Having inadequate renewals management processes and systems could lead to lost revenue, customer dissatisfaction, and potentially, customer churn. Finding a systematic way to manage renewals to avoid these pitfalls is key to making your customers happy, and growing revenue for your business.
Your company has worked extremely hard to get the product to where it is today. It’s basically selling itself, adds great value for your customers, and is super sticky, so they’ll want to keep coming back. As new customer sales have grown, you’re running into a speed bump in your process: managing renewals. Many things can go wrong while trying to juggle massive amounts of accounts, inconsistent data, and strict timelines. We’ll explore a few of those pitfalls, and discuss best practices for stopping the bleeding, and shoring up your renewals process which leads to happy customers and growing revenue numbers.
Many things can go wrong while trying to juggle massive amounts of accounts, inconsistent data, and strict timelines.
Renewals Tracking
The first pain point is tracking renewals in general. Which customers are up for renewal and when is their renewal date? How do we organize and triage renewal opportunities?
You’ll likely start out with a handful of contracts, so no worries there. You can track when renewals come up off the top of your head or with a Slack reminder. As sales keep growing, you’ll probably start tracking renewal details in a spreadsheet. Annual deals are standard, but now your sales team is making concessions on 3, 6 and 9 month contracts. This variance in term length adds more complexity, so now you have 2 tabs in your spreadsheet. Also, different customers require different notification periods (e.g. 30, 60 or 90 days before renewal).
For the first time, a few renewals slip because the manual process cannot keep up, or time ran out to issue a quote. You’ve now lost revenue due to missed engagement with a current customer or bookings numbers aren’t reflective of the actual state of the business, and your team needs to make up the lost revenue in the next quarter. Eventually, you go through a big manual project to onboard renewals management into your CRM. Each renewal will have an opportunity, but these opportunities and quotes are manually generated, so there are data consistency issues in that what’s in your system does not agree to what is in the signed renewal contract. The problem continues to compound until you have a huge mess on your hands, and have to spend months unwinding the details.
For the first time, a few renewals slip because the manual process cannot keep up, or time ran out to issue a quote.
Uplift / Easy Revenue
Most customer contracts come with standard renewal language. The contract will automatically renew at the then-current pricing, less discounting offered in the contract. This type of language allows your company to increase pricing at will, potentially with a notification to the customer. However, most customers that are negotiating their contracts with their vendors are going to ask for some sort of price protection.
This Order Form will automatically renew on an annual basis with pricing not greater than 5% above the stated contract price or
This Order Form will automatically renew on an annual basis with pricing not greater than the change in CPI + 1%.
Or something else that is difficult to include in your contracts, so is manually added, and is very difficult to systematically track. You’ll often see entities disregard this clause due to the difficulty in accuracy and tracking, and forego a price increase at renewal. If tracking were simple, this is revenue that you could otherwise get from your customers.
Guaranteed Renewal Pricing
In addition to the auto-renewal / price increase language in negotiated contracts, some customers are asking for completely bespoke pricing guarantees on renewals. You may see a tiered pricing guarantee based on volume or activity, or a flat rate based on the initial contract negotiation.
These, similar to the uplift percentage situation, are generally manually added to contracts, and are extremely time-consuming to track. If a renewals manager failed to review older contracts (another painful and manual process), pricing on the renewal quote sent to the customer will be wrong and the customer will get back asking for a revised quote. This makes some customers so dissatisfied that you’ll have to give another concession somewhere in the renewal contract, or the customer may churn completely.
If a renewals manager failed to review older contracts (another painful and manual process), pricing on the renewal quote sent to the customer will be wrong and the customer will get back asking for a revised quote.
Best Practices for Renewals Management
Given the manual and variable nature of the renewals process, there is one thing that can help tremendously: automation. In order to solve for revenue leakage and dissatisfied customers, automation can help by:
- extracting renewal dates
- notifying when the renewals team should reach out to each customer
- helping renewals managers get notified of upcoming renewals, notice period, contractual uplift availability, and guaranteed pricing
This type of automation will help you:
- Maximize renewals revenue
- Prioritize your renewals by dollar value, renewal date, allowed uplift, etc.
- Never miss a renewal due to built in notifications
- Identify opportunities for an upsell
Automating renewals will keep your revenue consistently growing, and more importantly, keep your customers happy!
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