How Effective Is Your Company's Renewal Strategy?
“It’s cheaper to keep an old client than find a new one.”
This old saying may seem threadbare by this point, but it still rings true. Keeping a satisfied client allows you to increase your efficiency and grow your business. It’s cheaper to keep a current relationship in place, than to lose a client and have to secure a new one. One way to do this is through focusing on renewals.
Why Focus on Renewals?
Building strong relationships with existing clients can make your revenue-generating efforts more efficient and can help boost your bottom line. According to research by Bain & Company, a 5% increase in customer retention can lead to a 25% to 95% increase in profits.
That increased margin comes from both the reduced expense of securing a new client, and the higher potential of upselling and enhancing a relationship with an existing client. Selling to a new prospect generally has a success rate between 5% and 20%; the probability increases tremendously when you’re upselling an existing customer (landing in the 60% to 70% success range).
In addition, reducing churn and turnover means you don’t have to work as hard to grow. Consider these numbers: if you want to achieve 10% growth over last year’s numbers, you also have to factor in any churn that occurs during the same time period.
If you have a 20% churn rate, your sales numbers actually have to increase by 30% just to reach that 10% growth mark. If your churn numbers are lower, you can achieve greater success and profitability with the same efforts.
How to Focus on Renewals
If renewals are a key focus of your sales success, then you need to take strategic steps to ensure these retention efforts occur and your customers are kept in the fold. These seven strategies can assist you in building a culture focused on renewing and retaining customers.
#1 - Don’t Take Anything for Granted
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.
This can be a dangerous game of roulette, because customers don’t always complain when they’re dissatisfied. In fact, research from Bain shows that 60% to 80% of customers who would call themselves “satisfied”, choose not to conduct additional business with the company that they’re satisfied with.
Dedicating ongoing resources to customer education and success means that you’re engaging with them throughout their relationship with you, and showing them that you provide ongoing value.
Creating regular touchpoints with customer success teams, generating useful content, and asking customers to help you build solutions that fit their needs are all important ways to highlight the value of your relationship and show them that they’re important to you.
#2 - Assign Responsibility
Determine whether it’s more beneficial to your company to have a second round of sales connections and follow-ups when renewals are upon you, or whether you can add more value by focusing your efforts on customer success.
If you choose the customer success route, teams play a beneficial role in building a long-term relationship. Customers want easy resolution to their questions and concerns, and they want guidance in putting the services they buy to work.
Customer success teams provide these benefits, focusing on thorough onboarding processes, ongoing support, and knowledge enablement. They make it easy for clients to use your products and services. Clients will be ready to renew easily when the time comes because they know exactly how they’re succeeding and can quantify the value they’re gaining from your product.
#3 - Focus on Experience
According to SaaS industry leader Jason Lemkin, experience will win out over any other sales techniques you use, from discounts and incentives to last-minute pushes.
“If SaaS companies are doing what they’re supposed to be doing – building, selling, and servicing a product that customers can’t live without – renewals should take care of themselves,” Lemkin explains. “If customers love your product, they won’t let their contracts expire.”
Creating a positive experience for customers, including reducing their wait times, handling issues with single-touch resolution, and respecting the value of their time, is what keeps them loyal and encourages their renewal. When you make the use of your product frictionless and simple, it makes it less appealing for customers to seek out competitors and more likely they’ll show an interest in upgrading and using additional solutions you can provide.
#4 - Set Renewal Targets Based on Revenue
Part of the reason renewals are so valuable is because they increase the possibility that your existing clients will take on new products from you, thus increasing their long-term value as a customer.
When setting goals for your sales and customer success teams, it’s important to focus on this aspect – growing the business – as part of the renewal process. Getting a client to re-sign should be a base expectation; in the meantime, you should also sell them on the value you’re providing and increase the services they’re using with you.
#5 - Adjust Your Corporate Mindset
Companies that are focused on generating short-term revenue may run their sales teams ragged, urging them to keep the funnel full and to bring in enough new customers to offset churn.
However, more successful companies will focus their efforts on building relationships.
Look at the way your business presents its efforts to your sales, service, and success professionals.
For example, company-first organizations may focus on things like revenue, profit and interactions, driving home those key words and phrases to their teams.
While the same areas of focus are important to customer-centered organizations, they look at it from a different perspective, highlighting value (a mutual benefit) over revenue, and focusing on engagement and connection over interaction. A cultural shift is required, and getting honest feedback from your employees can be a critical part of making this shift occur.
#6 - Create Expectations for Customer Success
If you know upfront what your customers want to achieve with your platform, you’ll be better able to guide their expectations and success.
Speak candidly and frequently with your customers, starting from the sales process on, to get an understanding of their goals. Then, filter this information to your customer success team and have them formulate their efforts around the same goals.
By doing so, you’ll be able to understand what your clients find important, then frame your successes with them around those touchpoints.
Working with an outsourced customer success team to focus these efforts can be beneficial as well; in one case study, a company that worked to create priorities with their outsourced sales team was able to increase their average Net Promoter Score by 0.8 points within 6 months, and to boost annual client retention rates by 20%.
#7 - Keep Metrics Top of Mind
Digging into data related to your clients’ use of your platform can give you some actionable insights to apply to the sales process. For example, one key metric to keep an eye on is how often the client is logging in to your platform or service.
Decreased use may mean they’re feeling unengaged or running into pain points; checking in can give you an opportunity to guide them back to your platform and give them additional value.
In addition, frequent tracking of customer ratings, including Net Promoter Score and CSAT (Customer Satisfaction) can give you touchpoints to start conversations and resolve issues.
It’s important to ask these questions and collect this data because customers won’t always tell you themselves if they’re running into an issue; if you’re not keeping a close eye on the data, you may find yourself surprised when they choose not to renew.
What’s your secret strategy for ensuring customer renewals? We’d love to hear from you; share your feedback in the comments below: