The contract renewal stage of the customer lifecycle is a critical component of driving retention for SaaS products. Knowing how to use technology to optimize your contract renewal process can increase your retention rates and your revenue.
In this article, we’ll discuss five essential technology tools you can use to automate your contract renewal procedures. First, we’ll review what contract renewal is and what it means to automate the process. Then, we’ll look at the pros and cons of contract renewal automation. Finally, we’ll cover how to use five of the most essential technology tools for effective contract automation.
What Is Contract Renewal?
Contract renewal is the stage in your SaaS customer’s lifecycle where they decide whether or not to extend a subscription that is about to expire. The start of the renewal phase depends on the length of your customer’s contract as well as your policy. For example, if a customer is on an annual cycle, the renewal period might start during the last few months of their contract.
Typically, a business will send one or more renewal reminders and offers to a customer whose subscription is about to expire. For top-tier, or Enterprise, customers this conversation usually begins 6 months prior to the renewal date. For mid-tier or mid-market, customers the process usually begins 3 months in advance. The customer’s decision to renew can be based on several factors. One of the most basic factors that can influence contract renewal is simply whether or not the customer remembers that it’s time to renew. Other factors include the customer’s financial situation, their perception of the value they derive from their subscription, how easy it is for them to renew their subscription and whether they’re considering any competing products.
Companies can increase the likelihood of renewal by taking steps to address these potential barriers. One strategy for increasing your contract renewal rate is effective automation of the renewal process.
What Is the Difference Between Manual Contract Renewal and Automatic Contract Renewal?
A manual contract renewal process relies on either your company or your customer taking the initiative to renew. In the most passive manual renewal scenario, a company takes no proactive steps to encourage renewal, leaving it entirely up to the customer to remember it’s time to renew and take the necessary steps. In a minimally proactive scenario, a company might assign individual account managers to email, text, or call customers at renewal time.
Automatic renewal takes a much more proactive approach to ensuring customer renewal. At a minimum, it allows new customers the option of choosing to have their credit card billed automatically at renewal time. A best practices renewal automation strategy, however, goes well beyond this minimum to ensure renewals.
In a best practices approach, your company systematically maps out the renewal process as part of the customer lifecycle. You identify what needs to happen at each step to provide valuable outcomes that make customers want to renew, and then implement automated procedures to ensure these outcomes. This includes developing standard, repeatable steps for extending automated renewal invitations, such as scheduling a series of email reminders as renewal time approaches.
An automated renewal approach involves taking steps before renewal, such as checking customer satisfaction metrics to identify customers at risk of churn and proactively reaching out to these customers to develop a remediation plan. Automated procedures also may be set up to reach out to customers who fail to renew.
Finally, in a best practices scenario, contract renewal automation utilizes KPIs and analytics to track customer retention rates and review the performance of renewal procedures. This can help companies identify problems with their renewal procedures and make corresponding adjustments and improvements.
Pros and Cons of Contract Renewal Automation
Renewal automation offers advantages for both companies and customers. For customers, not having to manually re-enter credit card data makes renewal easier, simplifying their renewal experience and helping to avoid potential hassles stemming from forgetting to renew.
For companies, making renewal easier for customers increases retention, thereby increasing revenue. Following best practices to automate retention can optimize renewal rates. This makes financial planning more predictable, helping to avoid cash-flow crunches and promoting sustained growth.
The main con of renewal automation is that some customers may not want to renew without being consulted, even if they approved automated billing. Additionally, some customers may want to upgrade rather than simply renew, and this opportunity can be lost if the customer is not engaged during the renewal process. These factors underscore the importance of sending reminders to allow customers to review their renewal options.
Five Tools to Help with Contract Renewal Automation
Contract renewal automation depends on the efficient use of the right technology. Here are five of the most essential technology tools to help you automate your contract renewal procedures.
Making it easy for customers to pay is critical for effective renewal. Payment gateways give your customers online payment options and allow you to connect your website to payment processors and credit card networks. Two leading payment gateways that support multiple credit card networks are PayPal and Stripe.
Electronic Signature Services
For contracts that require executive signatures, an electronic signature service allows your customers to provide signatures from a smartphone, tablet, or other devices. Useful electronic signature services include DocuSign, PandaDoc, and ContractWorks.
Customer Success Management Software
Sending automated notifications is a key component of an effective contract renewal strategy. Totango’s customer success management software platform lets you schedule automated messages to go out when KPIs monitored by your system detect key events in your customer lifecycle, including the approach of renewal deadlines. Totango also lets you detect when customers who are up for renewal are at risk of churn, so you can take proactive steps to restore satisfaction before their contract expires. With Totango’s Multidimensional Health Model you can detect often overlooked user behaviors that pose risks to the renewal process. You can customize your renewal reminders to incorporate upsell and cross-sell promotions with Totango’s Expansion feature.
For some SaaS subscription models, in-app messages are another way to send renewal reminders as well as upsell promotions. Sending messages in-app grabs customers’ attention while they’re engaged with your product, increasing their motivation to respond to renewal reminders. You can use in-app messages to link customers directly to a renewal page through digital adoption platforms such as WalkMe and Whatfix.
Calendar Scheduling Apps
Some contract renewal decisions may require customers to get support and recommendations from your team. You can make it easier for customers to schedule a conversation with a representative by using appointment scheduling software. Leading tools include Calendly and Chili Piper.
Automate Your Contract Renewal to Retain More Customers
Contract renewal is the phase of your customer’s lifecycle when they decide whether or not to continue their subscription to your SaaS product. Automation can increase the likelihood of renewal by using technology to make it easier for customers to extend their contracts. Key tools for automating contract renewals include payment gateways, electronic signature services, customer success management software, in-app promotions, and calendar scheduling apps. These automation tools provide key benefits such as staying ahead of due dates, keeping a pulse on the accounts with upcoming renewals, and streamlining the payment process.
Totango’s customer success management platform provides everything you need to automate the process of reminding customers when it’s time to renew, along with tools to nurture customer satisfaction and lay a foundation for successful renewal. Try it free to see how easy it can be to set up an effective automated renewal process that increases your customer retention and revenue.