SaaS leaders – The key to protecting your hard-won ACV through renewal
I was prompted to share some experience with respect to revenue retention on the back of Ben Sesser’s recent post that references a Pacific Crest study, clearly showing the impact of even small changes in renewal rates. The big question is, “How do we best structure our sales organization and practices in order to ensure renewal?”
I have 3 strongly held beliefs based on my experience with renewing contracts that apply to not only SaaS, but have origins in my early career when I was concerned with renewing field services maintenance contracts – The principals are universal:
1) Always be recording value
No matter what you are delivering to your customer, the initial investment was predicated upon a business case and related ROI. Whomever is responsible for customer success and ultimately renewal, should be checking in to ensure that this ROI expectation is being met and then course correcting along the way. Importantly, mutually recognized successes and ROI impact moments should be documented, ready to be presented to the customer at renewal time. Remember, every year your customer is competing for budget and they need to demonstrate that return on your service beats the investment hurdle.
The key to success here is a business process management system that ensures that an Account Management or Customer Success program doesn’t rely on memory or sticky notes (It can be built into your CRM as a standard set of timed activities).
2) Account/Customer Success Managers (AM/CSM) should be accountable for renewals, but not negotiating the order
This point usually starts a rigorous debate, but my perspective is this: The ultimate measure of success for an AM/CSM is the renewal value. If this were not the case, then we would not invest in the role – Having an ecstatically happy customer that doesn’t renew is no good to anyone (Unless you are early stage and they serve as powerful references).
So, my contention in a nutshell is that the AM/CSM should:
- Use customer sat metrics to guide their interactions and allocation of time
- Be incented (annually) on renewal rates (Not pure satisfaction metrics)*
- Work with a salesperson to ensure that the quarterly reviews are on plan and line up a successful renewal
- Not engage in any commercial discussions with the customer at all because this reduces the trust in the relationship. The act of renewing or expanding the relationship should be done by a salesperson (There is no one-size fits all here – It may be the original salesperson or a renewals focused team, depending on the maturity of your business).
3) Account Managers/Customer Success Managers should be industry or domain experts
Given my assertion that the primary goal for AM/CSM is renewal, their core value to a customer is ensuring that they get the highest ROI from the service/product. Implicit in this is the need for the AM/CSM to have sufficient knowledge of the domain or industry to provide real insight. The common mistake I see here is an Account Manager with a revenue focus being put in charge of an account where they have no real value to contribute to the customer in terms of best practices or industry insights.
*A renewals based incentive will ensure that a CSM/AM appropriately allocates their time across their territory. It means that the time-sink, low value (but often demanding) accounts don’t distract from where the real value is. I have seen pure satisfaction based plans and they simply don’t work from the standpoint of good commercial outcomes.