Tag Archives: recurring revenue

Want Renewals? Step 4 – The Close

Yes! You Need to Close.

You’ve done all you can to provide the best possible customer experience.  You have a terrific customer success team and you regularly communicate with all of your customers to offer help and suggestions – without being too sales or spammy.

Throughout the year, you’ve kept your customer success and your renewal sales team talking and working together so you know who is really using all the features, who might be needing something with a bit more horsepower (or less) and you’ve shared stories with your customers about others  who’ve had success using different features or solving different problems.

At least 120 days out from your annual deadline, your renewal sales team has executed a contact plan that has intelligently added voicemail messages to your email reminders because this is no time to risk emails being ignored. A goodly portion of your renewing customers have let you know that “Yes” they plan to renew.

So don’t screw it all up now by just sending out the bills and crossing your fingers that the money will come rolling in. Some will, but not enough.  This is the time for your sales team to directly engage with your renewing customers and close the deal!  Better yet, wherever there is an opportunity, this is when your sales team truly pays for themselves by up selling and cross selling your renewing customers.

I worked with a company once who made the mistake of backing off the customers as soon as they agreed to renew.  The reps never really closed the sales and even worse, since each sales group handled a distinct product, intra departmental conflicts precluded any attempt to up sell or cross sell and each sales team jealously guarded their client rosters.  If you don’t believe I don’t blame you, because this is crazy talk.  But it’s true never-the-less.

Book appointments. Your customers deserve that much respect for their time from you. Take the opportunity for your sales team to deliberately review their business needs. Look at changes that have happened in the last year. Look at new opportunities on the horizon.  Somewhere along the line, you probably told your clients about how you didn’t just want to take their money, you wanted to be their partners.  Make good on your promise to add some value.

Even the best-managed companies are going to lose some customers every year and the bigger you grow, the harder it is to replace the customers who churn out. So, employ every possible defensive strategy and the rock solid close, the up sell and the cross sell are among the best defenses.  It only takes a small increase to make a big difference.

Yes. If you’re thinking that you can’t possibly do this for business that renews every month, you’re right.  For larger sales or multiuser licenses, think about how often you can sensibly re-engage and create the “new close” opportunity

 

 

Want Renewals? Step 3- The Decision: Ask Early and Often

Is putting added emphasis on pushing customers early and often for a decision to renew is worth the effort? According to a 2011 report from Morgan Stanley, on average, for the technology sector, 30-40% of the revenue and about 50% of the profits are driven by recurring revenue. For those exclusively focused on web-based software or services, the numbers are obviously going to be higher.

There are a few other factors to consider, the specifics of which will vary by industry:

  • Many companies that depend on recurring revenue models do so knowing that it takes roughly the first year of revenue to pay back the acquisition cost. Renewals are the only road they have to profitability.
  • Confirming the renewals is actually a two step sales process; getting the decision and then confirming the close.
  • Over 45% of customers who did not renew their contracts, claim they were not contacted to ask for the renewal*
  • By one month, the renewal rate for contracts that have expired will be about half of what it could have been if followed up earlier.

So, is a concerted effort to get a yes/no renewal decision from your customers worth the effort? Yes. Clearly it is.

Use a multi channel approach to gain the decision. Realistically, almost everyone will use email as their first line of contact. It’s fast, easy, cheap and should do a decent job to gain the easiest decisions. Everyone already knows that much, but that 45% number, who claim they were never contacted flies in the face of emails adequacy as a sole source of contact. It’s much too easy to ignore and this decision is too important to the financial future of the vendor to be ignored.

The second line of contact is to call. This is the quickest, surest way to cut through the clutter of the email environment and guarantee that your customers know you are looking for a renewal decision. Start your calling 120 days ahead of the renewal date.

In the early stages, if you haven’t used the phone already to support your customer service outreach or customer nurturing programs you’ll probably find that the contacts you thought you were communicating with aren’t there anymore. So you’ll need to find the new influencers. You are going to hit voicemail, so plan a series of intelligent and compelling messages and use them along with your continuing emails to get a yes/no decision. If you’ve put a good sales process in place, those specific responses will prep your sales team for their closing calls.

*ServiceSource Recurring Revenue Index by Wavelength Analytics, July 2013

Want Renewals? Step 1- Reach Out from Customer Service

Everybody knows that the squeaky wheel gets the grease, and your customer service or account management staff are brutally well aware of that simple axiom.  They deal with squeaky wheels every day, slathering on the grease until problems are solved, questions are answered, information is provided and clients are purring with satisfaction.

Once the intensity of the on boarding process is a distant memory, its easy to assume that a quiet client is a happy client. Sadly that is not always the case. A quiet client could also be apathetic, profoundly disappointed, lending their ear to your competition or simply taking your service for granted. All of these options are possible. None of them are good.  And every one of them is made worse by your own ignorance of the situation.

Unless you have a lot of account management/customer service talent to spare, it’s not likely that you can guarantee that your quiet clients are hearing from them directly and regularly.  But that’s what you need to do.

One way to solve this problem is to put into a play a quarterly communications outreach on behalf of your customer satisfaction team. What can you accomplish with this program? A couple of things actually and every one of them is important to smooth your upcoming renewal period.

First off, you simply need to stay top of mind, reminding your customers of the benefits they are (or should be) gaining from your service. You can’t have them forgetting about you, and in doing so allowing (where applicable) your adoption and usage levels to drop.  Would you be rushing to renew a service you’re not using?  Not likely.

Secondly, you need to look for problems. Seriously. As much as pushing problems under the rug can make for short-term comfort, unaddressed issues will come back to bite you when it’s time to renew.  Worst of all, it’s almost impossible to project with any accuracy what you’re renewal rate will be unless you know how your company stacks up on the key performance indicators.  Do you know what they are for your service?

Once again it comes down to using communications to measure and manage the metrics that will affect your renewals.  If your silent majority of customers isn’t making it easy for you to keep that communications door open so you can evaluate how your performance stacks up, its in your own best interests to proactively push your foot in the door and open it up.

Do it regularly and do it quarterly.  Less frequent communications will make your efforts entirely too forgettable.  More frequent communications will probably cost too much in time, effort and cash to maintain.

 

 

 

Renewal Revenue Goals Need a Communications Plan

As more companies take advantage of new online business opportunities and models, the importance of a segmented communications program to support contract renewals is more critical than ever.  With some companies, maintenance agreement and support contract renewals are almost treated as an afterthought, but that is changing. There is simply too much money at stake.

What makes a good communications plan even more important is that in the face of increasing competition and a relentless decline in customer loyalty, doing a great job of providing the service for which you were contracted is simply not enough to retain the business.

To make the most of your renewal revenue opportunities, here are four distinct tasks that a good communications plan will address:

  1. Search out hidden problems with the silent majority of customers.
  2. Nurture your current customers like they’re leads for the next sale.
  3. Communicate to promote a decision to renew well ahead of the renewal date.
  4. Create a sales plan that creates appointments to close, cross sell and up sell.

Regardless of whether your contracts renew annually or monthly, proactive communications will pre-empt your competitors, improve your ability to measure your key performance indicators and reduce the number and value of churning customers and contracts.

Renewal Revenue 4 Ways to Fail

According to Morgan Stanley, 30-40% of the revenue and over 50% of technology company profits come from recurring revenue- and that number is even higher for SaaS/XaaS organizations. From 2012-2014 “cloud billing” will grow by about 35%

Given it’s importance, one would expect that companies depending on recurring revenue would have that re-sell process firmly in hand. But if, like this writer, you have recently fielded a call from a supplier’s customer service or even billing department, awkwardly attempting to secure your contract renewal, its pretty obvious that this process is often very poorly managed.

There are so many ways to make a mess of this sales opportunity it was hard to pick my top four, but here they are:

4 Ways to Absolutely Suck at Making More Money on Renewals

1- Leave it in the hands of customer service, accounting or email campaigns.  We want renewal revenue to be as simple as just paying another bill- and so we get lazy. But making the most of your recurring revenue opportunities is a sales job.  Your salse reps know that not getting  a “NO” is not the same as getting to “YES”. You need to close those renewals.  And even more important?  You need to upsell, cross sell and prospect those customers for new opportunities and referrals.

And don’t think that the 27 emails you sent with the billing reminders are doing you all that much good.  Sorry to mention it but most of the emails you send to your customers will go unread. How else can you possibly explain that the number one reason cited by non-renewing customers is that “no one contacted me” which is absolute idiocy.

2- Use the wrong measurements to evaluate your performance.  There are distinct stages in the process that give you recurring revenue and you will never be able to manage or grow this foot-in-the-door income opportunity until you can measure the the performance of your organization and your sales effort against some meaningful benchmarks.  A simple year over year number might be good to look at but it’s doing absolutely nothing diagnostically to help.

You need your decision rate, which will tell you how many and what percentage of your customers acknowledged your efforts to renew their agreement and gave you any answer.  You need to know your churn stats and how your  sales team is performing relative to:

  • actually closing the people who didn’t say “get lost”
  • upselling and cross selling  (what and to which types of product/service)
  • uncovering new opportunities and referrals

And you need to see your overall performance vs YAG

3-Wait too long to get the show on the road

The decision as to whether or not to renew your offering will depend on a lot of things, the most important of which being- “Did the customer perceive that they experienced the benefit they bought you for?”  This is not only affected by the realities of adoption rates and usage, but also by not letting those new benefits and advantages slip out of mind and out of sight.  Ignoring these factors all year long and only establishing contact 60 or even 30 days out from the renewal, perhaps even then with nothing more than an annual bill, will send your revenue performance on a steep, downhill slide.

4- Use your sales team the wrong way.  They’re called your sales team, not your “calling to touch base and made sure you saw our invoice” team.  Nor are they your “calling to make sure you saw our latest webinar about the new release features”  or even your “calling to wish you Happy Birthday” team.  (although these calls are not a bad idea when you decide that you want the relationship to be owned by sales.  They are your SALES team.

Their job is to take the companies who are interested in renewing their agreements with you and close them down.  They are supposed to cross sell associated services or products that are a good fit for their needs.  They are supposed to make this year’s sales bigger and better than last year, which means go for the upsell.

Companies love recurring because its so profitable. Maybe the problem is that it’s a little too profitable because we just aren’t working either hard or smart enough to really take advantage of one of the few growing business opportunities.