Picture this scenario: your company’s annual conference is fast approaching, and your Managing Director (MD) asks you to nominate a customer to present on the benefits they’ve achieved using your solution. Instantly, you think of “Customer X,” a long-time, mature client with stellar product usage metrics and glowing historical case studies. They’ve always seemed to derive immense value from your offerings, and you’ve built such a strong rapport with your primary contact that they’ve become both a trusted business associate and a friend. Confident they’ll be thrilled with the opportunity, you inform your MD and excitedly reach out to make the request.
However, their actual response leaves you stunned:
“Oh boy, this is a tough one. I’ve been meaning to call you. Not sure how to say this, but we won’t be renewing our contract when it’s up.”
The silence on your end speaks volumes. All the indicators—both subjective and objective—pointed to a thriving, mutually beneficial relationship. How could they be leaving? How did you miss the warning signs? What will you tell your MD? And, most alarmingly, could other supposedly “safe” customers be at risk as well?
This scenario exemplifies the “Watermelon Effect.” On the surface, the relationship appears green and healthy, but dig deeper, and it’s all red beneath—the relationship is in jeopardy. How can you identify clients experiencing this phenomenon, and more importantly, what can you do to prevent it? Let’s explore some warning signs and actionable steps to protect and nurture your customer relationships.
Are Your Customer Health Scores Accurate?
Customer Health Scores are indispensable for gauging the health of client relationships. These scores synthesize diverse data sources such as product usage statistics, support ticket trends, marketing interactions, contractual statuses, survey results, and ongoing vendor-customer communications. While these scores provide valuable insights, their accuracy depends on the underlying calculations.
A common pitfall is overemphasizing high product usage as a proxy for value. The assumption that “high product usage = high product value” is flawed. Consider a relatable analogy: you may use your local train service daily, but if it’s unreliable and unpleasant, you’d switch providers in a heartbeat if given the choice. Similarly, customers may use your solution extensively not because they love it, but because they lack alternatives.
If your solution holds a unique market position, customers may reluctantly rely on it despite frustrations. However, when competitors catch up, unresolved pain points can prompt them to leave at the earliest opportunity.
To address this, refine your usage metrics by asking, “Does this usage align with how the solution should be utilized?” Add this qualitative assessment to your health score calculation, allowing Customer Success Managers (CSMs) to flag areas needing further investigation. This ensures a more nuanced and accurate representation of customer health.
Do You Have a “Voice of the Customer” Program?
To secure long-term loyalty, your customers must see a strong return on investment (ROI) from your solution. If they perceive your offering as a “nice-to-have” rather than a “critical” tool, they’re at risk of downgrading or canceling entirely. A formalized “Voice of the Customer” program is crucial to go beyond surface metrics and uncover whether customers are genuinely achieving ROI.
The book Customer Success by Nick Mehta, Dan Steinman, and Lincoln Murphy underscores this with the “10 Laws of Customer Success.” The second law, “The Natural Tendency for Customers and Vendors is to Drift Apart,” highlights how changes over time can stretch a once-strong relationship to its breaking point. A well-structured “Voice of the Customer” program helps counteract this drift by keeping both parties aligned.
One effective approach is conducting Win, Loss, and Churn analyses. These involve in-depth interviews with key decision-makers to understand their motivations, challenges, and future needs. Whether managed internally or through external services, these insights can guide adjustments to strengthen customer relationships.
Build a Broad and Deep Customer Contact Network
Overreliance on a few key contacts—especially those without purchasing authority—is a significant risk factor. If your primary contact leaves, you’re left vulnerable to new stakeholders who may favor competitors or lack familiarity with your solution’s value.
Ask yourself, “If my primary contact left tomorrow, how exposed would we be?” If the answer isn’t “Not at all,” prioritize building relationships with multiple stakeholders across different levels of your customer’s organization. This approach not only mitigates risk but also provides diverse perspectives on your solution’s perceived value.
Pay particular attention to decision-makers who control budgets. Even if you can’t establish a direct relationship, ensure that other contacts share compelling “user stories” that demonstrate your solution’s impact.
Evaluate Your Solution’s Relevance
When your customer first purchased your solution, it addressed a specific pain point or need. However, how relevant is it to their current and future challenges? High usage doesn’t necessarily equate to high value.
One way to assess this is by analyzing the “Consumption Gap,” which measures the difference between your solution’s full capabilities and the extent to which customers utilize them. A wide consumption gap signals underutilization and dissatisfaction. Customers may opt for cheaper alternatives if they’re not leveraging your solution’s advanced features.
To address this, articulate the benefits of your solution in terms that resonate with your customers. Always ask, “Why should they care?” Clearly communicate how each feature makes their lives easier or more productive.
Additionally, ensure your product roadmap aligns with their evolving needs. Solicit and prioritize customer feedback, consolidating insights into actionable recommendations for your Product Management team. This ensures future releases deliver meaningful ROI for your clients.
In Conclusion
The adage “past performance is no guarantee of future results” applies to customer relationships. Even “safe” clients can become at risk if you neglect to address underlying issues. The “Watermelon Effect” serves as a reminder that a superficial green exterior can hide deep red warnings beneath.
To combat this, focus on delivering measurable ROI, maintain a critical eye on health metrics, and proactively learn from churned customers. By taking these steps, you can identify and mitigate risks, ensuring your customer relationships remain vibrant and mutually beneficial for years to come.