Renewals Led Growth is the new Product Led Growth
In the world of SaaS, nailing your SaaS growth strategy is a big deal.
Companies today deploy a combination of Product led growth (PLG), Sales led growth (SLG) and Customer led growth (CLG) to grow revenue. All of which have an important role to play and depending on your product complexity and customer profile, you will skew more heavily to one over the other.
Today we’re going to talk about – A new growth strategy that is being successfully adopted by SaaS companies of all sizes. It is agnostic to product type or customer profile and works in harmony with your other growth strategies.
We call it – Renewals Led Growth (RLG).
“Don’t find customers for your products, find products for your customers”Seth Godin
In this blog we will cover:
What is Renewals Led Growth?
Renewals Led Growth, often abbreviated as (RLG) is a SaaS growth strategy that uses the renewal event as an opportunity to sell additional products that are relevant to the customer to drive expansion.
This is done by automating the inclusion of relevant upsell and cross-sell opportunities as part of the renewal quote.
How Does it Work?
Renewals Led Growth is about viewing the lead up to the renewal event as a part of the customer engagement strategy. During our latest research on renewals best practices, we found that sending up to 7 renewal notices yields the highest retention results.
That is seven opportunities to engage with your customers. Treating your renewals in isolation, and not leveraging these engagements means you are wasting this precious opportunity.
Following these processes is the pathway to a more digital aligned organization. According to Gartner, 80% of B2B sales interactions between suppliers and buyers will occur in digital channels, by 2025. That’s not that far from today.
Renewals Led Growth (RLG) puts customers in charge of their expansion needs, eliminating the need for human interaction and the typical 3-5 business day waiting period. Customers can easily decide on additional licenses, service upgrades, premium account transitions on additional products on their own terms.
All of this drives efficiency through streamlining the process of showing upsell and cross options making it easier for the customer to do business with you. It saves your customer success manager and the customers time.
Renewals Led Growth – A Key Driver of NRR
Renewals Led Growth (RLG) is a growth strategy geared toward boosting an essential SaaS metric: Net Revenue Retention (NRR).
NRR is recognized as the SaaS industry’s leading growth metric and most accurate insights into your install base.
Let’s dive into the NRR formula:
NRR = (Starting ARR + Expansion Revenue* – Churned Revenue*) / Starting ARR
In simple terms, NRR calculates recurring revenue by considering expansion revenue (upselling) and subtracting churned revenue (customer losses), all divided by your starting recurring revenue.
NRR provides a valuable measure into your business’s momentum. As a SaaS company, it should be your north star and it should be ideally over 100%. Using RLG can help get you there. Let’s take a look at how Lenovo was able to double its revenue boosting their NRR with RLG using Renewtrak.
Lenovo’s RLG Transformation:
With more than 55 million renewals approaching expiration, Lenovo seized a prime opportunity to engage these customers to provide them with options. With manual methods off the table due to the sheer volume, automation was essential.
- To offer a seamless digital buying experience, catering to evolving customer needs
- Unlock new revenue streams.
By implementing Renewtrak’s Renewal automation platform, Lenovo converted each renewal reminder into an opportunity to present tailored expansion options aligned with their customers’ specific needs.
They were able to achieve the following:
- An impressive 200% year-over-year revenue boost.
- Provided their customers with a seamless, hassle-free digital buying experience
- Boosted conversion rates by 42%.
But how does Renewals Led Growth compare to other SaaS growth strategies and can it compliment either, let’s explore that briefly:
Renewals Led Growth Vs. Sales Led Growth
To explain the difference let’s take a look at the definition of both, product led growth and sales led growth.
What is Product-Led Growth:
So what is Product-Led Growth? In PLG the product is the hero, attracting, retaining, and earning customer loyalty through a fantastic user experience. It has undoubtedly become the winning go to market strategy for a majority of SaaS businesses. It’s highly efficient as it relies on the product for acquisition, conversion and retention
Think of Zoom, Netflix, and Slack as prime examples. They’ve nailed product-led growth, leading to lower acquisition costs and higher retention.
What is Sales-Led Growth?
Sales-led growth is a strategy that uses your sales team to demonstrate value and their processes to drive SaaS growth. In a sales-led company, the sales team is the driving force for acquisition, retention, and even expansion.
Companies like Microsoft and Salesforce have thrived on this strategy. It’s a solid approach for service companies, especially those selling technical products. However, it can get tricky due to the human element in sales.
Renewals Led Growth is Complementary to PLG & SLG
Product led growth is very focused on the product and sales led growth is focused on sales, but in reality – most companies employ a hybrid of the two strategies and many others as they both offer benefits.
Regardless of the strategy, once a lead is converted to a paying customer both strategies result in a renewal.
This is where RLG as a strategy should then be implemented to drive expansion revenue. It is complementary to both acquisition strategies.
At Renewtrak we take it a step further, we built an entire platform around the idea of Renewals Led Growth and utilized AI and automation to take your renewals to the next level.
Get Started with Renewals Led Growth
The truth is, Renewals Led Growth is only as successful as the automation platform used to achieve it. Renewtrak pioneered this concept and we designed our entire platform around it:
- Renewals as Catalysts for Growth – Turn every renewal into a growth opportunity with Renewtrak. Using automated renewal reminders that plant the seed and introduce options for an expansion at renewal
- Shifting from Order Takers to Growth Enablers – Instead of waiting for customers to initiate action, Renewtrak empowers sales and customer success teams to be proactive growth drivers by streamlining the quoting process. This allows companies to proactively engage customers with interactive and shareable quotes.
- Frictionless Customer Engagement Process – Renewtrak empowers customers, decision-makers, and buyers with interactive quotes, reducing quoting friction and frustration. This enhances satisfaction, expedites decision-making, and accelerates On Time Renewal
- Predict Renewal Likelihood Using AI – Our propensity to renew scores empower sales and customer success teams to prioritize their time and increase efficiency. These scores are based on action not emotion unlike customer health scores.