The counterintuitive insight about churn management: not all churn is bad, and not all retention is good.
The customers you should fire before they fire you:
Consistently negative ROI accounts. If the all-in cost to serve an account (CS time, support tickets, custom work, infrastructure) exceeds the revenue, you're losing money on every renewal. Renewing them is not a retention win. It's a financial mistake.
Customers who use your product in a way you weren't designed for. When a customer has stretched your product to solve a problem it wasn't built for, they're chronically unhappy with limitations that are features for everyone else. Their feature requests are noise. Their complaints pollute your NPS. Their churn, when it comes, is a relief.
Customers who are also PR liabilities. A customer who is consistently negative in community forums, who influences other prospects away from you, and who can't be satisfied — the cost of keeping them extends beyond their ACV.
Customers in a market segment you're exiting. If your ICP is evolving away from a segment you currently serve, continuing to renew and support customers in that segment delays your strategic focus. A proactive wind-down with appropriate transitions is better for both parties.
How to fire a customer well:
Give them runway. Announce the relationship conclusion with enough notice (typically 90-180 days) for them to evaluate and implement alternatives.
Help with transition. The vendor that helps a customer find a better-fit solution earns goodwill, future referrals, and the right story in the market. The one that just sends a non-renewal notice earns nothing.
Be honest but kind. "We've evolved in a direction that doesn't serve your use case as well as it should" is true and fair. It's better than vague "strategic fit" language.
Not every customer should be retained. Know which ones.