It’s surprising how many customers actually push out paying their renewals. It’s interesting, because in our personal lives, we’re less likely to delay paying rent or car insurance because the consequences are usually pretty high.
That is, you’re either not covered for something or you have a pay a significant reinstatement fee. However in the business world, the penalties for slow payment can be relatively inconsequential, so often this is something customers may take advantage of.
So how much of your renewal business is being delayed?
As I’ve mentioned previously, our experience tells us that anywhere between 10-30% per quarter of renewal business is typically pushed out. Less than 10% being pushed out is a considered being a “pacesetter” – if you fall into that category, then you should pat yourself on the back and not waste your time reading any further!
These numbers are also highly correlated to churn. Say, for example you have 30% being pushed out, you may still catch 10%-15% of those renewals within the following few months (as many customers invariably are delayed in processing it), but whatever is left over is churn
If that isn’t enough, here’s 4 more reasons:
You are simply giving your customer a FREE LOAN! In my recent blog “How much are you lending your customers”, I mentioned that customers often delay payment or don’t renew because it doesn’t seem necessary until some trigger occurs – ie an issue that requires support and they need to contact the service desk. If you’re not proactively following them up to complete the renewal transaction, then they will wait until the need occurs to generate the trigger, which essentially means you’re giving them a free loan.
Think like a cloud company, by that I mean always be working on your customer to make sure they are successfully using the technology you have deployed for them. This relates back to the fundamentals of customer success and ensuring the customer has fully “adopted” the product or service. In some examples I’ve seen, companies profile expected usage and support queries for certain phases of the product lifecycle. This can help you make sure the customer is on track to successful adoption.
Every time a renewal lapses, chances are the renewal will need to be re-quoted - it may incur additional fees, prices have changed or quoted items have also changed. This creates more work for your renewal teams which ultimately slows down the quote-to-cash period. While getting quotes right first time, every time is not always realistic, reducing the number of re-quotes will help control workloads.
Help keep your customer compliant within their own company. For any large company, having its IT up-to-date is pretty important in order to prevent any IT security risks. In some cases it may even be essential for regulatory compliance which can often be a good motivator to ensure renewals are paid on time. I’m not suggesting you alarm the customer with this message, but definitely reminding them of the importance of having the latest IT updates in place can be useful.
Renewing licenses and support subscriptions is not always everyone’s top priority, so really the job is up to the renewal specialist to proactively drive it. Ensuring the customer is informed, is aware of any risks as well as being satisfied and actually using the product can go a long way to closing that renewal on time.