By Chris Bucholtz
We’re increasingly moving toward a subscription economy. Technology’s making it possible, pressures on cash flow within businesses make it critical, and the need to make each customer just a little more profitable make it ever more viable.
But this economy puts a lot of businesses of all sizes into a new business: maintaining renewals. Sure, there’s a lot to be learned about customers by doing this, but it may represent a skill set you don’t have inside your company.
Enter companies like ServiceSource. Just as there were people who became rich selling shovels to the miners during the Gold Rush of the 1850s, ServiceSource is looking to make hay by selling renewal services to companies looking for a pot of gold in the subscription economy.
Drawing from data within CRM and other systems – including ERP – through an application called Renew onDemand, ServiceSource’s internal teams use company information to inform their selling process end-to-end, manage to forecasts, supply accurate quotes, and analyze performance. They use it to discover trends and to fine tune the message they provide when they contact customers, from the content to the timing of that contact. Think of it as value-added outsourcing of your renewal process.
“What we are very good at is closing the data gaps,” said Ashley Stirrup, ServiceSource’s senior vice president of solutions marketing. “Most companies are missing insight from the renewal process that can not only increase renewal rates but reveal upselling opportunities.”
The company consults with its customer companies and comes up with standard methodologies for the renewal process “on a company by company basis,” Stirrup said. Renewals and upsells are then handled by ServiceSource’s team, and the company makes its money by taking a percentage of the renewal fees.
“The reason we can do that and still be seen as a bargain by our customers is that we have the advantage of seeing the renewal process over and over, while businesses doing renewals on their own have just a view of their own activities,” said Stirrup. “We’re able to assemble best practices – not just in general but for vertical markets – that allow us to be much more effective during the renewal process than individual companies can on their own.”
The company examines that data to discover renewal-related trends across industries and geographies, allowing it to customize renewal approaches in a more granular way than companies could do on their own. “For example, software customers in Asia are four times as loyal than customers in the rest of the world,” said Stirrup. “They’re more price sensitive, but they’re also more likely to stay. That helps shape what’s emphasized during the renewal process, and it leads to more upselling opportunities.”
Pulling the data together is itself a major contributor to renewals. “We did a study of customers who did not renew, spanning customers from 50 companies,” said Stirrup. The top two reasons why people didn’t renew were, number 1, we couldn’t get ahold of them – that was 29 percent. Number two was cost – there are always a handful of people who don’t see the benefits vs. the costs and elect not to renew. That’s 18 percent of non-renewing subscribers. But the third reason people don’t renew is that the companies they buy from have bad data about them. That’s 16 percent of customers who fail to renew. If you can get command of the data, that’s a potential increase in renewals of 16 percent – and that’s a huge number.”
Companies like ServiceSource would not exist if not for two things: one, businesses are coming to grips with the reality existing customers represent a vital opportunity for growth, and two, an unrefined approach to renewals results in money being left on the table. This is a side-effect of the emphasis on new customer acquisition, the bright and shiny side of revenue acquisition that can overshadow the less glamorous but potentially more lucrative revenue source that recurring customers represent.(I wrote about that in this CMS Wire article not long ago.)
If you don’t have a solid handle on data management, renewal best practices and how renewing customers behave globally, you might consider calling in a third party to help. If a third party is beyond your budget, or if you want to keep renewals under your own roof, the ServiceSource model suggests several factors in this complex mix that you’ll need to keep in mind if you want to wring the most return from your investments in your customer data management systems.