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Lax Renewal Processes Result in Billions in Lost Revenue

Lax Renewal Processes The Value of Renewals It’s easy for solution providers to take their eyes off the renewal ball. Recurring Revenue: Six to Seven Times More Profitable, Grows on Average 8% a Year, vs. 6% for New Revenue, Vendors Overestimate Renewal Rates by 10% to 20%, Best Practice Vendors Increase Renewal Rates on Average […]

Written By

Michael Vizard

Sep 5, 2013

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Lax Renewal Processes

The Value of Renewals

It’s easy for solution providers to take their eyes off the renewal ball. Recurring Revenue: Six to Seven Times More Profitable, Grows on Average 8% a Year, vs. 6% for New Revenue, Vendors Overestimate Renewal Rates by 10% to 20%, Best Practice Vendors Increase Renewal Rates on Average by 18%

Renewal Rates by Category

A proactive approach substantially increases revenue. Software Vendors: 26% growth in revenue from renewals, Hardware Vendors: 23% growth in revenue from renewals, SaaS Vendors: 7% growth in revenue from renewals

Bad Data at the Root of the Renewal Problem

The whole renewal process is a lot more labor-intensive than it should be. 40% of initiatives do not achieve objectives due to dirty data. Renewal salespeople spend less than 45% of their time selling.

Renewal Success Goes to the Early Bird

The later the process starts, the less likely the chance of success. Only 16% of companies track decision time, close and conversion rates—which are basic to understanding true renewal rates. Each week closer to renewal reduces the chances of renewal by 2.5%. Once a contract is 30 days expired, the chances of renewal are cut in half. 45% of customers do not renew because they believe they were never contacted.

Dependency on the Channel

Most vendors depend heavily on the channel for renewals. JAPAC and EMEA regions rely on the channel for up to 80% to 90% of their renewals business. North America relies on the channel for up to 68% of renewals.

The Channel Challenge

Vendors tend to favor direct sales for renewals whenever they can. Channel sales teams, on average, are 12 percentage points less effective than direct teams. Most companies provide limited tools to the channel. 45% provide email opportunity lists, 21% provide price lists and quote templates, 20% provide a partner portal with expiration dates and tools

The Science of Renewals

Renewals needs to be a lot more about science than art. Only 21% of companies have a dedicated renewal sales team. Successful renewal sales requires a culture of science and discipline. Role specialization, 100% transparency about targets and performance, Structured territory reviews and stack ranking, Renewals-specific training curriculum—over 100 hours in Year One

The Real Renewal Opportunity

The potential revenue upside to vendors and partners is not insignificant. With proper insight into channel operations, companies in North America and JAPAC/EMEA increased their renewal rates by 20% and 40%, respectively, across all market segments.

Michael Vizard

Michael Vizard is a seasoned IT journalist, with nearly 30 years of experience writing and editing about enterprise IT issues. He is a writer for publications including Programmableweb, IT Business Edge, CIOinsight, Channel Insider and UBM Tech. He formerly was editorial director for Ziff-Davis Enterprise, where he launched the company’s custom content division, and has also served as editor in chief for CRN and InfoWorld. He also has held editorial positions at PC Week, Computerworld and Digital Review.

Lax Renewal Processes Result in Billions in Lost Revenue

Michael Vizard

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