Here’s a scenario that will disturb most of you: You are happily in a long-term committed relationship. Then you meet someone interesting, attractive and with a personality similar to your current partner. You figure your current partner isn’t going anywhere, so you spend lots of time developing a new relationship with this new person. You spend time together, you spend money on gifts and activities, and you find you have common interests. You end up in a relationship with this new person. Are you still assuming your first partner hasn’t gone anywhere? I think we can all agree that’s a pretty bad assumption.
So why do we treat our customers this way?
As I pointed out in Part 1 of this series, we invest far less time and effort (and people and money) in ensuring our customers renew than we do in acquiring them in the first place. But whether your annual subscription is worth $100 or $100,000, the second year is worth just as much as the first (as is the third, fourth, fifth, etc.)
The bonus is that we know our customers already. We know (if we did a good job tracking the initial sales cycle) why they bought from us. We know what value they expected to receive. We know how they did in the on-boarding process. We know why they called in for tech support or service. These are all things we don’t know about new prospects that can help make the renewal cycle so much easier.
My recommendation: Create a sales and marketing process and sales cycle for renewals that matches (with appropriate variation) the acquisition sales cycle.
Once a customer signs up, that is only the very beginning of the relationship. The process should start with translating the value the customer said they expected in the sales cycle into an on-boarding program that will help them achieve that value. The marketing process might include everything from tips-and-tricks newsletters, to periodic offers, to user conferences, to community resources.
But just like your acquisition marketing process, your renewal marketing process needs to capture how much value the customer is actually getting from your product and how they value the on-going relationship. This is precisely analogous to lead scoring in acquisition. The goal is to create a method to evaluate how likely a customer is to renew.
Your renewal sales cycle should start with your best renewal prospects. Unlike your acquisition sales cycle, this will be nearly everyone. This means you have a much fatter pipeline. The good news (for those of you who are now afraid of the staffing requirement) is this sales cycle is much lighter weight. But just like your acquisition sales cycle, you need to define the steps, ensure your customers meet certain criteria to move to the next stage and include opportunities for adding more products or services (upsell).
If you think you already do this quite well with your customer service reps, ask yourself one question: What one person in your company has responsibility for renewal revenue? This person is analogous to the head of sales for acquisition. If you don’t have that person, you don’t have a renewal sales process.
This is no small undertaking, so here is my recommendation to get started: First, create a method for evaluating how likely a customer is to renew (I include some recommendations on how to do this in parts 3 and 4). Then assign a small number (maybe only two or three) sales reps to focus on the subset of customers who are unlikely to renew but you believe are close enough that they can be saved (those very likely to renew probably will anyway; those who really hate you are probably leaving anyway — focus where you can make a difference). Give that team a quota, and let them at it. Then add marketing processes and programs to make sure you don’t lose touch with customers after on-boarding or renewal.
Then measure. The most important measurement is the difference between renewals among the marginal customers before you did this and after. You can even create a control (assign the team only half the marginals, and let the other half use your current process).
I think you and your customers will be much happier, and there won’t be so many clamoring to get out your back door next year.