Sales White Paper: Maximizing Renewal Revenues

MaximizingRenewalRevenuesWHITE PAPER

Sell Smarter. Manage Better.

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EVOLUTION OF THE RENEWAL SALES MODELIn established technology providers, renewal revenues can account for half of total revenues, and attract a vastly higher profit margin than new business. Despite this glaring fact, many companies do not have a dedicated and strategic approach to managing and growing the recurring revenue number.

The renewal sales model has been an interesting evolution to watch over the last 30-plus years. Initially, when there was just a perpetual license paid up front and annual maintenance, the maintenance bill was mailed out annually and technology vendors just waited for the money to come in. The maintenance sold itself and there was no alternative. Over time, marketplace resistance started to set in and in the early 1990’s customers were questioning the value they received from maintenance. Vendors found themselves periodically contacting customers to find out why the invoice wasn’t paid.

Maximizing Renewal Revenues

INTRODUCTIONThis White Paper is about transforming your Customer Renewal team into a high-performing sales team.

When The TAS Group acquired Infomentis at the end of 2010, it acquired high caliber professionals and methodologies with a 16-year track record of delivering measured uplift in renewal revenues to almost 100 enterprise companies.

This White Paper shares the insights and best practices honed over this period, so that, where appropriate, you can put them into practice in your renewal organization. Of course, much of this will depend on your perspective towards renewals, as well as your business situation, the products and services you sell, the types of renewals you deal with, and how you harness the efforts of people directly or tangentially involved in your renewal process.

We will look at how the renewal sales model has evolved over time, and overview the transformation model underpinning the objective of this White Paper. We will discuss checklists for each of the 4 main parts of the transformation model: coverage, people and skills, sales process, and finally knowledge and sales tools. We will also present our top 5 transformation best practices. We will close by touching on The TAS Group’s Selling the Value of Renewals solution which builds on and automates the renewal best practices in this White Paper through the Dealmaker intelligent software application.

As with any of our White Papers, there will be a big variance in the seniority and experience of the readership. This White Paper aims to provide something for the complete range of requirements, but if you want to dig deeper or move wider, we urge you to get in touch with us individually. You can do this via email to: [email protected].

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your customer could derive value from. Customers might not always be aware of the service features in your offerings. They may also see additional value in a higher level of service depending on where they are in their lifecycle with you. This is done more effectively in sales mode than just from an administrative perspective.

Furthermore, renewals are about uncovering and reinstating lapsed customers. It makes sense to periodically investigate groups of customers for whom maintenance or subscription has lapsed to see if there is a possible way back in. This is a great opportunity to find out why they didn’t renew – much like the more established win/loss analysis you might do for your new business deals, and a sales approach pays dividends again here. You can also employ the bargaining chip of an amnesty for back charges, since most technology companies will apply all back charges for customers who want to re-sign.

A sales approach to renewals is also about identifying and generating opportunities for additional users, product or services. This is not unlike up-selling additional service plans or features, but it requires actual discovery and ability to probe for additional customer needs outside what they are currently licensed to address. As you probe for feedback on the value of the original investment, you get to discover their business needs, how much they’re using of your product or service, and what additional gaps or broken elements of their business model you can help address with additional products and services.

Finally, it may also involve closing the sale of those additional products and services. It’s important to distinguish between groups that have responsibility for selling or positioning, and those that have quotas and are expected to actually close business and may even carry a quota. Sometimes it is a fine line between customer service and inside sales and so you may also be closing this business, or you may have a formal process for handing off the lead in a disciplined fashion to the person that will hopefully close it.

If you are doing the closing, it’s all understanding how your additional products can help with more value. For the customer, the benefit is that they only have to deal with one person. You are improving the trust, the relationship and the continuity of relationship by uncovering needs, elevating them to matters of consequence, attaching solutions, developing benefit statements, and closing the business. This is real selling.

The focus moved to collecting on the invoice, with ‘Customer Service teams’ being set up that were really focused on collection. This became a more strategic approach, making sure that there were no issues with large strategic customers, enabling their maintenance bills to be paid on time. By the early 2000’s, these teams were still reactive for the most part, solving system and billing problems, and paving the way for the maintenance to get paid.

By the mid-2000’s, the license model had started to move towards subscription or software-as-a-service. As long as you continued to subscribe, your software will run. If you ceased to subscribe, you might get a short grace period but in time you wouldn’t be able to access the software, or your data.

Most recently we’ve seen companies that have made the most gains in renewal metrics equip and recognize their renewal sales teams as real sales teams. In fact, we see more and more sales VPs responsible for the overall renewal number.

A December 2011 poll by The TAS Group of 145 companies found that 16% took a collections-focused approach to renewals, 23% had an administratively-focused team in place, whereas 61% had deployed a true inside sales team focused on renewals. We hope this White Paper will provide those with a collections focus some insights to change the way they approach their customers, those with an administrative focus the incentive to take their staff to the next level, and those with an inside sales resource, who know the effort and resources involved, further advice on up-skilling their people to maximize revenues.

RENEWALS ARE A SALES EFFORTRenewals mean real selling. If you’re talking to a customer, then you have to be in sales mode. This starts with the concept of the value of renewal. You need to be able to sell the value of being your customer, even if you’re in a services or support role. Never has this been truer than with existing customers. Your customers bought your solution for specific reasons, to solve specific business problems. They renew for those same reasons – so that your solution can continue to deliver whatever those results are. You need to be able to convey to each customer specifically why they should continue to be your customer.

You also need to be able to uncover and up-sell additional plans or features, exploring what else in your offering set








RENEWAL TRANSFORMATION MODELThere are 4 parts to the Transformation Model:

• Coverage• People and Skills• Sales Process• Knowledge & Tools

CoverageAs a general rule, we recommend having some kind of customer segmentation strategy applied to coverage and the overall renewal process. It’s not how many segments you end up with, but how you segment that’s important. In a December 2011 poll of 165 companies, The TAS Group found that 3% segment by products or services licensed, 26% by renewal size, 15% by renewal size and region, 39% used a mixture of criteria, and 15% did not segment. Companies could also segment by the number of end users, among other criteria. Taking the most popular single strategy of sorting customers by their annual renewal spend, as the graphic suggests, there are different sales and marketing strategies you might want to apply depending on where any particular customer falls in the pyramid.

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Further investigation usually reveals that customers at the top of the pyramid are not only adequately covered, but are at the lowest risk of defecting. Coverage in this case is often provided by one or more field sales people, perhaps working with a renewal or account manager. Customers in the small or inactive segments often don’t require any coverage at all. It’s the customers in the middle of the pyramid that are usually at risk, as they are the ones that you might not have adequate coverage for, and are attractive to your competitors. We recommend you take a look at the customers in the middle of your pyramid and ensure that there is enough coverage there.

Importantly, closer analysis may unveil that buying behaviors and opportunities vary by segment and may therefore require different coverage. For example, depending on your industry, companies might require more or less care or service levels from you depending on where they are in their lifecycle with you, and often depending on how large your footprint is with them.

When there is a choice of service level, most companies will gravitate towards the least expensive service level that they can live with unless there is some driver for more or less services. A larger footprint often requires a higher level of service to keep systems optimized, and customers can either resource this in-house or else pay you. You need a different sense of skills, degree of touch and relationships between your top 5 renewal customers and your smallest renewal customers. You need the right people, talking to the right customers, at the right time, and you should adapt your approach to each segment.

In a subscription model, there is typically one level of support service, but there could perhaps be ancillary services that customers might be interested in. Renewal reps, therefore, could be tasked with identifying additional products for their customers.

Particularly for larger customers, aligning the renewal model with the field sales model often makes the most sense, as sales and renewals can work together to come up with the strategy that will deliver the most value for – and revenue from – customers. Where the teams are separate, you need tight alignment, or it destroys credibility with customers when they hear different stories from different quarters of your company. We encourage you to look at how they communicate with one another, furnish them with exactly the same information to use, and institutionalize a high degree of co-ordination.

Another consideration within coverage models is what skills and competencies are required for each customer segment. Obviously, working with a multi-million dollar customer requires a different skill set than working with a $10,000 customer. With smaller customers, you would typically see less complexity, less time at your disposal to deal with the renewal, and fewer objections as well.

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People and SkillsSo how do you address each segment? Once you figure out how you want to treat your customers, getting the right people with the right skills into the job is next. We encourage you to develop a competency model, recognizing that different skills are required, and assess people against those competencies. Then you can perform a gap analysis and figure out how to fill the gaps to better address each segment.

There are different ways to close the skill gaps based on your company’s policies. You could decide to up-skill the people you have. Another alternative is to hire in the talent from outside. For people who are not suited to the role and the competencies that the segment demands, you may consider moving them to other parts of the business where they can contribute more productively. We have seen field sales people successfully moving into account management and renewal roles, and clearly the success of this will depend on the compensation models.

A good number of our customers also outsource a piece – though not all – of their renewals business to a specialist third party renewal company. Typically the outsourced part will be towards the bottom of the pyramid, the part that received little or no coverage. In this area we can point to one customer improving renewals by 20%, from 60% to 75% renewal rate, by outsourcing the smaller renewals. You need to ask yourself how important it is that you have your own employees interfacing with customers, as opposed to a third party, and as you might imagine, the tendency is to stay closer to those customers towards the top of the pyramid. You need to make sure you align available resources with the right customer segment, and how you prioritize your segments will guide the levels of allocation that each segment receives.

It’s also important to establish an ongoing hiring plan, and a progression plan for how you plan to develop your people over time. This development of your people is not just a case of up-skilling them once and then letting them loose. Transforming your renewals team into a high performance sales team is a process, not an event, and you need to put in place the appropriate framework for regular coaching and regular reinforcement. When you train people, you’re asking them to change their behavior for the foreseeable future, and this won’t happen unless all the conditions for change are in place. (For more information on Sales Change Management, refer to our White Paper with the same name.)

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Sales ProcessCompanies with a well defined – and well followed – sales process, generate more sales. You need to clearly define your renewal sales process, and even within the renewals area you might find there is more than one sales process. For example, you may differentiate an annual renewal from a mid-term invoice-only renewal.

A renewal process is usually different from a new business sales process. A new business sales process has a variable time between first contact and close. A renewal has a fixed closed date and in effect works in reverse, the variable time being when you start to engage with your renewal customer. You need to plan by working backwards, and this can be as far back as 150 or 180 days before the contract renewal date to begin the conversation, set expectations and handle objections, so that they don’t happen a few days before ‘day zero’ and run the risk of derailing the renewal.

Whatever the sales process is, it must support the intricacies of the contract between you and your customer. Despite the written word being enshrined in your contract, customers may still look to reduce users, look for bargaining room, plead poverty, employ fellow-vendor peer pressure, or play procurement hard-ball. Or they may elect to try not to pay or get out of the contract. Some contracts are not auto-renewable, and you have to re-sell the value. Customers will always look to get a better deal, or get more benefit. So while timings vary by customer, and circumstances vary, the need for having your renewal process mapped out does not vary; you must do it.

If your company has a prevailing sales methodology, leverage it for your renewals. Sales process and sales methodology integrated in your CRM system are proven to increase revenues and improve the use and data integrity of your CRM system. For example, you could adapt Target Account Selling® (also known as TAS®) opportunity management methodology to your renewals, thereby connecting the method to the process.

Sales is predominantly about revenues, which means renewal sales is about renewal revenues. Make sure your renewal sales process supports your renewal revenue objectives. Your revenue objectives and compensation plans should be properly defined and dovetail accordingly.

With any sales process, you need to think about measurement, review, adjustment, improvement and so on. You should look at measuring renewal rates (by both customer count and revenue), the time and effort to renew, the length of the renewal sales cycle, how much you are discounting, how often, and so on, by segment. When you measure it, you can manage it, fine-tune it, improve it, and eventually become more proactive about how you approach your renewals. For example, if the renewal cycle metric is getter longer, you can move out the start date from 120 days to 150 days before the contact renewal date.

To read more on the subject of sales process, see the White Paper from The TAS Group called ‘Sales Process Equals Sales Success’.

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Knowledge and Sales ToolsIt goes without saying that you have to arm your reps properly for them to succeed. Your value story is so important. Why should your customers renew? What are the real benefits of being your customer? What makes you different from competitors, including the competitive option to ‘do nothing’?

Many of the companies we have worked with did not have a strong value story for renewals. Companies always have great messaging for selling their products and services in the first place, but when it comes to renewal, the messaging is typically not as good. In this scenario, customers have additional objectives that can’t be handled, the renewal sales cycle elongates, the renewal lapses, and the knock on effects to revenue and cash flow can be significant. You need to do the homework, developing in-depth competitive research and employing good marketing, but understanding your customer and using a specific, resonating value story is key to protecting your current customer base.

Your reps need to have access to all types of information regarding your customers: industry knowledge, specific customer results as available, and their product history with you – what they’ve purchased and dropped, what products and services they are currently using. Good renewal sales people will also listen to earnings calls and strategize with their counterparts in field sales to determine if there are additional opportunities they might listen for or focus on when talking to customers.

It’s important to have a call plan before you make your renewal call to your customer. As well as the basic details of the customer contacts you’re calling, you should prepare the questions you will ask to elicit the information you need, detail out the objections you anticipate for this customer, what expectations you have already set, and what your objectives and desired next steps are for the call itself.

You should equip your renewals teams with a range of sales tools. These might include typical objections, preferred answers, job aids, and generic value stories that can be built

on and made specific to your customer. Especially towards the top of the pyramid, you have to understand the specific value that each customer gets from your products and services. You should point to concrete results, like renewal rates, customer satisfaction scores, and the other metrics where you have collected the actual results to compare with the target results established at the outset of the contract. Companies who have renewal roles focused on the customer, not the selling team, will generally achieve better satisfaction scores.

As we have mentioned before in this White Paper, there has to be an ongoing coaching process. Just like in the sports domain, people need observation and feedback from coaches in order to develop skills. Be proactive about your coaching, based on what you are measuring, so you can adapt the development plans for your people. Finally, there will almost always be things you are doing well within the enterprise. Don’t re-invent the wheel needlessly. Capture the internal best practices you have, bring in the best practices you don’t have, and coach to them both relentlessly.

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TOP 5 TRANSFORMATION BEST PRACTICES1. Start with a Solid Renewal Sales ProcessDocument and ensure that internal systems are in place and everyone is trained accordingly on your renewal sales process. Remember to coordinate activities with the intent of subscription customers renewing before their contract expires, and maintenance customers paying before their contract expires.

2. Avoid Competing Priorities of Renewing and Sales RevenueHere we are talking primarily about compensation plans. If you are compensating renewal sales reps for new sales of product or service, on top of renewals, make sure that that compensation is weighted so that they are not sacrificing a single customer renewal in order to make a sale at another customer. Examine your compensation plans and look for where you might be incenting sub-optimal behavior.

3. Have Realistic Renewal ExpectationsYou might have one overall renewal rate goal you are striving for, but make sure it is realistic within your industry, and recognize that there should probably be different expectations for each customer segment in the pyramid and for each rep. For example, in the Government segment sector, there is generally one set renewal process from which vendors cannot deviate or they will be excluded.

4. Have Lead Management DisciplineIf you do uncover a lead, you need to have the engrained discipline to manage it according to your current lead management process. Either you hand it on according to the process, or you close it yourself.

5. Recognition of the Investment RequiredWhen there’s change involved, there’s investment, and getting the right renewal systems, processes, people and tools in place is no different. Investigate what’s going on in the market, and how you compare. There’s nothing wrong with being more expensive, you have to be able to understand why and explain why you are worth more and defend it.

Furthermore, pricing analysis of renewals rates involving complexities like bundles may lead you to see if there is any elasticity to the pricing that will drive greater acceptance and adoption.

Segmentation is important and does take time. The biggest challenge can often be your systems and extracting the data you need in the form and detail you need it.

In short, developing your systems, processes, people, and tools requires investment. If you make the investment, and execute correctly, the benefits are better coverage, better customer satisfaction, improved revenue, improved renewal rates, and renewals ahead of time, which in turn improves cash-flow.








DEALMAKER SMART RENEWALS MANAGERDealmaker Smart Renewals Manager from The TAS Group helps you maximize renewal rates for subscription or maintenance recurring contracts. The smart renewals sales process and playbook outline the proactive steps to take to anticipate potential cancellation of contracts. Automated deal coaching, applied in context, identifies risks and vulnerabilities in upcoming renewals, and helps you to defend the value of retaining your solution. Call planning techniques help you optimize each sales call, and anticipate and answer objections and tough questions. Dealmaker Smart Renewals Manager helps you standardize your approach and maximize predictable and profitable revenue from subscription or maintenance recurring revenue.

In order to achieve sustained benefits from Dealmaker Smart Renewals Manager, we offer a blended learning approach, including eLearning, instructor-led web sessions and workshops to increase your knowledge and skills.

The proven effectiveness of Smart Renewals Manager is exemplified in our work with Lawson Software (now part of Infor). Lawson set a number of challenges for their initiative:

• Grow the maintenance portfolio of each support or maintenance manager

• Improve on an already excellent renewal rate• Take a more customer-focused approach to selling• Meet their NetPromoter customer satisfaction targets

across the business

• Find a partner with the necessary knowledge and experience of the maintenance business

Smart Renewals Manager presented Lawson with a range of solution components to address their specific business requirements:

• Consultative selling from the buyer’s viewpoint• Completing and using discovery techniques and tools

to expand their footprint in and navigation through their customer organizations

• Handling objections more creatively and successfully• Avoiding competitive traps that delayed the sales

process• Avoiding feature/function discussions which inevitably

led to commodity-based discussions about price, in favor of value-based discussions which commanded a higher price

This approach yielded the following quantified results:• Increased number of customers on the ‘Silver’

maintenance program from 50 to 87 within a year, a 74% increase

• Improved an already excellent renewal rate by 3 percentage points

• Increased up-sell amount by 20%• Exceeded NetPromoter customer satisfaction target

scores in all categories

“We have been able to expand our footprint and navigate our customer organizations and relationships far more successfully. We’ve been able to quantify both the revenue and non-revenue effects of The TAS Group programs, and they really work.”

Jaymie Cater, Global Director, Silver Maintenance and Business Development, Lawson

“The TAS Group brought to bear their experience, depth of knowledge and understanding of our business, against a very aggressive timescale. Our teams are now experts of positioning the value of our services, and understand the dangers of feature/function dialog which inevitably leads to price- or commodity-based discussions.”

Mick Ling, Global Director, Maintenance Business, Lawson








CONCLUSIONThe renewal sales model has evolved over time, to the extent that progressive organizations realize that selling renewals requires genuine selling approaches and skills. Transforming a Customer Renewals team into a high-performing sales team requires attending to renewal customer segmentation and coverage, the people and skills needed to deliver the renewals, sales process and best practices that underpin the company’s renewal function, and finally the right knowledge and sales tools. A number of best practices

maximizes the probability that the transformation of your Customer Renewal teams will be a success. The TAS Group’s Dealmaker Smart Renewals Manger provides an automated and intelligent skills blueprint proven to protect and grow renewal revenues.

For more information on The TAS Group, Dealmaker Smart Renewals Manager, or anything else discussed in this White Paper, please contact us at [email protected].

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ABOUT THE TAS GROUP The TAS Group helps sales professionals sell smarter and manage better. Through a unique combination of deep sales methodologies and intelligent software applications, customers achieve measureable results including increases in win rates, deal sizes and qualified opportunities, as well as decreases in sales cycle length. According to the Aberdeen Group, customers of The TAS Group realize 21 percent greater attainment of sales quotas.

Dealmaker® intelligent software is the engine driving revenue growth and sustained adoption of improved sales practices.

The TAS Group has helped more than 850,000 sales professionals in more than 65 countries, from small private companies to market leaders. For more information visit http://www.thetasgroup.com and read the dealmaker365 blog at http://www.dealmaker365.com.

ABOUT DEALMAKERDealmaker software from The TAS Group delivers real-time opportunity and account management, intelligent deal coaching, accurate sales forecasts, smart playbooks, self-paced learning, and predictive analytics, resulting in measurable sales growth.

Dealmaker can be delivered as a standalone application or can be integrated with Salesforce CRM, Microsoft Dynamics CRM, Oracle CRM On Demand, Oracle’s Siebel CRM and SAP CRM, or with any third party software application through the Dealmaker API. For more information visit http://www.thetasgroup.com.

Copyright © The TAS Group. All rights reserved. This briefing is for customer use only and no usage rights are conveyed. Nothing herein may be reproduced in any form without written permission of The TAS Group.

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Sales White Paper: Maximizing Renewal Revenues

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