Posted By rtweb-admin on Feb 22,2019
When you run a subscription-based Software as a Service (SaaS) or Hardware as a Service (HaaS) business, your long-term revenue growth and success depends on renewals to a significant degree. However, customers do not always stick to one technology vendor—not when they can turn to competitors offering advanced enterprise solutions with better capabilities and features.
Industry analysts expect IT solutions renewals to average just 24.9% for the 2017/2018 period. As such, there’s much more space for revenue growth by getting more customers to renew their software or hardware subscriptions. But, against the backdrop of intense competition, how can you pull it off as a renewals manager of a global or regional technology firm?
You can start with proper renewals management practices! Here are some critical issues to overcome:
1. Not Tracking Usage/Adoption
Many technology providers are struggling with high churn rates because they’re unable to track user adoption. Companies that outsource IT managed services may also find it difficult to have all their employees use their technology and integrate it into their day-to-day workflows. If the customer is not using the premium technology solutions you provide, then they are not extracting the maximum value from it. They might just as well not renew the service!
Visibility into user adoption is necessary for technology providers to improve renewal rates and maximise earnings. So, you need to find a way to track software or hardware usage, but you do not want to wait until the license expiry date to do it.
For instance, consider a company that signs up for your software and subscribes to a 100-user plan. Several months or years down the line, there are only 10, 15, 20, or so active system users. Perhaps, you supplied a fully-integrated business management solution or an ERP, but the customer has not yet adopted some parts of the system, such as inventory management, human resources, or accounting?
The three most likely explanations for the poor tech adoption rate are: the customer prefers to pay for redundant cloud computing resources, they do not know how to leverage the product optimally, or the solution falls short of customer expectations. Whatever the case, you may need to reach out to the subscriber early enough and see if you can help them get the most out of your software.
Can you identify a decline in usage levels, such as, when the customer or their employees are no longer signing into the system as frequently as before? Early inquiry into why a company is increasingly losing interest in your product can also help avert potential churn.
2. Not Proving Value
As a SaaS or HaaS renewals manager, customer success is your problem if not responsibility. But how can subscribers succeed if you’re not helping them drive measurable business value from their investment in your technology? If they fail, they will most probably not renew their subscriptions.
Many times, your software or hardware offerings are not the problem. It could be that the customer has not yet opened their eyes to what’s possible with the continued adoption of your tech solution. You can play a meaningful role in getting them to see and evaluate the advantages that your product brings to the table.
The ability to track customer results is therefore essential to the realisation of higher tech subscription renewals rates, which translate to revenue growth. Vendors can show their customers verifiable statistics and case studies that are relevant to their specific business types and workflows.
For example, a wholesaler whose profitability primarily depends on inventory turnover will more likely renew their ERP software license after statistics show a 30% decline in overstock levels along with a 25% increment in order fulfilment a year after deploying the cloud-based solution. Well before the renewal date, be sure to send your customers several email reminders about the advantages they get from using your system.
3. Lack of Predictive Analytics
The inability to track renewal trends is detrimental to the attainment of high tech customer retention rates. It means that a vendor is unable to predict possible renewals, and they can’t strategise in advance to exploit imminent opportunities and drive revenue through contract extensions.
It gets complicated when a provider is handling hundreds or even thousands of contracts at the same time. In that case, they can deploy advanced statistical algorithms and predictive analytics to provide complete and clear visibility into possible renewal rates, which helps improve revenue capture going forward.
IT managed service providers require quick access to historical renewals data for each customer for campaign management purposes. Automatic notifications for renewal windows or stages help them identify subscribers that need contacting as well as the right time to approach prospective renewals with promotional messages and reminders.
4. Not Addressing Customer Pain Points Before License Expiry
Sometimes, an issue with a product may inform a customer’s decision not to renew. It may be the case if the churn rate is significantly higher or the adoption rate is much lower than a pre-established, acceptable baseline.
Conduct surveys to find out the kind of solution your current tech customers want in the future. They might be open to renewal, but only with some added functionalities, features, or security patches. Reach out to users that fail to extend their subscriptions and find out their reasons. From them, you can extract critical insights to inform future product development, increase customer satisfaction and retention rates, and boost subscriptions revenue.
It also helps to use software analytics to identify and enhance the most popular product features. Typically, these are the functionalities that most of your customers are incorporating into their daily workflows.
In the business world, most technology users want to renew a service contract to continue leveraging tools that are integral to core enterprise processes. Identifying and improving such features provides opportunities for software and hardware vendors to up-sell or cross-sell and make more money.
Customer renewals management is critical to accelerating business growth and driving revenue generation. The process requires planning and concerted efforts on the part of SaaS and HaaS vendors.
At Renewtrak, we have the solution that technology providers require to manage subscriptions cost-effectively while minimising churn rates. Feel free to check out our website and download our white-paper, “The 5 Imperatives for Effective Customer Renewals.”
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