It’s no secret that the shift to the cloud and the rise of the subscription model across many industries has put a spotlight on the need for businesses to consistently show value and create a delightful, frictionless customer journey experience. The need for a frictionless experience is especially true when it comes time for your customers to renew their contracts. As Aldo Gucci once said, “Quality is remembered long after the price is forgotten.” This is especially true when it comes to the quality of your engagement and the value of your product.
Often, larger enterprises lose focus on their lower-spend (or long-tail) customers when it comes to renewing a contract. You can use many strategies to ensure that value is realized throughout the customer lifecycle, recognize churn risks earlier, better understand customer buying behaviors, and increase renewal rates across your entire install base. But to achieve this level of insight and performance, you must remove the roadblocks. In this blog, we’ll tackle a few common friction points that we see and how we help to overcome them.
Friction Point One:
Sending Out Renewals Quotes Too Late
The most significant friction point that we consistently encounter with businesses (and their partners) renewal efforts is when they reach out too late to their customers about a renewal event. Often, these businesses don’t reach out (especially their lower-dollar customers) until 30 days before a renewal event, sometimes as little as 2-3 weeks in advance. If you don’t allow customers time to gain necessary approvals, you risk securing the on-time renewal or worse, losing the customer. A $10K renewal for their product seems like small potatoes to many enterprises that we work with, but their budgets are much smaller to their customers (especially in the SMB space), and these events are a much bigger deal.
How to Overcome this Renewal Friction Point: Get the renewal quote into the customer’s hand between 90-120 days out of a renewal event. This time allows your renewals rep to have more than enough time to cover inventory work out any issues, changes, or pricing disputes. For renewal contracts with federal, state, or local governments, ensure that your team reaches out 120 days in advance.
Friction Point Two:
Not Having a Clear Approval Path for Renewals
Your renewals rep has a point person, or decision authority, within your customer’s business. However, your decision-maker often still needs approval from leadership, finance, legal, etc., to approve the contract. Can your rep call upon the chain of command to get the agreement approved whenever it gets down to the wire for an on-time renewal?
How to Overcome this Renewal Friction Point: There are various qualification criteria that we use, but it comes down to knowing what needs to be done to get the customer to buy. Ensure that your teams identify the need, who supports the purchase (decision criteria and budget), approval chain (decision process), and timelines.
This could be a case for a health check conversation with the decision-maker and renewals rep when the quote gets sent to the customer. Use the discussion to ensure that the original need, budget, approval chain, and timeline used to qualify the account is still relevant. If there has been an update to the authority chain, make notes on the customer account. To streamline the approval process, have a clear path of the authority chain (point person in finance, legal, etc.) so that contract renewals can go straight to the source.
Friction Point Three:
Renewal Coverage Model is Not Focused on the Lower-Tiered Segment
Many customers, especially in the long-tail segment, only receive an email from their renewal rep 60 days out, ten days out, and the day the contract expires. They do not actually speak to anyone to learn how the customer is enjoying the product/service or if there are any issues to tend to until they renew their contracts (sometimes years later). This is a secure way to lose a customer in today’s SaaS world.
Once a new customer contract is closed, and the onboarding process is complete, your team should start the renewal process. This enables your renewals manager to track key milestones where it’s essential to communicate with the customer.
For example, six months into a contract, your renewals manager should reach out to get a pulse check. Ask if they are getting the value out of the product/service, if they need assistance, like more training, to get the most value out of certain features. The goal should always be to ensure that your customer is successful, healthy, and happy with your product/service.
How to Overcome this Renewal Friction Point:
- Incentivize your team to give attention to their entire customer territory base instead of only focusing on your high-dollar customers.
- If your business does not have a dedicated renewals rep and your account executives own both new logos and renewals, ensure that they allocate enough time to focus on the renewal process.
- Do not overload them with too many accounts where they can’t focus on their entire pipeline.
Friction Point Four:
Reps Not Knowing Where to Focus Their Efforts
How well does your organization measure and track renewal KPIs? Businesses often track renewal rate, retention rate, etc., but they do not segment this renewal rate to properly understand the story behind the data.
How to Overcome this Friction Point: Deconstructing your renewal rate into three subcomponents helps determine whether your reps are selling your product/service value and can uncover issues with your long-tail customers. Here, we break down three critical components to a renewal rate:
Resolution Rate: This metric measures how many answers (“yes” and “no”) that your team achieves from its total pipeline. It proves how well a renewals team covers a “batch” of business. If you’re experiencing a low-resolution conversion rate, your team may be focusing too much on the top-dollar deals and not enough on the rest of the stack.
A resolution rate can also help decide if you’re keeping dead opportunities in your sales pipeline too long, thus clogging it up with useless data.
Close Rate: Your close rate is essentially how many customers — out of those who responded — told you “Yes.” It measures how well your teams are selling the value of renewing with your company. This metric also enables you to understand why a customer did not renew, whether it’s related to the product value or caused by a customer going out of business.
Conversion Rate: The conversion rate compares the closed opportunity amount with the current and previous closed transaction amount. This tells you how well your team can increase
the value of a contract using tactics like multi-years, upselling, cross-selling, add-ons, and upgrades. A conversion rate can be negative, which can inform your future tactics to focus on.
You Can Create a Frictionless Customer Journey Experience
At the end of the day, your goal should always be to be easy to do business with. Whether it’s a lack of knowledge around who approves contracts, a lack of insights into where to focus your team’s efforts, or the lack of human touch, your organization can take the steps outlined above to create a genuinely frictionless renewals process. Concentrix has over 20 years of experience creating exceptional customer journey experiences, from acquisition through renewals. We can help you gain insights, scale globally, or enhance your current resource capabilities. To learn more, reach out to a talk with a renewals expert today.