The Vicious Cycle of Customer Churn and How To Stop It

Why do SO many venture-backed companies get stuck in the vicious cycle of customer churn? Long-term customers are the fuel that drive business growth, so there’s a disconnect that deserves exploration.

In the world of venture capital, there’s pressure to grow quickly. These companies are given aggressive sales targets, and there are consequences if they fail to hit them.

“It’s a short-term orientation, which comes at the expense of long-term planning and growth,” says Sam Jacobs, Revenue Collective Founder & CEO. Recently, Sam shared his perspective at the virtual launch party for my #1 bestselling book, Keep Your Customers. Check out the interview below:

“Even though it feels good to bring in a customer, a month later they’re already saying bad things about you because the onboarding hasn’t gone the right way, the implementation hasn’t gone the right way.”

As Sam says, the pressure to close the wrong customers is like jamming a square peg in a round hole. Even if you can do it, it’s never going to be a good fit.

And once a customer becomes unsatisfied, and leaves, it’s very difficult to win them back. All of the time, energy and money a company spent to close the initial sale and onboard the customer is lost. This is especially costly in the world of recurring revenue business models, where customers generally don’t even become profitable until year two, three or beyond. Any customer who churns before that magic mark has been served at a loss.

Sure, the adrenaline rush of closing the deal and hitting the numbers feels oh-so good in the short-term, But the quick hit of cash isn’t healthy for the long-term if it ends in a customer who buys and quickly bounces out of the company.

Building Brands on Customers

In Keep Your Customers, Mark Suster takes Sam’s observation about churn a step further to explore the long-term impact.

Mark is an entrepreneur and the managing partner Los Angeles-based venture capital firm Upfront Ventures. Upfront is the largest venture capital firm in Southern California, with more than $1.8 billion in total funds raised. The firm has backed such successful companies as Ring and Bird scooters.

“Building a great business comes down to having a brand that customers love,” Mark says. “A brand isn’t built on marketing campaigns. It’s built on customers. The problem with scaling so quickly that you disappoint customers is that you can’t rebuild trust. Companies that undermine customers’ trust rarely return to greatness.”

And it gets worse.

Not only is the trust broken for that unhappy customer, but for every other person that customer talks to about their bad experience. And you can believe that unhappy customers are happy to talk.

  • High rates of churn.
  • Unprofitable customers.
  • Broken trust.
  • Negative word of mouth.

They’re all poison to a business.

Fortunately, business leaders can prevent it from happening with a bit of listening, planning, and old fashioned hard work.

Interested in learning how? Snag a copy of Keep Your Customers today or contact me directly and let’s talk!