Improving profits with intelligent contract renewal management
Nick McMenemy, CEO Renewtrak, discusses how diving into your renewals function is key driving customer success
Successful technology companies are examining how they can maximise revenues and profitability throughout their entire business and are working to understand the benefit of focusing on long-term profitability through renewals. Customer success has become crucial to driving the profitability and sustainability of technology companies.
Winning new deals requires a tremendous amount of effort and resources. Marketing and customer success teams have to expend resources and create costly campaigns. Sales teams must commit to calling, emailing and connecting with leads until a deal is closed. Additionally, execution teams must be brought in to customise and implement solutions.
All too often once the deal is won, and their initial client needs are met, these clients are managed into a steady state of profitability decline. Although we are all aware that it is easier and cheaper to sell to existing clients, then it is to acquire new ones!
Contract renewal management software is the key to success in this effort. Intelligent renewal software tools help firms manage and monitor their existing contracts. It helps engagement professionals keep up with current clients and be notified when renewal dates are approaching. Specific factors make focusing on contract renewal for customer success especially important.
1. The Long Tail
While most new sales efforts go towards the 1% of deals worth over $25,000, the vast majority of contracts are under $10,000. The long tail of clients worth over 97% of the total technology market is spending under this threshold with a majority of those under $2,000. These clients are purchasing SaaS solutions, cloud hosting, security, operational tools and much more. However, their contract size is not significant. So it does not make sense to spend thousands of dollars marketing and using sales team resources to capture a single client in this long tail.
Instead, it makes sense to spend less effort on reaching out to a large number of potential clientele. The companies that reach the bottom of the funnel and become full-fledged clients deserve more attention as renewals become a key to profitability.
Sales teams often visualise this dynamic as the Ubiquitous Market Triangle with the high-value clients on top of the pyramid and the low-value ones on the bottom. However, it turns out that the majority of the volume is in the fat, long tail of clients.
2. Divide and Conquer Mentality
Unfortunately, many firms ignore the lessons of the Long Tail. Instead, they have a divide and conquer mentality with existing contracts. In other words, they merely rank their existing contracts by size and put resources in that order.
As previously mentioned, this leaves out the majority of revenue and clients. Focusing on the largest ones may allow for noteworthy sales, but it results in lost revenue, lost opportunity and lower profitability. Instead, firms that use intelligent software to keep in touch with all current clients no matter how small do much better over time. These companies can build up their client base and revenue through the long tail rather than picking off a few individual large contracts with extra effort and resources.
3. Overlooking Rebates
Another common mistake customer success and sales teams make is overlooking rebates for high renewal retention. Vendors often provide a 12% rebate on revenue for renewals of over 90%. Even if the team can maintain a renewal rate of over 70%, they often receive up to a 9% rebate.
Those rebates flow straight to the bottom line or the commission income of the sales team because they do not require any additional cost outlays. Technology Firms interested in profitability and sustainability should be very focused on achieving rebate targets.
4. Features of Renewal Management Software
Technology firms that use renewal management software see many critical benefits. First and foremost, these tools help customer success teams to remember when the renewal date is approaching. As businesses switch to focus on long tail clients, keeping track of all the various renewal dates for contracts becomes increasingly difficult if not impossible. Intelligent software allows for sales or engagement teams to receive pop-ups, messages or emails reminding them to contact clients about an upcoming renewal. They also include the date and size of the renewal contract.
Another critical feature is automated outreach and contract offers to clients. For some essential services like hosting and domain registration, the outreach can merely ask the contact to go to the payment page and enter credit card information at the same price for continued services. Other solutions like security or SEO that are more complex may automatically suggest a phone call with a sales representative to determine the best way to improve or upgrade services at an expanded rate. Either way, these tasks are done automatically without manual input from sales or marketing.
Renewal management tools also help to review and organise existing accounts. Focusing on the long tail still may require segmentation of clients into different buckets. Each bucket may have a different sales strategy or product offering. For example, a company may sell simple anti-virus security online. PCs, Macs and Linux computers would all get different offerings. Additionally, clients that need additional support for cloud services would get a more tailored pitch that also yields more revenue and profit. However, it would also be automated so that the sales and marketing team would not need extra effort before the client responded.
These intelligent software solutions allow teams to assess the risk of failure. Companies that are not using their existing services and have not contacted the vendor for help are at extreme risk of not renewing. On the other hand, clients that use the service on a daily basis and have high interaction with the vendor are almost automatic renewals. Using this analysis, the sales team can determine where their efforts may yield the best returns. High-risk clients require early intervention while low-risk clients may be contacted near the end of their term.
Intelligent contract renewal software should be as easy and accessible to use as possible. That means there will be a native mobile app, web access and constant updating. The solution should be intuitive and easy to customise, and implementation should be a matter of days. These tools are crucial for customer success teams to be able to deliver the growth technology firms must deliver to remain competitive.
For more information on business topics in the United States, please take a look at the latest edition of Business Chief USA.
G7 Summit guide: What it is and what leaders hope to achieve
Unless you’ve had your head buried in the sand, you’ll have seen the term ‘G7’ plastered all over the Internet this week. We’re going to give you the skinny on exactly what the G7 is and what its purpose on this planet is ─ and whether it’s a good or a bad collaboration.
Who are the G7?
The Group of Seven, or ‘G7’, may sound like a collective of pirate lords from a certain Disney smash-hit, but in reality, it’s a group of the world’s seven largest “advanced” economies ─ the powerhouses of the world, if you like.
The merry band comprises:
- The United Kingdom
- The United States
Historically, Russia was a member of the then-called ‘G8’ but found itself excluded after their ever-so-slightly illegal takeover of Crimea back in 2014.
Since 1977, the European Union has also been involved in some capacity with the G7 Summit. The Union is not recognised as an official member, but gradually, as with all Europe-linked affairs, the Union has integrated itself into the conversation and is now included in all political discussions on the annual summit agenda.
When was the ‘G’ formed?
Back in 1975, when the world was reeling from its very first oil shock and the subsequent financial fallout that came with it, the heads of state and government from six of the leading industrial countries had a face-to-face meeting at the Chateau de Rambouillet to discuss the global economy, its trajectory, and what they could do to address the economic turmoil that reared its ugly head throughout the 70s.
Why does the G7 exist?
At this very first summit ─ the ‘G6’ summit ─, the leaders adopted a 15-point communiqué, the Declaration of Rambouillet, and agreed to continuously meet once a year moving forward to address the problems of the day, with a rotating Presidency. One year later, Canada was welcomed into the fold, and the ‘G6’ became seven and has remained so ever since ─ Russia’s inclusion and exclusion not counted.
The group, as previously mentioned, was born in the looming shadow of a financial crisis, but its purpose is more significant than just economics. When leaders from the group meet, they discuss and exchange ideas on a broad range of issues, including injustice around the world, geopolitical matters, security, and sustainability.
It’s worth noting that, while the G7 may be made up of mighty nations, the bloc is an informal one. So, although it is considered an important annual event, declarations made during the summit are not legally binding. That said, they are still very influential and worth taking note of because it indicates the ambitions and outlines the initiatives of these particularly prominent leading nations.
Where is the 2021 G7 summit?
This year, the summit will be held in the United Kingdom deep in the southwest of England, with Prime Minister Boris Johnson hosting his contemporaries in the quaint Cornish resort of Carbis Bay near St Ives in Cornwall.
What will be discussed this year?
After almost two years of remote communication, this will be the first in-person G7 summit since the novel Coronavirus first took hold of the globe, and Britain wants “leaders to seize the opportunity to build back better from coronavirus, uniting to make the future fairer, greener, and more prosperous.”
The three-day summit, running from Friday to Sunday, will see the seven leaders discussing a whole host of shared challenges, ranging from the pandemic and vaccine development and distribution to the ongoing global fight against climate change through the implementation of sustainable norms and values.
According to the UK government, the attendees will also be taking a look at “ensuring that people everywhere can benefit from open trade, technological change, and scientific discovery.”