Table of Contents
What is Renewal Management?
Renewal management is the business process dedicated to tracking customer subscriptions and contract renewals. Those in charge of renewal management oversee customer orders, payments, trial periods, discounts, and other related activities.
Although “renewal management” can be applied to any type of business, it is most commonplace in Software-as-a-Service (SaaS) organizations, which make the majority (or all) of their income through subscription fees.
Generally, vendors will send out renewal notifications in advance of the customer’s contract expiration date, allowing them to plan ahead and decide whether or not they want to renew their subscription. They often offer discounts or promotions to entice customers to renew their contracts as soon as possible.
In some cases, a company will send an account manager or a member of its customer success team to initiate a renewal conversation in-person.
- SaaS renewal management
- Subscription renewal management
Why Renewals Are Important
Since long-term customer loyalty is critical for financial health and sustainable business growth, the renewal management process is a vital function for software companies.
Organizations with strong renewal management policies and processes are typically able to retain more of their customers, resulting in higher levels of customer satisfaction and loyalty.
Improved Cash Flow
When businesses track customer renewals, they can better anticipate their future cash flows. This helps them budget for upcoming expenses and plan for expansion or new investments.
Having predictable revenue also shows investors that the business is growing sustainably and can meet its financial obligations more reliably.
Customer Lifetime Value
Customer lifetime value (CLV) is a vital metric for SaaS businesses because it represents the total revenue a customer will bring in over their lifetime.
With successful renewal management, businesses can increase CLV by retaining customers longer and upselling or cross-selling products and services. This increases profitability for the company.
Personalization is the most critical element of the B2B customer experience — McKinsey research shows the vast majority (71%) of B2B buyers expect companies to deliver highly personalized interactions, while around the same proportion (76%) get frustrated when companies miss the mark.
Reaching out to active contracts to start the renewal cycle is one of the best ways to personalize the customer experience for a few reasons:
- It shows existing customers they’re a priority to the vendor.
- The buyer generally receives some sort of offer to entice them to renew.
- The customer has already spent time onboarding the product and is likely familiar with its features, making for a smoother process.
Customer Acquisition Costs
No matter the industry, the average SaaS customer acquisition cost (CAC) is several thousand dollars.
When companies retain their buyers through the customer renewal process, they reduce this cost significantly by opening themselves up to referrals, word-of-mouth marketing, and other cost-effective methods of acquiring new customers.
Renewal Management Challenges Facing Subscription-Based Businesses
The ability to buy online makes it easy for B2B software vendors and their customer accounts to connect, but it also entails new challenges for subscription-based businesses.
Here are some of the key challenges that subscription-based businesses face:
- Flexible billing models. Offering various billing options, such as monthly and annual payments, can help attract a wider customer base. But managing these different billing cycles with varying subscription tiers is complex and requires an efficient billing system to prevent errors.
- Involuntary churn. Involuntary churn occurs when customers unintentionally lose access to a service due to issues like expired credit cards or payment failures. Subscription-based businesses need systems that promptly notify customers of potential payment problems and provide easy solutions to avoid losing them.
- Accommodating users who change subscription plans. Customers may want to upgrade, downgrade, or modify their subscription plans. Businesses need to ensure a smooth transition for these users and adjust billing accordingly, without causing any disruption to the user experience.
- Reaching out for renewals at the right cadence. Finding the right balance in communication with customers about renewals is a crucial part of any renewal strategy. Over-communicating can annoy users, while under-communication may result in missed renewal opportunities or low customer responsiveness.
- Creating a seamless user experience. Customer satisfaction depends on a frictionless renewal process. This involves designing an intuitive user interface, clear pricing and terms, and easy-to-use payment methods.
- Managing promotions and discounts. Managing dynamic discounts on an individual basis is challenging, as businesses must track the eligibility and duration of each while remaining profitable.
Best Practices for Customer-Centric Renewal Management
Develop a Customer-First Approach
Renewing customer accounts always entails a customer-sentric approach. Ideally, businesses should communicate with their subscribers through content and offers tailored to their needs.
Here are a few examples of customer-centric renewal management strategies:
- Setting up an automated reminder system for upcoming renewals
- Discounting and offering other incentives to get customers to renew early
- Sending personalized emails or messages that address the customer by name
- Providing personalized renewal offers tailored to their preferences
- Developing loyalty or rewards programs to reward long-term customers
- Launching an exclusive referral program for your current subscribers
Software vendors can also adopt a subscriber-centric approach throughout the duration of the contract through content marketing, email campaigns, and company-hosted events like webinars and ‘how-to’ sessions.
Clear Communication Milestones
Rather than leave anything up to change, it’s best to set clear communication milestones for each upcoming renewal. Adding this information to the company CRM system, customer portals, and marketing automation software makes it easier to stay on top of renewals.
Onboarding is the perfect time to set expectations and give customers an idea of what their journey with your product or service will look like.
At the same time, it’s important to provide helpful resources such as FAQs, walkthrough videos, and written tutorials to make sure they know how to get the most out of their subscription.
Software vendors with a high degree of product complexity offer their own implementation and system integration services.
6 Months In
At the six-month mark, it’s time to start assessing customer satisfaction and getting feedback from users.
A simple survey is the best way to gather data on how they’re using your product, what their needs are, and how you can improve.
On the other hand, if customers are expressing a low level of satisfaction or if usage has decreased significantly since onboarding, a member of the customer success team can reach out to book a call and discuss potential solutions.
90 Days Before Renewal
90 days before the upcoming renewal, busiensses should already have established a relationship with their subscribers.
This is the ideal time to provide customers with renewal offers, discounts, and promotions.
It’s also important to be transparent about changes in terms and pricing and let customers know how their subscription might look different after the renewal date.
Once there is already an existing customer relationship and the renewal is nearing, businesses should focus on tracking expansion opportunities to increase CLV.
This could involve offering new products or services that may be of interest to customers or upselling existing subscriptions with additional features.
Escalations and dispute management are parts of doing business that nobody wants to deal with, but they are inevitable.
There are several reasons a customer may become frustrated enough to escalate the issue, but the most common is a customer service rep’s lack of knowledge and understanding about the process.
It’s important to provide customers with clear, concise documentation or a customer support portal where they can easily find answers to their questions or be assigned to someone on the service team who can answer questions for them.
Document the Renewal Process
Like any customer communication, the renewal process should be documented and recorded.
Businesses should track the entire process from onboarding to post-renewal as well as document customer feedback, interactions, and any changes made in response to customer feedback.
Keeping all touchpoints as notes in CRM helps organizations make accurate forecasts of future demand and retention, reach out to customers at the right time, and provide more personalized services in the future.
Automating Renewal Management
Contract Management Software
It also makes it easier for companies to track their subscription base, measure the success of renewals, and ensure compliance.
Customer Relationship Management (CRM) Systems
CRM software integrates customer information from multiple sources to provide an up-to-date record of customers and their renewal cycles.
The system can be used to automate emails sent to customers in advance of their renewal dates and alert sales representatives when a customer is about to renew, allowing them to reach out and start the renewal process.
It also provides businesses with a 360-degree view of customers so they can leverage customer data for targeted marketing campaigns and personalize interactions.
Subscription Management Software
Susbcription management tools help businesses track and manage their subscription base, from acquisition to renewal.
They automate the customer onboarding process, manage payment plans, and collect subscription data. They can also be used to set up automatic billing schedules for recurring payments, so customers never miss a payment.
Billing software automates subscription billing, streamlines payment processing, collects payments from customers, and helps businesses manage into-and-outgoing cash flow.
Billing is usually built into subscription management software, but it is also available as a standalone tool.
People Also Ask
What are the stages of contract renewal?
Stages in the contract renewal process are as follows:
Creation: Creating the first draft of a new sales or service contract.
Contract negotiation: Negotiating the terms of the contract to ensure it meets both parties’ needs.
Review/approval: Finalizing and approving the contract.
Execution/signature: Signing the contract to signify agreement between both parties.
Renewal or termination: Going over the terms with the customer and considering renewing or terminating the contract.
Tracking: Monitoring ongoing compliance with the terms of the contract.
What are the goals of a renewal manager?
The primary goals of a renewal manager involve managing and optimizing the renewal process to bolster customer retention and revenue growth, which include critical objectives like customer retention, revenue growth, contract monitoring, performance analysis, enhancing customer engagement, process optimization, encouraging cross-functional data and collaboration, along with efficient sales reporting and forecasting.