may need to have a larger account management team to help fulfil higher-touch requirements for important accounts’ customer service. Your customers need to feel heard and valued, and having the right people in place is key for building that longer-term relationship.

3. Adapt to your customers’ changing needs

Your customers, as mentioned before, are subject to many changes outside of your control. However, by maintaining a close relationship with your customer, you can quickly adapt to their changing needs and make accommodations for new requirements they might have. Being flexible and offering solutions that are personalized can be the difference between retaining a customer and watching them leave for a competitor.

Discover best practices for improving your B2B account management.

Adding customer retention strategies into your CX program

Customer retention strategies are vital for improving business outcomes, but they can be augmented by a comprehensive CX program. Your CX strategy should encompass other optimizing activity, such as:

• Developing a customer health benchmark score and optimizing over time
• Optimizing the buyer journey
• Analyzing your win/loss ratio and taking action