Renewals & Renewal Rates are at the Core of the SaaS Business Model
Your internal discussion around renewal rates can sound like a political debate. “Renewals are down, but our renewal rates are improving!”
Everyone knows how important renewals are, but many struggle to understand how to measure and use renewal rates organizationally as the true measurement of performance. Why? Because it is tough math for most, and therefore hard to get the right and complete renewal rate information.
Absent SaaS Optics, real renewal rate information can’t simply be pulled from a calculator, nor from anyone but a true spreadsheet guru. And even then, the limitations of spreadsheets don’t really provide the real insight needed, at least not easily.
Sure, you can add up the value of the renewed contracts this month and count the number of renewals. You can even do that with a calculator. But, a deep dive into the information can reveal so much more important information.
For the typical SaaS company, “renewal rates” are the ultimate measure of how well the company is meeting the needs of the marketplace. While the marketing and sales teams contend nothing happens without their great work, in the end SaaS is all about repeat buyers and repeat buyers repeat because they are happy with the solution. In a SaaS business, the marketplace votes you in or out at renewal time.
In the typical SaaS business, a big piece of the total cost of purchasing is shifted to the buyer. Sales resources are typically more limited and less available to the buyer. Group seminars, demos, and try-and-buy are all commonly employed. Since it is a natural tendency to cut costs (and corners), buyers aren’t always validating your solution when they first subscribe. In fact, they may be only validating your marketing or sales prowess. At renewal time is when the real confirmation comes - the confirmation that clearly tells you that your solution is not only buyable, but that is adoptable, usable, and valuable.
The more you know about your renewals and renewal rates, the more you know about the health of your business.
At SaaS Optics, we designed our application to give you maximum insight into your renewals. We start by helping you ensure there is integrity in your contract life cycle information. An expired term or contract that neither renews nor cancels throws of your data. We make it easy to ensure each contract runs through its natural life cycle.
We provide robust and easy-to-use reporting tools to make it easy to generate all renewal rated information, such as actual renewal bookings (summarized contract values) and by any number of cuts - time period, regions, sales team, channel, industry, etc.
Most importantly, we provide not only simple renewal rates, but much more sophisticated Life Cycle Renewal Rate Curves that plot the renewal rates throughout the customer contract life cycle for a like group of contracts. Typically, the like group is a “class of” group, meaning sold in the same time period or in the same relative term. But, that is only one logical cut. The Life Cycle Renewal Rate Curve for a class of can be further broken down by an industry segment, or even by contracts driven out of a specific marketing program.
Through inspection and analysis of this information comes the ability to make quick and informed packaging, pricing, services, training, marketing, sales support, and client support decisions that drive your business forward faster and farther.