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SaaS Renewal Time: How to Measure Value You've Delivered

Posted by Darrin Fleming on Jun 14, 2016 9:00:00 AM
Darrin Fleming

saas renewal

Traditional sales techniques have always concentrated on closing the sale. Once the sale was complete, there was no further reason to engage with the customer until you had another product to sell. Until a few years ago, software solutions were sold the same way.

Software as a Service (SaaS) and other emerging subscription services changed everything. Marketing and sales must now adapt to a new landscape. One practice in particular has created new challenges; that of offering services using a building block approach. How does a company successfully renew a customer at a higher price as more modules, storage capacity, and users are added?

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On-Premise vs. Service Based Sales

Traditional on-premise software sales were based on selling software based on features and benefits. You found a prospect’s pain point and matched the features of your software to the pain points of the customer. Typically, the up-front cost was higher but it was justified by the lower, ongoing costs of ownership.

One of the attractions of service-based sales such as SaaS is the low barrier to entry and low cost to implement and use. Therefore, the SaaS renewal sale must be based on the value the solution brought to the customer in the past. Part of learning to measure value requires a look back at how the solution has performed and then comparing it to how well the customer performed those tasks before the solution was available.

Offering Value through Engagement & Measuring Success

If you want customers to renew at a higher price you must show them that you have provided much more value than just the cost savings of using a subscription service. One way to do that is through customer engagement.

Engage with your customers just as much, or more, after they sign up for your service as you did when you were selling to them. In fact, according to the 90/10 Rule: “If a...user doesn’t become loyal within 90 days of being provisioned, then there is only a 10% chance that they ever will.”

With subscription services like SaaS there is plenty of opportunity to deepen your relationships in order to promote loyalty and retention. From the moment your customers sign up, you should be communicating clearly and often about how they can receive more value from your offering. This includes what value they are missing by not leveraging the entire solution, but also how you can support them with:

  • Implementation assistance
  • Training
  • Technical support
  • Automatic updates

Don’t spam your customers, become the helpful presence that makes the service even better. When it comes time to renew, you will have a solid foundation to justify a higher renewal price.

Helping Your Customer Realize the Value of Your Service

Customer retention is about more than the renewal cost, which means you need to help your customer assess and measure value you have brought in terms of additional revenues and cost savings. Bring together everything you have provided the customer during their first term of service, from technical support to automatic upgrades, to help them visualize how much more your service is worth.

Ideally, this assessment is something you have put together before meeting with your customer. You can use baselines from previous customers or a generic baseline, but the closer you can be to the customer’s specific situation, the more convincing your information will be.

Heads-Up

ROI Selling has plans in the works to provide a new value realization tool to let you calculate the value you’ve created in the past. You can get a head start by giving your customers so much value that it will be obvious and a price hike will not be an unpleasant surprise. At the end of the day, value is what drives customer retention. Measuring that value will provide you with a solid tool to reduce churn and cost-effectively run your business.

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Topics: Value Pricing