What Many SaaS Companies Get Wrong about Renewals

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“Don’t lose what you already have.”

This is Rule No. 1 for any recurring-revenue business. Retain existing customers or forget about growing.

Renewals are an especially acute priority for software-as-a-service (SaaS) companies, which have become huge players in not only the high-tech industry but in the overall economy. A recent report said the sector now generates $100 billion a year, with an annual growth rate of 30 percent. However, given the unique nature of software, keeping the renewal pipeline flowing is an ever-present challenge for SaaS companies.

Obvious, right? But here’s what many SaaS businesses get wrong: Though most now have “customer success” functions dedicated to delivering value at every step of the customer journey, many still maintain an overly heavy focus on the climactic renewal stage.

A customer-success operation that makes it all about the renewal is inauthentic. That attitude seems more concerned with the business’s success than the customer’s. Genuine customer success means a vendor is doing everything possible to, well, help the customer be successful.

Yet nary a day goes by at any SaaS company without a renewal fire drill – teams scurrying to close a renewal deal or, worse, attempt to save it. (And let’s face it, if you’re in save mode, you’re already in trouble.)

These exercises can sap a disproportionate amount of time and energy from the organization. And they reflect a misguided emphasis on the finish line rather than the entire race.

With a holistic approach that aligns and empathizes with the customer at every step of the journey, from post-sale adoption to onboarding to understanding the value experience from the software, SaaS companies can turn the annual renewal event into practically a fait accompli.

The journey to customer success has three stages. Let’s briefly explore each.

Initial adoption: Great, the sale has been made. Now what? Laying the groundwork for a long-term relationship right at the outset can spell the difference between a one-and-done (cancellation after a year) and a multi-year partnership. And the essential element in that foundation is relationship mapping.

Relationship mapping is an elegantly simple approach that answers the following questions: Whom are we working with? And what do they hope to gain by using our solution?

It’s important to remember that in larger, complex organizations, these may be different groups of people with different motivations. For example, hands-on users of the software may be most interested in how it helps them do their jobs easier. But business unit executives or procurement buyers may have other definitions of success. Thus, a SaaS vendor must get smart about what results will matter to whom and in what specific ways.

Initial adoption is about much more than getting customers to log in. It’s crucial to grasp why they’re using the product and how that value is recognized and shared across the company.

Engagement: Once the relationships are understood, priorities should turn to getting users to their first a-ha moments with the software. And that means executing a top-notch onboarding program.

Great onboarding isn’t about perfunctory how-to sessions. It’s showing customers the results they can expect – a highlight-reel video is an effective way to do that – before diving into how to get started with the tool.

My SaaS company, perhaps counter-intuitively, has discovered that charging a fee for onboarding tends to drive higher attendance and interest. Of course, this also places a greater onus on us to deliver an excellent experience. We believe onboarding should be an ongoing nurturing campaign, with multiple interactions aimed at developing power users. It’s like the difference between a single visit to the gym and a sustained exercise program.

Outcome/derived value: The vendor should proactively determine what results the customer has been getting and how they tie back to the objectives delineated in the beginning. While this third stage is the culmination of the first two, the work should be happening all along, not merely as the renewal decision looms. If everything has been done right by this point, and barring any extraneous factors, the renewal should come easily. No fire drills, discounts to try to keep the business, etc.

By putting these three stages at the forefront of their post-sales strategies, SaaS companies can devote their energy where it belongs: throughout the customer lifecycle, not just when it’s time for the customer to decide whether to re-up. This kind of immersive program can make renewal less a question of “if” and more one of “how can we expand the relationship?”

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