It is cheaper to keep a current relationship in place than to lose a client and have to secure a new one. Keeping a renewing client allows you to increase your Customer Success team’s efficiency and grow your SaaS business. Fortifying relationships with existing clients can make your revenue-generating efforts more fruitful and can help boost your end goal. One way to do this is by optimizing your renewal process.
The Renewal Process
Traditionally, the contract renewal process begins with the end in mind. It starts by backing up from the renewal date to defining a customer contact cadence, allowing the renewal team enough time to work with their clients in planning for value maximization and often accelerates the renewal.
That said, new emerging practices that continuously challenge us considering adjusting the standard process to additional business models. In some cases, the renewal process is owned by the Sales team (not the Customer Success team). Assuming that the Sales team owns the renewals, this blog will first address the question of which role within Sales should own the renewal process. In other words, in this blog, we are going to assume that the situation calls for Sales to own the renewals. We will then explore best practices for how to optimize your renewal rate regardless of the renewal owner at your organization.
Who in Sales owns the Renewal Process?
When working with new clients, we typically see the following Sales roles handling the renewal processes:
- Account Executive – A hunter. the person who brings in new business and reports to the Sales team.
- Account Manager – A farmer. The person who constantly has conversations with your accounts whenever there is an opportunity for upselling and expansion. This is a traditional role in on-premise and hardware companies.
- Renewal Manager – this role is fairly obvious, it focuses on the contract renewal process.
Do you need a Renewal Manager?
When there’s a great deal of small to medium renewal contract transactions, even if your company uses software to manage the renewal process with an Evergreen clause, it is highly suggested to have these contracts manually reviewed by a Renewal Manager. Most especially in cases where there are around, say 60-70 contracts that need to be renewed per quarter, hiring a specialized renewal Manager is necessary given the situation. In that sense, overlapping and overwhelming responsibilities can be effectively prevented. With a clearer understanding of the role, the Renewal Manager can definitely focus on the whole process.
If you do not have a Renewal Manager role, your company might be debating on assigning the renewal process to your Account Executive team. The same team is also responsible for hunting new logos. One of the companies I’ve worked with recently did just that and over a span of a couple of years, they’ve seen a drastic reduction in new logos acquired. This happens since it is easier for a salesperson to achieve their quota by farming enterprise accounts vs hunting for new ones.
In some companies, where Sales owns the renewal process and not the Renewal Manager, we’ve seen an unfortunate phenomena where the Account Executive “blocks” the Customer Success Manager from the account. This typically happens when the Customer Success Manager is perceived as an overlapping role to the Account Executives in securing the renewal and uncovering expansion opportunities. This issue is easily resolved by separating the function that owns bringing new logos from those who farm for expansion opportunities and own the renewals under the Sales umbrella.
Four Tips to a Better Renewal Process
As you can already gather, having the proper role in overseeing the renewal process is important to achieve an effective renewal process. However, there are a few simple things you can do to optimize your overall renewal process.
- Embrace Your Customers
It can be easy to focus your efforts on getting new clients and only come back to check in on your existing ones when you notice their contract is up for renewal in the near future. Dedicating ongoing resources to Customer Success means that you are engaging with them throughout their relationship with you, and showing them that you provide ongoing value. That way, they will feel that they are involved and have a clear outlook for how they can generate additional value from their partnership with you.
- Define Clear Responsibilities
Having your Sales team handle your renewal process might be justifiable, however, it is important to have well-defined role definition and cross-functional alignment with your Customer Success team to ensure the most effective renewal process.
- Set Renewal Targets Based on Net Retention Revenue
Renewal is a key process for any organization, mainly due to the fact that most upsells and cross-sells are obtained during the renewal negotiation process. When setting goals for your Renewal Management team (whether it’s reporting to Sales or Customer Success), it is therefore important to set their renewal targets and key performance indicators on Net Retention Rates (not GRR).
- Create Expectations for Customer Success
If you know upfront what your customers wish to achieve with your platform, you will be better able to guide their expectations and success, as well as obtain the renewal decision more easily. Speak candidly with your strategic customers about their reasons for purchasing your products, starting from the sales process on, to get an understanding of their business goals. Then, filter this information to your Customer Success team and have them formulate their success plans and product adoption initiatives around the same goals. By doing so, you will be able to understand what your clients find important, then frame your successes with them around those touchpoints, and secure more renewals.
Traditional and on-premise companies would typically have the Sales team own the renewal process. In order to ensure new sales logos are obtained at a rate that allows your company to meet your shareholder’s goals, it is important to assign the renewal process to the proper role while clearly defining the responsibilities and quantitative goals of both Sales and Customer Success teams. Per TSIA, companies who continuously optimize their renewal process are seeing 13.7% more revenues from installed customer base than those who don’t. Follow the tips in this article to get started on your path to higher revenues and faster growth.
Customer Success Around the Web
- SEG Net Retention Wave– Take a look at this new perspective on the interrelationship between valuation, ARR growth and net retention.
- 5 Interesting Ways Real Companies Use Net Promoter Score Results– See how to take NPS data and use it to fuel and direct your marketing strategies, Customer Success best practices, and even Product development.
- 5 Ways to Improve Your Customer Onboarding– Learn how to set the tone for your customer journey, so your CSMs really get it right.
Fighting Churn is a newsletter of inspiration, ideas and news on customer success, churn, renewal and other stuff and is curated by ChurnZero.