Customer Retention Begins Long Before You Try to Renew a Contract
In the recurring revenue economy, customer retention is synonymous with success. 80 percent of customer lifetime value comes through renewals. So, you could say that securing customer renewals is our bread and butter.
While we hope that renewals happen organically as a result of all the great work we do to help our customers be successful, sometimes they need a gentle nudge to get over the finish line. Assuming our customers will renew simply because they seem happy isn’t enough. Even the best Customer Success Managers should follow some basic practices when it comes to the renewal process with the goal of preserving (or even improving) the relationship.
Consider the prerequisites and process required for a successful renewal.
Prerequisites to Renewals
Just as customer retention isn’t a given, renewal time doesn’t just pop up out of nowhere. We know when the contract will renew from the moment we sign the contract, and we should be focused on securing that renewal from day one. In fact, while our customers may not be thinking about their renewals when they sign, we should be.
Long before we ask our customers to renew, we set the stage (and expectation) that renewal is the goal. As part of this stage-setting, there are key events that go into readying customers for renewal.
- Sales: While your customer may be signing a one-year contract (or more), you have no intentions of a short-lived relationship. From the moment your customer signs, you are invested in their retention and loyalty. If the sales cycle has integrity, then your customer embraced the value proposition of your solution, the potential ROI, and agreed upon success metrics. If the contract was signed with confidence and trust, then you are well-positioned for a renewal from the start. In other words, if the solution is a good fit, the likelihood of renewal is high.
- Delivery (kickoff): A great kickoff includes a review and alignment of goals and desired outcomes. It involves further discovery of desired outcomes and expectation setting for the future relationship. The rest of the Customer Success relationship must continue to deliver on the value that’s promised. This is best done in an agile fashion so that customers derive ongoing value throughout adoption.
- Business Reviews and Retrospectives: Intermittent retrospective meetings are important steps to maintain contact and create momentum in advancing value attainment. Business reviews with executives (to assess the value of the relationship) and retrospectives with key users (to constantly reprioritize goals and make adjustments to deliver on those goals) are important in securing a role as a trusted advisor and professional. These meetings go a long way in securing loyalty and increasing customer retention likelihood.
If all of these prerequisites have happened with ease, you are likely in a great place for securing a renewal.
The Renewal Process
The renewal process can be broken down into three main steps: Review/Prepare, Meet to Secure Renewal, and Follow Through.
Reviewing and preparing isn’t as simple as re-reading notes from your last QBR. It should involve a thorough review (especially if you are new to the account) of the History, Performance, Functional Capabilities, and Communications of the account.
- History: Remind yourself who bought what when, when they went live, how long that took, what the customers standards for success were, and what issues any of the users have had over the course of their contract.
- Performance: Know how your product has performed for your customer as well as how they perceive that your product has delivered real value. Usage trends and surveys are key to understanding how your customer regards the performance of their purchase.
- Functional Capabilities: Know if your customers are making full and appropriate use of your solution. Analyze how the product is currently configured and assess whether or not that’s the best configuration for their needs as you know them. Assess how fully they are using integrations, reporting, or new features.
- Communications: Review and seek to fully understand the communications that have taken place over the course of the last year. What was communicated? Who was involved? How were communications resolved? This includes communication with customer success, support, finance, and any other business unit with customer contact. All of these communications affect your customer’s overall experience, and must be understood as part of the renewal process.
2. Meet to Secure the Renewal
The Renewal Meeting is very similar to the QBR but with the key objective of securing your customer’s agreement to renew their contract. To do this, you may need to “go heavy”, which may involve having an executive presence on the call. “Going heavy” requires some detailed planning. Here are a few reminders:
- Begin scheduling efforts 90-120 days in advance of the renewal date, and do so using succinct and positive communications.
- Have an agenda for the meeting that is targeted at securing a commitment to renew. We recommend:
- Make Introductions
- Review of Objectives
- Establish Value Achieved
- Review Future Goals
- Plan for Future Value Attainment
- Agree on Renewal Process and Timeline
3. Follow Through
Regardless of how smoothly the Renewal Meeting went, be diligent in following through. This is both an external process and an internal one. Do what you said you’d do for your customer (i.e. send a summary e-mail and any documentation that requires customer action), and use the context from the Renewal Meeting to assess the ongoing renewal likelihood.
While we hope that most renewals happen organically because our customers are deriving continuous (and improving) value from our solution, we know that Customer Success teams exist because that isn’t always the case. Having a game plan for securing renewals is a key part of doing Customer Success, and the plan should (literally) begin during the sales process.