Whilst your sales team, or “hunters” are celebrating their new wins and new revenue, countless existing customers are slipping away. It’s time to fix that leaky bucket, because your greatest chance for revenue growth relies upon what you do with your customer base. I’m sure your business already acknowledges this. But how are you executing your retention strategy? Are your processes streamlined, efficient, cost-effective or profitable?
From what I have heard from many industry experts, as well as from my own observations, it seems that very few companies are doing it well right now. And I’m not referring to the SaaS world, because if they don’t get renewals right, they won’t survive. It’s the rest of the tech industry. Over the years, I’ve spoken at length to countless technology providers, from your large multi-national Fortune 500 vendors, right through to smaller resellers and MSPs. What I found is that a lot of the issues with renewals management actually stem from common misconceptions or myths, about how customer retention and renewals should be managed.
So let’s bust some of those myths now!
Myth #1: It's just a renewal.
So many businesses are still aiming for a straight renewal. They set reminders and call the customer 30 days out; however, the renewal should be the last resort!
Don’t serve up a predictable outcome to your customer. Transform your renewal strategy, so that it’s not only focused on revenue protection, but also revenue growth. This shift in mindset is essential for the ongoing profitability of your business.
Your team should consider whether there are opportunities for additional revenue, such as an upsell, upgrade, cross-sell, refresh and more. Finding these nuggets of opportunities throughout the customer lifecycle journey (not 30 days out from renewal) is key. If you don’t, there’s a good chance that when you give them a call about the renewal (a transactional conversation), your competitors are already in there demonstrating value!
Myth #2: Renewals are straightforward.
Businesses often underestimate renewals. How hard could it be? You get reminders and your team follows up at the time of renewal.
I’m afraid it’s not that straightforward. First off – volume is a big factor. The amount of renewal transactions you’re contending with these days are far greater. This is largely due to the shift from perpetual licensing and on-prem solutions, to cloud-based subscriptions and consumption models. These require a completely different approach.
You need better data management, business intelligence, feedback loops and most importantly – automation for it to run effectively. For example, iasset helps its customers to not only identify renewal and expansion opportunities, but also autogenerates quotes using parameters like price lists, margins and pricing logic - ready for the end customer or partner to action. That is what I call true automation. A model that can scale as your business continues to grow.
Secondly, minimising cost of sale is extremely important in today’s market. Companies need to find the right balance of cost-effectiveness without compromising the customer experience. Who owns the renewal? How much of it can be automated?
Hiring more people to handle the growing volume of renewal transactions isn’t always the answer, especially considering the significant added cost. However, it does make sense to apply your staff to the most critical parts of the process. For example, according to TSIA, there has been a resurgence in renewal specialist roles, to help handle complex renewals.
Myth #3: Building a tool in-house will solve all my problems.
I see this misconception all too often, that building a renewals tool in-house is the best solution. However, building software in-house isn’t as straightforward or cost-effective as it seems. In fact, we’ve witnessed countless companies try and fail!
I urge you to please consider the following before you decide to go down this path:
- A project of this magnitude will take away a significant amount of time as well as resources (usually years).
- Most companies that I speak to who’ve tried to build their own, either never finish, or end up with a subpar tool that fails to fulfil their requirements.
- Consider the opportunity cost, as many businesses don’t factor this in. That is, missed revenue throughout the build process. If you don’t have the mechanisms in place to effectively manage renewals and expansion opportunities for one, maybe two years whilst you wait for something to be built, you are likely to lose a great deal of revenue during that period.
- Once complete, you will need to commit more time and resources towards ongoing maintenance, enhancements and fixes.
- There is a knowledge risk associated with internal builds. Once the people/brains behind the build have left the business and all that knowledge walks out the door, it becomes much more difficult to maintain.
- Think beyond simple renewal automation. For example, what about the global complexities? Different currencies, languages, partners, suppliers, quote-to-cash capabilities, hundreds of line-items in quotes? Will your team have the expertise to build these in?
- It is difficult to build something in-house that is on-par with existing platforms available on the market. The reason for this is that these have been developed based on years of industry expertise, best practices and are tried, tested and enhanced on an ongoing basis.
My advice, save yourself the headache and instead leverage an existing platform that is going to cost a fraction of your expenses and can be working in the matter of weeks or months.
Final words
Times are tough, so don’t allow these misconceptions to get in the way of having a healthy, profitable, customer retention and expansion function. If you’re finding that your processes and tools are letting you down, please feel free to reach out to our team of experts at iasset.
Have you seen our recent ChannelTalks episode about renewals and quote-to-cash automation? Catch it here now!
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