TSIA believes customer success is a service capability with a sales result. We’ve already talked a lot about streamlining the adoption-focused capabilities of Customer Success, ensuring that you as a technology or equipment provider are engaging with your customers with prescriptive time, event, and value-based interactions along the journey. But now, I’d like to discuss the processes directly associated with sales results, specifically, the role that Customer Success can play with renewing subscription revenues.
Identify Your Charter of Customer Success
What is your primary charter, or definition, of customer success? Most CS organizations that TSIA has surveyed self-identify as having 1 of 3 charters: adoption (45%), renewal (45%), and expansion (10%). Though we’ve gone into detail about these charters in other posts, here’s a brief explanation of each.
Adoption: You have the responsibility to deliver against the promise of your technology and ensure your customers are extracting value from their purchase.
Renewal: Your customer success organization owns the responsibility of renewing the recurring revenue agreements, which are typically associated with subscription agreements.
Expansion: You grow revenue with existing customers through upselling or cross-selling.
Industry Trends on Renewal Coverage Models
As we look at the customer segmentation pyramid, we find that the largest subscription renewals are well-covered by account executives, renewal specialists, and CSMs.
However, as we move down this pyramid, we’ve found that most companies begin to run out of resources. For medium-sized customers, it’s typically the renewal specialists that are in charge of renewals, with little to no Customer Success coverage. The renewal specialist is essentially wearing both hats of “renewal” and “adoption.” However, renewal specialists would be among the first to tell you that they aren’t doing enough with driving adoption. We either need to reduce the number of customers they are responsible for, or utilize at-risk customer analytics to implement trigger-based outreach.
We see the least amount of coverage for smaller subscriptions. This is a prime set of customers where trigger-based outreach can provide a cost-effective option to drive up adoption, and ultimately secure the renewal.
Who Owns the Commercial Relationship for Smaller Subscription Renewals?
The fact of the matter is, anyone can be an influencer with the renewal of a subscription, but the person who is responsible for securing payment for the renewal is the one who owns the commercial relationship.
Through numerous conversations with our members, I’ve observed that it’s often unclear who the commercial owner is for the renewal of smaller contracts. Although they tend to have less coverage, in the aggregate, these smaller contracts can add up to a significant amount of meaningful revenue. Knowing that, we need to cultivate these customers and grow them into larger subscriptions.
During a recent renewal workshop I conducted with one of our member companies, when talking about who the commercial owner is for these smaller contracts, they replied, “We assign the contracts to someone who cares about the dollar amount, because all of these customers are important.”
Enter Customer Success Managers
Let’s talk about a best-case renewal scenario where we think customer success managers can make important contributions to revenue retention:
- The customer has a good health score
- They’ve adopted the platform and are receiving value
- They may have had helpful interactions with your Support or Customer Success teams
- They’re sending positive signals about continuing their relationship with your company
These customers are great candidates for the customer success manager to own the commercial relationship. And, if you couple this responsibility with frictionless renewal capabilities, that’s even better.
Frictionless Renewal for Smaller Subscriptions
With medium to large subscriptions, it makes sense to use a high-touch renewal process, but with smaller subscriptions we need to have an efficient renewal process that uses automation whenever we can.
3 Core Capabilities of Frictionless Renewals
Based on TSIA research, we’ve found there are 3 core capabilities you must build in order to remove friction from your renewal process:
- Implement standardized, perpetual terms, often referred to as auto-renew terms
- Offer procurement cards/EFTs (electronic fund transfers) as real-time customer payment options
- Deploy an online order or ecommerce engine to provide customers with a self-service payment option for their transaction
The good news is you don’t have to have all three of these capabilities in place in order to start reducing friction in your renewal process. Start by building the capabilities that are within your reach, and then gradually work with your company to build up the rest of the capabilities.
Taking a Lesson About Auto-Renewals from B2C Companies
There’s a lot that can be learned from B2C companies that call on consumers. Because they live in a high-volume world, there are several tactics we can learn and apply to our smaller contracts, allowing us to revisit the renewal process for smaller subscriptions.
In a typical B2B renewal, there can be a lot of thrash around quoting time, and price and term negotiations can result in multiple renewal quotes being generated. Some companies even have a process where they must ask the customer if they can invoice them before they actually invoice them, which isn’t efficient.
By applying auto-renew terms, we can limit the amount of price and term negotiations so that these transactions are true renewals, rather than the resale of a subscription. Also, by offering more efficient customer payment options like purchasing cards (credit card) or EFTs (electronic fund transfers), you can eliminate the need for a purchase order. Purchasing cards are used by businesses as a way to decentralize the buying process and eliminate the need to go through procurement to issue a purchase order.
Whenever a purchase order is issued by a customer, the customer would typically have to engage their back-office team and accounts payable function, and you in turn would have to engage your back-office and collections teams. So, using a purchasing card or EFT saves both you and your customers time and back-office costs. Subsequently, you can build a business case to reinvest the back office cost savings into growing resources in your customer-facing teams, such as your Customer Success function. Sounds like a win-win to me!
Learn Even More About Contract Renewal Best Practices
If you’re a TSIA Service Revenue Generation member, we have a TSIA Outcome Chain that can help you remove friction from your renewal process and answers questions like, “How do I implement auto-renewal terms with my customers?” and, “How often do customers use procurement cards?” If you have questions as a member or are interested in joining our community to gain access to these resources, reach out to us today.
You can also learn more about the concepts presented in this blog post and more by listening to my On-Demand webinar that I co-hosted with other TSIA researchers, Phil Nanus and Steve Frost, called “What Every Customer Success Team Needs to Know About Renewal and Expansion.” Be sure to give it a listen!
About the Author
Julia Stegman is the vice president of service revenue generation research for TSIA. She has over 25 years of experience in the high-technology industry, and is responsible for helping TSIA members uncover new opportunities to grow their recurring revenue and gain clear line of sight into what is contributing to growth or erosion in their current renewal model.