Today, in the modern business world, the subscription economy has completely flipped how businesses create revenue. Those were the days when businesses could only count on one-time sales. Nowadays, the number one is subscription, especially in the SaaS world, where Annual Recurring Revenue (ARR) becomes the golden calf for investors and entrepreneurs.
The Shift to Subscription Revenue
The subscription model needs a different sales model. Though securing fresh logos is necessary, the big money is on renewals. Investors will pay substantially more multiples for recurring, subscription-based revenue than they will pay for one-time sales. This change forces organizations to adjust their sales and, above all, their positioning strategy.
Most companies have modified their technique of attaining fresh customers, although many still falter at keeping up with the renewal procedure. This oversight is expensive—renewal revenue usually is the largest growth contributor for an overall company once a subscription business is established.
Your Renewals Business is Handled By
In most companies, renewals are part of departments titled “Customer Success” or “Customer Service.” This gap from the primary sales function creates a fundamental challenge: the people accountable for renewals typically lack the sales skills to thrive and hit renewal rates.
A typical task for a customer success representative is that they are handling two main responsibilities:
1. Satisfying the individuals using the service
2. Consistently discovering and shaping what customers mean by value over time
Without special training, these representatives automatically default to the first responsibility—responding to the inquiries and complaints—while neglecting the crucial “selling” part of renewals. This supporting bar is the way to lower retention rates and loss of profit opportunities.
Change Drives Opportunity
The primary sales tenet that 'change is the key to opportunity' holds profoundly true for renewals in the subscription economy. The worlds of your customers change day to day—new decision-makers enter, new regulations come into effect, market strategies are altered, and new competitive threats emerge. These changes also impact how your customers perceive the worth of your service.
A solution that satisfies a customer to perfection at implementation may become less satisfactory as time passes and conditions change. The monthly subscription economy requires continuous monitoring of how customers' "value expectations" change during the duration of the contract.
Renewal Sales Cycle Begins Well in Advance
Maybe the biggest mistake in selling subscriptions is waiting until the contract expiration is near to initiate the renewal talk. This method of play significantly handicaps you with regard to determining the result.
Good smart subscription sellers know that the process of renewal starts almost instantly post-implementation. Customer success representatives will frequently have to chat with the customers about
- - Changes in their business environment
- - Changing definition of what "value" is.
- - Determining who the final approving or denying authority will be
- - Establishing relationships with finance departments, which are very careful about recurring expenses
This proactive approach is only more vital when a price increase is on the table during discussions of renewal.
Don’t Tell Customers Their Value—Ask Them
The critical error many make in filing for renewal conversations is to not explain the value. This method contravenes two fundamental principles of good sales:
1. The customer says more and prefers to believe what he hears from the customer than what a salesman tells him.
2. Customers have a higher regard for what they request than for the things that the seller voluntarily proffers.
Instead of preaching to customers about how wonderful your service has been, effective renewal professionals ask promiscuous questions that encourage customers to describe the value in their own words. This approach bounds triple the buy-in and reduces the resistance within the renewal negotiations.
Different Initial Situations Need Different Strategies
The process of renewal sales is completely different from that of new logo acquisition. Most notable was that the decision-makers for renewal are not the decision-makers for the original purchase. Although customer success teams usually deal per se with data users, these people virtually never enjoy any power above renewal decisions.
Finance departments periodically review any overhead expense during budget opening, which may not correlate with contract expiration dates. This misalignment indicates that consumers must be enabled to concisely explain the worth that your subscription brings in where finance challenges the price—before the renewal date comes.
Training Is Non-Negotiable
For organizations committed to achieving all possible subscription revenue, specialized sales training is required for customer success. The skills needed aren’t a big difference from acquiring new business, but the application and context need training.
Customer success people should be trained in:
- - Finding and list building of renewal decision makers
- -.FloatTensor Regularmente identificar, evolução em prioridades da client.
- - Having questions that enable customers to speak to the value they own.
- - Tweaking renewal talks at the beginning of the contract cycle
- - Handling price rise talks gracefully
The Price Increase Challenge
Closing can sooner rather than later subscription businesses wind up needing to explore putting an upward spin on their prices , and that complicates the renewal a lot more. Price rises normally often bring unpredicted, unintended scrutiny and resistance with the cheapest.
Subscription sellers of significance constantly prepare customers for price breaks long before they can happen by constantly telling and expanding the value tale. They educate customers on the value proposition, not just the initial one but how that value has built up and changed over the course of the subscription period.
The Bottom Line
In a subscription economy, to treat customer success as merely "a high-end version of the complaint counter" is a wrong, costly assumption. The organizations that best understand the sales aspects of renewal and, in consequence, properly train their customer success teams will achieve significantly higher renewal rates and increased successful price raises, leading finally to steady revenue growth.
The strategy for the subscription economy doesn't disagree with the basic principles of sales excellence—it has just changed how and when those principles are applied. Only companies that evolve their strategy to include this new reality will be successful. Those that don’t will suffer from excessive customer turnover and lost revenue opportunities.
