Customer retention is the lifeblood of a SaaS company. Where the foundation of SaaS customer retention is renewals. According to a research study, a mere 5% increase in customer retention can lead to a 25% increase in company profits. On average it costs five times more to acquire a new subscriber than the revenue you can expect from a renewal. It makes perfect sense to optimize renewal to cut costs and increase recurring revenue.
What is the Renewal process in customer success?
‘SaaS renewal’ is a term relating to Software-as-a-Service companies that operate with a subscription-based financial model. Basically, a SaaS renewal is when a SaaS customer renews their subscription, either automatically or manually. You may have previously heard the terms ‘subscription renewal,’ ‘SaaS subscription,’ or ‘tech subscription,’ but they all mean the same thing, by and large.
How is the renewal process important in SaaS?
The success of the renewal process is directly reflected in Customer Lifetime Value (CLV), which again influences Customer Acquisition Costs (CAC) realization and budgeting, profits, and long-term growth. As your customers become long-term users, it will give you more opportunities to upsell thereby increasing the LTV(lifetime value). SaaS renewal rate reflects the effectiveness of the customer success team and customer value. It is a mirror of the financial health and growth prospects of the company. Get to know more on calculating the SaaS renewal rate,
Who owns the renewal process?
Whether Customer Success or Sales should own the renewal, expansion, and upsell is a hot-button issue in today’s SaaS sphere.
Creating specialized roles and breaking out the revenue piece is the best way to ensure continued success in adoption, renewals, and expansion. This births three distinct roles:
Customer Success Manager
Customer success managers are focused on long-term goals, specifically driving adoption, delivering value, and ensuring ROI. They are also in charge of setting up interactions like Quarterly Business Reviews (QBRs), customer education, and helping customers implement as many features as possible. Specializing in adoption allows customer success managers to be proactive instead of firefighting.
Retention is the sole goal of renewal managers. They initiate the renewal conversation internally and hold different stakeholders accountable to do their quota towards renewals. On the customer’s end, they ensure that the service agreement is aligned to actual customer needs and identify renewal risks early. Renewal managers should only manage about 60 to 80 accounts and report to the customer success team.
Expansion managers focus on growing customer accounts by finding new opportunities to upsell and cross-sell. They educate customers on new ways they can derive additional value from the solution. Expansion managers report to the sales team.
Taking responsibility for renewals from the sales team and passing it to the Customer Success team is a strategic error that a SaaS company should avoid.
To add up, the Account Executive is responsible for renewals and the success of the Customer Success team is based on user & feature adoption. They will definitely team up throughout the journey; however, items to focus on are clearly demarcated. Account Executives focus on building a strong rapport with all the stakeholders within the client’s organization.
Customer Success Manager’s understanding of the client is combined with the shrewdness of an Account Executives to nail down the best renewal contract and collaborate with Customer Success to ensure the customer is successful.
What are the components of the SaaS renewal process?
The renewal process for customer success is the process of accessing and transacting the known renewal opportunities over a fixed period. The different components of the renewal process are-
Sales, adoption, expansion, and renewal all start with the customer. SaaS customers buy products based on an expectation of value, which demands a shift to an outcome-based selling approach. Delivering promised value to each customer is vital to building long-term relationships with smoother renewals, making it easy to scale the entire process across the board. Hence, businesses need to develop new capabilities to capture, measure, and deliver outcomes proactively.
Once customer outcomes have been captured, you can proceed to design a scalable renewal process with a high chance of forecastable success. We’ll discuss the fundamental strategies and philosophies behind creating a best-in-class renewal motion that delivers a consistent and manageable experience, starting with who should own renewals.
Hiring and compensation
Hiring renewal managers isn’t a typical process since there aren’t many candidates out there with many years of experience. However, personnel with account management, sales, or customer success experience are excellent places to start your search.
Like customer success, renewals need to be driven by technology. The right technology stack helps track renewals, identify renewal risks, harmonize cadences and outreaches across teams, design playbooks, and automate processes. Outreach reminders and templates can always be automated, although the message should be personalized for each client.
How to set up a renewal process?
Creating a SaaS renewal process could be a cumbersome process. We, at CustomerSuccessBox, have created a template that covers the objective to clearly define the step-by-step process for renewals of key accounts.
The key objectives of this template include-
- Account study– Study the account health parameters and identify renewal opportunity
- Action Plan– Create commercial renewal plan post-analysis of account study involving CX Head
- Connect with the right stakeholders– Connect with the decision-makers and share updated commercial plans. You can offer discounts, other modules or upgrades also.
- Decision– Follow up with right stakeholders in case decision is yet not made
- Renewed– Update contract with new commercials if the decision is positive
Check out the template here.
P.S. – The main image has been taken from pexels.com