If you run a subscription-based software company, you may want a customer-retention program that delivers renewals on time, with a price upsell, and with happy customers. However, landing all three is easier said than done.
I was sharing a meal recently with a customer success executive talking about customer churn and how they are dealing with new types of issues since taking ownership of customer retention. They discussed challenges with customers' understanding of contracts even after having signed a renewal, and how their goal was to protect revenue at all costs. This is the essence of subscription-based customer retention efforts, protecting your revenue and driving recurring subscriptions.
To protect revenue and keep subscriptions for the long haul, I have outlined six pitfalls to avoid when launching a customer retention strategy:
1. Starting too late
A successful retention playbook starts months before the renewal date. At minimum, your internal research phase should begin 180 to 120 days before the renewal date, so you can be ready to communicate with customers about their renewal 120 to 90 days before it. The variability in these timeframes is based on customer profiles and timelines. For example, large enterprise customers may need longer to route contracts internally, so for them start your process earlier rather than later.
2. Being too formal
Renewals are formal agreements and require contracts, as I noted above. But the conversations do not have to be formal. A normal cycle of renewal should feel like an ongoing conversation, especially if delivered by your customer-facing team.
I find the most casual renewal conversations happen with the happiest customers. This includes renewals with a price increase because your customers should understand the rising costs of the platform, interest rates, etc. Of course, there will be exceptions that need a more formal discussion: such as an escalation or a customer churn risk.
3. Not training your team
Assuming your team knows how to negotiate a contract or discuss the logic of a price increase is wrong. Training is essential to any job task or function and is especially important in revenue-generating roles.
In my experience, employees who do not understand the art of negotiation will often give the lowest asking price to or the best terms for the customer and not the company they work for. This comes down to fear of losing the deal, being nervous about confrontation, and other similar reasons. But this can be avoided with training and practice. Some techniques for training on renewals include one-on-one coaching, call shadowing, role-playing, and also employing training tools and courses. There is a solution for every budget.
4. Failing to have contracts for every renewal
Contracts are essential tools for professional and practical assurance of renewal. They allow you to keep your revenue protected for the duration of the agreement. However, legal documentation can be time-consuming. Consider designing a Master Service Agreement, which can have simpler renewal amendments executed at each cycle, while maintaining the broader customer agreement.
There is something to note here--if your customers want to exit mid-contract, you can legally keep them on or work on alternative arrangements, such as an early-out settlement. But do not forget to also document any alternatives with a new amendment.
5. Lacking shared documentation on customer discussions
This sounds simple but is more important than you know. A few of my customer success leadership roles were passed on from my predecessors. However, that did not mean all their information was passed on. On a few occasions, I spoke to customers who had made an arrangement with my predecessor, via email or a phone call, that was not shared broadly.
This lack of information led to a lack of trust and poor communication over the customer's journey with us. People turn over internally and externally, so be sure to document everything so it can be found by future generations. Not only will your internal team benefit from it, but your customers will have past information as well.
6. Not understanding finance and customer debt
I learned so much about customers in default in more recent experiences that I wish I had known in my early days. Having a baseline understanding of revenue, debt, cash, and what happens when customers default is very important--and often overlooked by non-finance teams.
It is not so easy to lean on collections agencies for all customer debt, and legal battles can be expensive, so ensure you are paid up within 90 days or else take alternative action with your customers. It is OK to say to a customer, without a signed renewal contract, "I will have to pause your service." Even a happy customer should understand there is a business to run behind the product they are using.
Avoiding these six pitfalls can ensure you have timely, well-priced renewals and informed, content customers who want to stay with you for the long-haul.
EXPERT OPINION BY PARUL BHANDARI, FOUNDER SOUTH ASIAN SUCCESS, CEO OF CUSTOMERXSUCCESS@PARULLAHOTI
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