Insight: SaaS (42) Bridging the Chasm: From Active to Renewal
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We discussed SaaS onboarding in the previous article ‘Insight: SaaS (41) SaaS onboarding hands-on guide’, and now we’ll discuss how CSM encourages clients to renew their subscriptions.
The major premise of the previous essay was that we should keep onboarding customers, first helping them to have an AHA moment, then letting them to become an activation, and eventually enabling them to become an adoption. However, we did not go into detail in the previous article about how to get clients to renew with ease once they reach the Adoption stage. In this article, we’ll start with CSM’s perspective and explain to you what CSM should do to ensure customer renewal during the service process.
Customer retention is based on the idea that our SaaS and services can help clients achieve the results they want. Customers will only renew in the next cycle if they use our items properly. The following should be the link between product usage and contract renewal: Consumers that use SaaS products frequently will likely be renewed, but customers who don’t use SaaS products frequently may be lost.
Customer renewals are heavily influenced by how the product is used. Customers who are only signed up by offering superior skills represent a significant cost for the organization if they are lost in the next cycle. The expense of recruiting new clients is now extremely high. It takes a long time and a lot of resources to acquire a customer. If such CSM teams and SaaS firms are left behind after client activation, they will be disqualified.
CSM must keep track of existing customers’ status and cannot contact them solely when they are due for renewal. You can encounter apathy instead of customer rage. When I used to work in sales, I knew that when a customer was upset, it was usually a sign that there was an opportunity. If you can calm the customer’s rage, your relationship with them will improve, and your chances of closing a sale will increase. If a consumer is uninterested in what you have to say, the chances of closing are slim to none.
As a result, contract renewal is a battleground between CSM and clients. How can we assault blindly without investigating the enemy’s situation during the battle? Only by mastering the typical consumer dynamic can we gain the upper hand in the final battle (when renewing the contract). So, what are the most typical questions customers have when it comes to contract renewal?
1. Do you have an answer to the question I asked before?
2. Why haven’t the bugs I found been fixed yet? When will it be updated?
3. Are the features I want in your update plan?
Question 1 is a follow-up to a previously asked question about ‘debt.’ For the customer, the CSM must review all previous support records, discussions, and email exchanges. Make a list of the issues that customers haven’t indicated as fixed. One by one, go over the debts on the list. Sort things out if a clear solution can be provided. If a problem can be solved in the future but not now, we will advise the client that we can’t fix it right now and will establish a date with the customer to solve it. Then send the product department the development task, which is the most important. In the event that a problem cannot be resolved shortly, inform the consumer and ask for forgiveness.
Question 2 provides a summary of the customer’s discovered bugs. Notify the R&D department right away if it hasn’t been fixed, and revise it as soon as feasible. If the bug has been fixed but no new version (or Hot Module Replacement) has been released, let customers know that it will be fixed in the next version update.
Question 3 is a brand-new request from the customer, which he explains clearly. It’s a great new opportunity if the customer’s needs are within the company’s positioning and product boundaries. If the CSM performs its job of conveying customer feedback, these new needs will undoubtedly enter the development cycle. SaaS function expansion is frequently accompanied by unknown hazards. If the consumer makes the demand, the chances of no one paying the bill are much reduced. CSM must notify consumers about the length of time it would take to handle these new criteria and make them patiently wait. If the customer’s new needs fall beyond the scope of the product, you can tell them that they won’t be getting any related content. Customers can be recommended a third-party SaaS that collaborates with the company to tackle this problem.
These problems are not only resolved before the renewal but they are frequently resolved during times of peace. If CSM fails to complete these necessary tasks before renewing, the first thing to do should be introspection. SaaS firms should be ashamed of themselves for not being able to do even the most basic tasks.
When the customer refuses to consult, CSM should question the customer’s recent circumstances. CSM is not the same as support; it is a job requirement that requires active participation. Support can always passively answer customers’ inquiries, but CSM cannot. It must take the initiative to ask customers questions and actively gather information about how all products are used.
What metrics does CSM keep track of?
1. Duration of use
Depending on how frequently SaaS is utilized, usage time can be tracked on a daily or weekly basis. The total usage time and average usage time can be calculated if there are multiple seats.
The length of time spent using a feature does not always imply that good things will occur; for example, the user may be obsessed with attempting a feature that he isn’t using appropriately. The longer you utilize it under normal conditions, the more your product has proven to be trusted by customers.
2. Seat Utilization Rate
Seat Utilization Rate = Active Seats / Total Number of Seats Purchased
Seat Utilization Rate is a popular analysis measure for SaaS that uses a pay-per-seat pricing model. Many seats are purchased but never utilized when selling a plan to Enterprise that includes a seat floor. For instance, a company’s SaaS Enterprise plan may have at least 50 seats, but only 10 may be used regularly.
If this indicator has remained below 50%, you should be concerned that the customer’s ACV isn’t appropriate for this scale. In the future cycle, it could be degraded or perhaps churned. Increase the Seat Utilization Rate in some way.
3. Product Usage
Product Usage = Number of Features Used / Number of Total Features
Product Usage examines the effect of continuous onboarding. When customers only see a subset of the capability, the value of SaaS is diminished. CSM should encourage clients to try out more services and assist them in locating functions that have not yet been used but are appropriate.
It’s ideal to attain 100% Product Usage, which means customers have used all of the functions at least once during the first half of the cycle. For example, if a client orders a one-year subscription, the CSM should encourage the consumer to try out all of the features within the first six months. Although idealistic, this can be a long-term objective.
4. Feature Used Frequency
Feature Used Frequency = The Feature Used Times / Period
Feature Used Frequency measures how often a feature is used.
First, every function, such as connecting SaaS accounts to other social media accounts, has a natural separation between the high and low frequency at the start of design. This is a low-frequency function that should not be used to count these functions. Several functions are frequently employed at the product’s core. Canva, for example, creates a design draft. The function must then be counted on a regular basis. Furthermore, each SaaS must establish a warning line based on the average level of usage frequency of customers of similar segments in the past. Attention must be made if a Feature Used Frequency falls below the warning line.
Second, each consumer has a preferred function that they employ consistently. The customer is still normal if the frequency of such function’s usage is steady. If there is a significant drop, which is a red flag, your SaaS has likely been replaced.
So how can these metrics be used to help renewal?
1. Actively identify customer problems.
Assume we offer features A and B as a common basic functionality. The majority of clients prefer to utilize A first, then B. And there’s a customer whose Feature A’s Feature Used Frequency is significantly higher than that of Feature B. As a result, we need to figure out what caused this result.
Feature A may be exactly what the consumer need, whereas feature B isn’t. Customers can use other SaaS to do what feature B can do. We need to know what technique the customer utilized to replace Feature B at this time. If something is missing in Feature B, we must address it as soon as possible.
It’s possible that the transition from feature A to feature B isn’t smooth enough. Users are unaware that they should use Feature B at this moment after using Feature A. This necessitates the optimization for the integration between product functions. CSM must also assist consumers in moving from Feature A to Feature B.
Canva, for example, made the download under the Share button when it was designing and downloading. The Download button took me a minute to find. The shift from design to download isn’t smooth. How can downloads be added to the share submenu? It’s two entirely separate things, and I appreciate Canva’s desire, but the design isn’t nice.
The problems of the consumer are disguised in the usage logs. Some of the qualities that CSM requires are data analysis and reasoning. If you can uncover all of your consumers’ hidden issues, I believe you will have no trouble with the retention.
2. Warning of churn crisis.
The best manifestation of all CSM does is lowering churn. Customers must be retained to avoid being lost in the following payment cycle. However, we all know that churn is an unavoidable reality in the SaaS world. Your customers will churn one day, and what CSM does is a delay that day. For many CSM employees, this is a harsh reality, but it is the fact.
Companies, like people, age with time. Each epoch has its own set of businesses. The enterprise’s splendor will be limited to its own age. Several companies have exited the stage, and other companies and brands will always be lurking behind the scenes, waiting for their chance to perform. This is true for both SaaS businesses and their clients. If SaaS wants to show off its best side in this period, it must take every opportunity and save all that is impossible.
The essence of what SaaS firms do is reduce churn. The primary job of SaaS is limited to three things: product development, client acquisition, and churn reduction. It must be a successful SaaS business if these three essential activities are completed properly.
When are SaaS customers most likely to churn?
A week or so after the consumer is activated, it is determined whether or not the customer will be lost. 70% of turnover happens within the first week of a customer’s activation. Although the customer has had their AHA moment and has been activated, the SaaS solution has not yet entered their workflow. The buyer may easily forget about your product at this point. Most Free plan consumers will not use it again after activation, especially for SaaS companies that use Freemium. Customers who have already paid will have a lengthier churn warning period, which might last up to two months. If clients do not utilize SaaS on a regular basis after two months, it is essentially a loss.
Customers must be awakened by SaaS providers. For example, to wake up consumers on the Free plan, it is required to send emails frequently. Although there is no guarantee that everyone will return, having even one consumer return is a wonder. Because the number of consumers on the Free plan is so enormous, and the number of CSM workers is so small, private talks with each customer are difficult.
You must have someone from CSM speak with those paying clients and inquire whether they are having any problems? Encourage clients to use more features based on their needs. CSM needs to communicate with the End User more at this moment. Encourage customers to utilize your SaaS more frequently. It’s best to integrate SaaS into client company operations, offer some suggestions, and encourage customers to use products to address problems. Make SaaS a part of the customer’s job.
Preventing customer churn is basically equal to customer renewal.
So, when does CSM have to notify clients that their contract is up for renewal?
Don’t directly negotiate for renewal with clients without any assistance or communication for a lengthy time. Unqualified SaaS businesses and CSMs are responsible for this. The client will believe you are here to collect money rather than to assist him.
Based on maintaining in touch with clients every month and assisting them, we should notify consumers one month in advance of the agreed-upon renewal time and price. In the event of an emergency, this time is set aside for the SaaS company. If a customer has a challenging problem, for example, they will inform you to fix it when they renew their fee. SaaS companies should set aside some time for themselves.
CSM keeps track of these indications to have a full picture of a customer’s usage status and preferences. To effectively communicate with clients regularly, this information must be correctly utilized. This is the part of the SaaS service that deals with that. Recognizing the customer’s firm, understanding their business model, knowing what roles in the customer organization will use our products, and knowing how these roles use our products are all important aspects of customer success. SaaS CSM can detect problems from the standpoint of customers and enable customers to succeed based on these principles.
Please send me an email (jasperhanlingyi@gmail.com) if you have any questions or suggestions.
The next article ‘Insight: SaaS (43) Some of my unconventional views on Product Marketing’ is published. Simply send me some claps and feedback if you enjoyed my article.
