OMERS Ventures
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OMERS Ventures

Why you need to think about renewals before a customer even signs up.

A conversation with two experts in the space.

Over the past several years, we’ve seen a shift in SaaS benchmarks and metrics that are more focused on retention than on acquiring new customers. Metrics like Net Dollar Retention have become the gold standard versus focusing on funnel or conversion metrics (though also important). Companies are not only looking at the front end of the sale but also the post-sale processes to ensure that their customers continue to stay on board. Gone are the days of hiring up sales teams without knowing the churn or renewal rates of your current customers. And we all know that keeping existing customers is cheaper than acquiring new ones as you don’t have to market to them, pursue those leads, and close the sale. The customer is already on your platform!

While lots has been written about the importance of the customer success function (we’ve written about its future and KPIs), the act of renewing is a process that many just assume ‘happens’. A lot of the focus post “first” sale has been on implementation and/or onboarding. But even this experience is part of the renewal process; in reality, the whole customer journey is part of the renewal process. That’s why customer success is critical because, at renewal decision time, a customer can either 1) churn, 2) renew the existing contract or 3) add additional products or services to a renewal. So how do we build our systems from the outset to encourage customers to get to option number 3? I had the opportunity to explore the importance of renewals and why it’s a critical role within the lifecycle of the customer. This time we invited experts from Miro (Sarah Stern (“Stern”), Head of Customer Revenue Operations) and Hopin (Sarah Wood (“SWood”), Head of Renewals) to share their knowledge on best practices of the renewal function.

Below we talk about 4 key topics regarding renewals:

  1. Who should own renewals and when?
  2. What are the skillsets of a renewals manager that you look for?
  3. When is the right time to hire a renewals manager?
  4. When should I start working on renewals and how do I work with the team to collaborate?
Chatting about renewals is fun :)

Who should own renewals and when?

SWood: It may be counterintuitive to say, but I’m not sure it matters who owns renewals. What does matter is how incentive structures are designed, and the behavior these incentives drive. Incentives need to be aligned to the company goals, but also clearly drive responsibility on the right actions across the different customer-facing roles.

I believe that renewals are fundamentally commercial, but I do think that there are a lot of elements within the function that are consistent with the post-sale customer experience and that element of the relationship.

Stern: Customer success is a relatively new and evolving space versus a more established sales function. And in the same way people are trying to figure out who owns customer ‘onboarding,’ we are all trying to figure out where renewals ownership should sit. Because customer success is such a new function, people tend to think they are responsible for everything from adoption, making sure customers continue to value the product, all the way through to renewals. I think there is this natural inclination to say, “these CS people are focused on making customers happy, so it makes sense that they should also be the ones to renew them.”

That empathy with the customer is not always the same skill set it takes to renew. Signing a customer up for a renewal takes a commercial skillset, and the empathy built by the customer success teams can potentially come into conflict with the commercial drive. I have a slight bias to thinking that renewals as a specialty makes sense, but it really depends on your organization and how you’re structuring your go-to-market teams to figure out what makes the most sense in your own business.

SWood, based on what you said, what are the skillsets of a renewals manager that you look for?

SWood: I’m looking for people with very strong commercial negotiation chops. But I also want someone who is passionate about building a relationship with the customer and understands their role within the entire lifecycle.

So then, when is the right time to hire a renewals manager?

SWood: If a customer success manager is spending 40–70% of their time on renewals, that means everything else that was on their plate (and is critical to customer success!) is being left by the wayside. It’s natural — because in a scaling business, dollars and contract dates are going to be king, but then who’s thinking about onboarding, adoption, and activation?

It stands to reason that if a true customer success focus is being neglected in favor of renewals, it will affect your bottom line and churn negatively over the longer term. Ultimately it will affect your gross dollar retention. So that’s the trigger to think about when adding a dedicated renewals manager. Across multiple companies, I’m seeing more and more teams separate renewals from the customer success function — a comparable evolution to some team’s decision to specialize in onboarding/implementation rather than group it in with other CSM responsibilities. I’m seeing teams separate these responsibilities out of necessity to create a better customer experience. Renewals and the CSM are going through a similar transition.

If those patterns are true, then it indicates to me that if renewals are time-consuming, then it does require a person to own it, to project manage it. Because if renewals don’t happen on time there are so many implications — from finance to revenue recognition… all the important things people don’t think about until you’re really in the weeds.

Stern: The responsibility for gross retention and being on time are critical, and need someone who is ultimately accountable. If you have a situation where there’s a lack of clarity or confusion over ownership that’s where things can cause problems.

When should I start working on renewals and how do I work with the team to collaborate?

Stern: You need to work backward from the ultimate deadline when you need to get a signature on a piece of paper. Look at the complete buying process and start having early communication among the team so we know when different team members need to come in, in order to support not only a renewal, but ultimately that third category where they renew for more than they originally bought.

One of the first things I did when I came to Miro was to implement clear rules of engagement across the different teams. Operationally we have clear processes and expectations. We have account managers or renewal coordinators and they all have a role to play in the process and know what that role is. We know when we need to get health scores filled out, when to assign someone to the renewal, and know who’s responsible for kicking off the process, and following it through. We need to make sure we have the right fields in Salesforce. On and on. It’s important to have the structure in place so that you’re starting these conversations with customers at the right time, and that the team is aware of some of the potential roadblocks down the road.

SWood: Apart from the rules of engagement, what I really like is an account team-based model or pods. Whether team members are assigned based on region or level of touch to the customer, pods should include your company’s designated customer contacts (which varies depending on your organization). More importantly, these teams need to have a CS ops person or at the very least someone who wakes up every day and thinks about making sure the renewal process doesn’t fall apart. This person needs to be accountable to retention and managing the deal to close on time. In my experience, the POD model creates a sense of accountability because the team builds relationships with one another. As they get to know each other, the steps and processes focused on successful renewals become more intuitive (and as a result, efficient).

The best part is that as a company, you appear as a unified front to the customer. So if you think about my 3 pillars for a renewals team to work, it’s incentive structure, as I mentioned earlier, rules of engagement and accountability.

Any parting words?

SWood: Just remember that the renewal is a reflection of what happened over the last 12 months. It is the moment of reckoning. It’s when all the things that got brushed under the rug for the last 12 months suddenly reveal themselves. But renewals is a team sport and it all starts with how you set things up to make the renewal team successful from the outset. And really you can never start a renewal too early.

Stern: Renewals by definition is tech debt, because at any point in time, whoever is responsible for that renewal is essentially taking responsibility for everything that customer has experienced in their interaction with the company — good, bad, or average. And at that point, it’s often too late to turn any negative experiences around. So start early and always have your eye on that renewal from the perspective of the customer. whether you’re on a one-year, two-year, three-year contract, you are dealing with the mess someone created one or two years ago, and you need to get ahead of the situation.

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