What is Co-Term?
The phrase co-term has two slightly different meanings in this sense.
On the one hand, it refers to configuring the subscription license term of an account – this creates co-termed licenses.
This also means that if an account has multiple subscriptions that were taken out at different times with a supplier, and all of those subscription licenses are due for renewal at different times of the year, they are then bundled together to share the same renewal or co-term renewal date as the original agreement.
This is a technique that is especially common among software companies.
The second meaning of co-term, or co-terming, is where all of the products, solutions, devices, and support services for an account, are bundled together to form a single co-term support contract.
The only difference is whether it’s a subscription license or products and/ or services being combined into a co-termed agreement. Again, this is a popular technique that many software companies utilize.
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How Co-Terming Helps Grow Revenue
There are many benefits associated with leveraging the co-terming method, and perhaps one of the most advantageous is that it greatly supports revenue growth.
For businesses that are selling multiple subscription-based software licenses of services to one account, it can greatly increase cash flow, as all subscription renewals are now synched to the original active license, meaning that there’s more cash flowing through the business before the next renewal.
Advantages of Co-Termed Subscriptions for Buyers
It’s not only sellers that stand to benefit from co-terming subscription licenses, such as by lowering billings – it’s good for buyers, too.
Not only does co-terming make the entire subscription license renewal process much more efficient and simpler to manage, as billing and procurement cycles and budgeting is made easier, but it also prevents licenses from expiring, which can have detrimental effects on a buyer’s day-to-day operations.
Many companies also offer multi-year discounts for their co-term new subscriptions, which can save buyers significant costs.
They can also save resources in terms of administrative time and effort, as there’s only one contract number with one term to keep track of.
How CPQ Software Helps Manage Co-Termed Subscriptions
While not every business will want to offer co-term for their subscription licenses, for various reasons, those that don’t could be missing out significantly.
If a buyer wants to change their subscription plan for a more cost-effective option, add or remove products or services within their plan, and you can’t facilitate this until the next renewal date, this is essentially mismanaging co-term subscriptions and can result in customers churning.
Buyers are not looking for a convoluted billing process for their subscriptions, they will simply find someone else to work with to avoid any further hassle.
Having the ability to configure more than one contract effectively and efficiently, all with the same beginning and end term date, can not only mean the difference between gaining and losing a customer, but also reduce license expirations, and pricing inaccuracies.
Having a CPQ software solution in place can do just that. For example, Dealhub’s CPQ solution will automatically combine all of an account’s billing – whether that’s subscription licenses, products, solutions, or services – into a single co-term invoice, which is stored within your existing CRM system or billing software solution.
In turn, this enables the business to offer greater discounts due to reduced admin costs, which is obviously great for the buyer, but also, the billing and payments processes are made easier on both sides, as there’s only one contract and one renewal date – it’s a win-win.
People Also Ask
What is a co-term quote?
A co-term quote is a quote that configures all expiration of license dates – this can be subscription licenses, or other products, services, and licenses that a business offers – and then breaks the overall annual subscription price down into a daily pricing structure. This means that all subscriptions and services from one supplier are combined into one renewal cycle.
What does it mean to co-term a license?
Co-terming a license means synchronizing the renewal date of all licenses from one supplier or vendor to the original contract license that a buyer took out.
For example, if a buyer takes out a software subscription license, and then opts to add more people to that license, the new license will be added to the initial service and adhere to the same contract documents, and all combined licenses will be on the same renewal cycle.