Sales reps are often surprised when a key account that they thought was satisfied does not renew. There may have been an assumption that because the account had not raised any issues, renewal was a certainty. This “no news is good news” mentality is a dangerous assumption, that can be costly to your business. While losing an account to a competitor is costly, it does provide you with a unique opportunity to learn why a client left your business. Through using Renewal Intelligence, you can identify the signals and missed opportunities, that lead to an account leaving.
Renewal Intelligence may sound similar to Win/Loss research, or Voice of Customer programs, while they’re equally valuable, each one answers a different set of questions. Win/Loss seeks to better understand the sales decision process It’s both tactical (i.e. what happened in a particular deal) and strategic (i.e. is the value proposition optimal, is the pricing strategy competitive, etc.). The results of Win/Loss are not just helpful for sales, they can be applied across the entire value chain. While Win/Loss focuses on the sales decision process, Voice of Customer programs (VoC) aim to better understand their customers (or target market). Companies who understand their customers, and their personas, have a better understanding of their overall competitive environment, and can better position themselves in the market.
Often overlooked is the value of Renewal Intelligence. We define Renewal Intelligence as: Understanding the timing and reasons why customers plan on renewing (or not renewing) with their current provider. This type of information is critical to helping you and your staff better meet your client’s needs, as well as identifying any blind spots you were unaware of. Renewal Intelligence and Win/Loss may sound similar in scope, but while Win/Loss focuses on the sales process, Renewal Intelligence centers on the sales process in relationship to an overall experience.
Renewal Intelligence has been part of our business for over 30 years, and during that time we have identified several areas to target: Contract Timing, Changes in Stakeholders, and Budgets. Not all areas will be relevant for every opportunity, but by adopting a framework for understanding your customer’s (or prospect’s) intent to renew, a more effective approach to securing renewals and identifying opportunities can be created.
If the customer is yours already, you know when the contract ends; if the customer is not yours, knowing when the contract ends can be more difficult. However, the value of that knowledge can dictate when and how you approach that prospect.
Contract end dates and decision timelines are not always aligned. Often the decision to renew or not takes place well before the contract end. Understanding the decision timeline and how different types of expenditures (i.e. operational versus capital) are decided can inform when you approach your customer about renewal; understanding this information from your prospects allows you to align your sales efforts as the renewal decision is being reviewed versus after the fact.
Changes in Stakeholders:
One of the most significant signals that can inform renewal intent is changes in people. New leadership often leads to new vendors; leaders often want to bring in firms they have worked with in the past and have relationships with. Understanding this landscape in both your current customers and your prospects is critical.
Changes aren’t limited to senior leadership. Changes in direct contacts/stakeholders have impact as well. Sometimes organizations take the opportunity to conduct basic due diligence on other options when longtime managers (with long-term partners) move out of the organization. Fletcher/CSI (FCSI) has supported clients by tracking the movement of key personnel and identifying signals when there may be opportunity.
Companies have varied approaches to budgeting. While most organizations have a formalized process for budgeting, the timing and length of the process, specifically how budgets are set, the propensity for mid-year changes, and other details are critical to understand. If a company has a reduction in budget, that may represent an opportunity for a new supplier to offer an alternative solution.
How Renewal Intelligence Can Work:
FCSI recently helped a tech company better understand why its renewal rates were so low. Too often the sales team assumed the contract renewal was a virtual guarantee. As the end of the contract neared, the sales rep would contact the customer (many times for the first time in several months) and discuss renewal, only to find that the customer was not renewing but in fact signing with a competitor. We worked with our client to help them better understand the timing of renewal decisions of their customer base, creating a program whereby the renewal process started 6 months prior to contract termination. The sales reps contacted the client 6 months, 5 months, 3 months, and 1 month prior to contract termination. Any issues were able to be worked out, competitor pressures were blunted, and a seamless transition between contracts was made. And as much as anything, customers felt more appreciated.
In another instance, our client, a provider of professional services to hospitals, universities and other large campuses, used renewal intelligence to make their prospecting efforts more effective. We identified that the retirement of the head of operations was a primary driver for these businesses to consider a new solution provider. FCSI was able to contact these organizations and identify any near term expected retirement dates for the operations heads. With this intelligence, FCSI worked with our client to create a sales plan aligned with organizational changes for the prospect.
The renewal decision is not typically made at the end of the contract – it’s made implicitly and sometimes explicitly over the course of the contract. The Renewal Intelligence framework enables companies to recognize early signals that can help blunt competitors and identify opportunities at prospects. Used as part of a holistic process that includes Win/Loss and Voice of Customer research, Renewal Intelligence can provide a comprehensive approach to better understanding your customers and maximizing sales.
Author: Chad Stimson, COO Fletcher/CSI