Sales Tips: Reducing Churn with SaaS Renewals

By John Holland, Chief Content Officer, CustomerCentric Selling®

Customer ChurnFor people selling technology there have been a number of significant changes with buyers over the last 15 years or so. Access to the Internet and social networking has leveled the playing field and buyers are better informed than ever before. 

Buyers doing research consciously avoid talking to sellers they feel may manipulate their requirements.

Another change has been the advent of SaaS-like revenue models. Implementation of new technologies is no longer an IT mountain to climb.

Customer satisfaction is critical because the effort and expense of migrating to a competing technology has never been easier.

Years earlier when a renewal or upgrade were options, incumbent vendors enjoyed many advantages. While competitors could offer lower pricing, the cost of converting was often prohibitive.

Customer RenewalToday when a contract is up for renewal for SaaS-priced offerings, buyers can readily make changes and choose another competitor’s offering. This is a blow to incumbents because margins on renewals are much higher than for net new customers.

I think back to a vendor I did consulting for in the 90’s. They offered tax accounting software to small to mid-size accounting firms. About two weeks after tax season they called clients and asked if they wanted to renew for another year. They were proud to have a 68% renewal rate. I was horrified to realize that they were losing 32% of their clients every year. 

I helped them modify their approach by:

  1. First informing the buyer that in the last year they had prepared X number of tax returns, had the advantage of XXXX man-hours of research on taxes, and had an error rate of Y% below the industry average.
  2. At that point they asked if the buyer would like to renew. They were pleased with a 15% increase that drove them from 68% to 83% of their customers renewing.

For SaaS renewals, vendors may want to consider monitoring activity and results of the previous year before asking for a commitment of another year.

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