Sales White Paper: Maximizing Renewal Revenues

Maximizing
Renewal
Revenues
WHITE PAPER

Sell Smarter. Manage Better.

Maximizing Renewal Revenues
INTRODUCTION
This White Paper is about transforming your Customer We will look at how the renewal sales model has evolved
Renewal team into a high-performing sales team. over time, and overview the transformation model
underpinning the objective of this White Paper. We will
When The TAS Group acquired Infomentis at the end discuss checklists for each of the 4 main parts of the
of 2010, it acquired high caliber professionals and transformation model: coverage, people and skills, sales
methodologies with a 16-year track record of delivering process, and finally knowledge and sales tools. We will
measured uplift in renewal revenues to almost 100 also present our top 5 transformation best practices. We
enterprise companies. will close by touching on The TAS Group’s Selling the Value
of Renewals solution which builds on and automates the
This White Paper shares the insights and best practices renewal best practices in this White Paper through the
honed over this period, so that, where appropriate, you Dealmaker intelligent software application.
can put them into practice in your renewal organization.
Of course, much of this will depend on your perspective As with any of our White Papers, there will be a big
towards renewals, as well as your business situation, the variance in the seniority and experience of the readership.
products and services you sell, the types of renewals you This White Paper aims to provide something for the
deal with, and how you harness the efforts of people complete range of requirements, but if you want to dig
directly or tangentially involved in your renewal process. deeper or move wider, we urge you to get in touch with
us individually. You can do this via email to:
info@thetasgroup.com.

EVOLUTION OF THE RENEWAL
SALES MODEL
In established technology providers, renewal revenues can
Evolution of
account for half of total revenues, and attract a vastly higher
profit margin than new business. Despite this glaring fact,
Renewal Sales
Sales

many companies do not have a dedicated and strategic Inside Sales
approach to managing and growing the recurring revenue Team
number.

The renewal sales model has been an interesting evolution to Renewal
watch over the last 30-plus years. Initially, when there was just Team
Administrative

a perpetual license paid up front and annual maintenance,
the maintenance bill was mailed out annually and technology Collections
R Focus
FO LE
LD

vendors just waited for the money to come in. The
SO

maintenance sold itself and there was no alternative. Over SA
time, marketplace resistance started to set in and in the early Sells Itself
1990’s customers were questioning the value they received
80’s Today
from maintenance. Vendors found themselves periodically
contacting customers to find out why the invoice wasn’t paid.

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The focus moved to collecting on the invoice, with ‘Customer your customer could derive value from. Customers might
Service teams’ being set up that were really focused on not always be aware of the service features in your offerings.
collection. This became a more strategic approach, making They may also see additional value in a higher level of service
sure that there were no issues with large strategic customers, depending on where they are in their lifecycle with you. This
enabling their maintenance bills to be paid on time. By the is done more effectively in sales mode than just from an
early 2000’s, these teams were still reactive for the most part, administrative perspective.
solving system and billing problems, and paving the way for
the maintenance to get paid. Furthermore, renewals are about uncovering and reinstating
lapsed customers. It makes sense to periodically investigate
By the mid-2000’s, the license model had started to move groups of customers for whom maintenance or subscription
towards subscription or software-as-a-service. As long as you has lapsed to see if there is a possible way back in. This is a
continued to subscribe, your software will run. If you ceased great opportunity to find out why they didn’t renew – much
to subscribe, you might get a short grace period but in time like the more established win/loss analysis you might do for
you wouldn’t be able to access the software, or your data. your new business deals, and a sales approach pays dividends
again here. You can also employ the bargaining chip of an
Most recently we’ve seen companies that have made the amnesty for back charges, since most technology companies
most gains in renewal metrics equip and recognize their will apply all back charges for customers who want to re-sign.
renewal sales teams as real sales teams. In fact, we see
more and more sales VPs responsible for the overall renewal A sales approach to renewals is also about identifying and
number. generating opportunities for additional users, product or
services. This is not unlike up-selling additional service plans
A December 2011 poll by The TAS Group of 145 companies or features, but it requires actual discovery and ability to
found that 16% took a collections-focused approach to probe for additional customer needs outside what they are
renewals, 23% had an administratively-focused team in place, currently licensed to address. As you probe for feedback on
whereas 61% had deployed a true inside sales team focused the value of the original investment, you get to discover their
on renewals. We hope this White Paper will provide those business needs, how much they’re using of your product
with a collections focus some insights to change the way or service, and what additional gaps or broken elements of
they approach their customers, those with an administrative their business model you can help address with additional
focus the incentive to take their staff to the next level, and products and services.
those with an inside sales resource, who know the effort and
resources involved, further advice on up-skilling their people Finally, it may also involve closing the sale of those additional
to maximize revenues. products and services. It’s important to distinguish between
groups that have responsibility for selling or positioning, and
RENEWALS ARE A SALES EFFORT those that have quotas and are expected to actually close
business and may even carry a quota. Sometimes it is a fine
Renewals mean real selling. If you’re talking to a customer, line between customer service and inside sales and so you
then you have to be in sales mode. This starts with the may also be closing this business, or you may have a formal
concept of the value of renewal. You need to be able to sell process for handing off the lead in a disciplined fashion to the
the value of being your customer, even if you’re in a services person that will hopefully close it.
or support role. Never has this been truer than with existing
customers. Your customers bought your solution for specific If you are doing the closing, it’s all understanding how your
reasons, to solve specific business problems. They renew additional products can help with more value. For the
for those same reasons – so that your solution can continue customer, the benefit is that they only have to deal with one
to deliver whatever those results are. You need to be able person. You are improving the trust, the relationship and the
to convey to each customer specifically why they should continuity of relationship by uncovering needs, elevating
continue to be your customer. them to matters of consequence, attaching solutions,
developing benefit statements, and closing the business. This
You also need to be able to uncover and up-sell additional is real selling.
plans or features, exploring what else in your offering set



RENEWAL
TRANSFORMATION MODEL
There are 4 parts to the Transformation Model:
• Coverage
Knowledge & People &
• People and Skills Sales Tools Skills
• Sales Process Key Features

• Knowledge & Tools 7x24
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Coverage
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Sales Process

Seller
Solution Solution
Qualify Discovery Development Presentation Close Integrate Monitor

Awareness
Agree Valid Business Decision Timeline Work Live to
to Consider Opportunity Case to Proceed Defined Started Site
Defined

Coverage
As 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
Skills December 2011 poll of 165 companies, The TAS Group found
Sales Tools
that 3% segment by products or services licensed, 26% by
Key Features
7x24
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at-a ram
Proactive Services
renewal size, 15% by renewal size and region, 39% used a
mixture of criteria, and 15% did not segment. Companies
Re
updates
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’s
Cases nse Tim ty Level & C
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Coverage
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Level ctio
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Geor ns on
Pa ge Sm

could also segment by the number of end users, among other
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Susa es espwi ews
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Model
s b T ti
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criteria. Taking the most popular single strategy of sorting
Le ase
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customers by their annual renewal spend, as the graphic
suggests, there are different sales and marketing strategies
Sales Process you might want to apply depending on where any particular
customer falls in the pyramid.
Seller

Solution Solution

Awareness
Defined



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 “Top” Sales
with a renewal or account manager. Customers in the small or Marketing • Field Sales
inactive segments often don’t require any coverage at all. It’s • Strategy “Big” • Account
the customers in the middle of the pyramid that are usually at • Campaigns Mgmt
risk, as they are the ones that you might not have adequate • Messages • Telesales
coverage for, and are attractive to your competitors. We “Medium”
recommend you take a look at the customers in the middle of
your pyramid and ensure that there is enough coverage there.
“Small”
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, “Inactive”
companies might require more or less care or service levels
Source: Customer Marketing Method, 2000
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 Particularly for larger customers, aligning the renewal model
gravitate towards the least expensive service level that they with the field sales model often makes the most sense, as
can live with unless there is some driver for more or less sales and renewals can work together to come up with the
services. A larger footprint often requires a higher level of strategy that will deliver the most value for – and revenue
service to keep systems optimized, and customers can either from – customers. Where the teams are separate, you need
resource this in-house or else pay you. You need a different tight alignment, or it destroys credibility with customers
sense of skills, degree of touch and relationships between when they hear different stories from different quarters
your top 5 renewal customers and your smallest renewal of your company. We encourage you to look at how they
customers. You need the right people, talking to the right communicate with one another, furnish them with exactly the
customers, at the right time, and you should adapt your same information to use, and institutionalize a high degree of
approach to each segment. co-ordination.

In a subscription model, there is typically one level of support Another consideration within coverage models is what skills
service, but there could perhaps be ancillary services that and competencies are required for each customer segment.
customers might be interested in. Renewal reps, therefore, Obviously, working with a multi-million dollar customer
could be tasked with identifying additional products for their requires a different skill set than working with a $10,000
customers. 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.



People and Skills
So 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
People &
different skills are required, and assess people against those Knowledge & Skills
competencies. Then you can perform a gap analysis and Sales Tools
figure out how to fill the gaps to better address each segment. Key Features
7x24
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There are different ways to close the skill gaps based on your
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Coverage
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Jam Matth s
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Susa es espwi ews
n as o s ere

company’s policies. You could decide to up-skill the people
CW
es on se n
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by Tim tia

Model
Se e to
ve by rs
rity C
Le ase
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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
Sales Process
moving them to other parts of the business where they
can contribute more productively. We have seen field sales

Seller
Solution Solution

Awareness

people successfully moving into account management and
Defined

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 It’s also important to establish an ongoing hiring plan, and a
will be towards the bottom of the pyramid, the part that progression plan for how you plan to develop your people
received little or no coverage. In this area we can point to over time. This development of your people is not just a
one customer improving renewals by 20%, from 60% to 75% case of up-skilling them once and then letting them loose.
renewal rate, by outsourcing the smaller renewals. You need Transforming your renewals team into a high performance
to ask yourself how important it is that you have your own sales team is a process, not an event, and you need to put in
employees interfacing with customers, as opposed to a third place the appropriate framework for regular coaching and
party, and as you might imagine, the tendency is to stay closer regular reinforcement. When you train people, you’re asking
to those customers towards the top of the pyramid. You need them to change their behavior for the foreseeable future, and
to make sure you align available resources with the right this won’t happen unless all the conditions for change are in
customer segment, and how you prioritize your segments will place. (For more information on Sales Change Management,
guide the levels of allocation that each segment receives. refer to our White Paper with the same name.)



Sales Process
Companies 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 Sales Tools Skills
invoice-only renewal. Key Features
7x24
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at-a ram
Proactive Services
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updates

A renewal process is usually different from a new business
Respo Severi FAQ se
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Cases nse Tim ty Lev’s & C
el
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erity
Level ctio
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Geor ns on

Coverage
Pa ge Sm
Stev t Willi ith
en am

sales process. A new business sales process has a variable
Jam Matth s
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Model
Se e to
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Le ase
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time between first contact and close. A renewal has a fixed
l

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 Sales Process
as far back as 150 or 180 days before the contract renewal

Seller
Solution Solution
Qualify Discovery Close Integrate Monitor

date to begin the conversation, set expectations and handle
Development Presentation

Awareness

objections, so that they don’t happen a few days before ‘day
Defined

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 Sales is predominantly about revenues, which means renewal
may still look to reduce users, look for bargaining room, sales is about renewal revenues. Make sure your renewal
plead poverty, employ fellow-vendor peer pressure, or play sales process supports your renewal revenue objectives.
procurement hard-ball. Or they may elect to try not to pay Your revenue objectives and compensation plans should be
or get out of the contract. Some contracts are not auto- properly defined and dovetail accordingly.
renewable, and you have to re-sell the value. Customers will
always look to get a better deal, or get more benefit. So while With any sales process, you need to think about
timings vary by customer, and circumstances vary, the need measurement, review, adjustment, improvement and so
for having your renewal process mapped out does not vary; on. You should look at measuring renewal rates (by both
you must do it. customer count and revenue), the time and effort to renew,
the length of the renewal sales cycle, how much you are
If your company has a prevailing sales methodology, leverage discounting, how often, and so on, by segment. When you
it for your renewals. Sales process and sales methodology measure it, you can manage it, fine-tune it, improve it, and
integrated in your CRM system are proven to increase eventually become more proactive about how you approach
revenues and improve the use and data integrity of your CRM your renewals. For example, if the renewal cycle metric is
system. For example, you could adapt Target Account Selling® getter longer, you can move out the start date from 120 days
(also known as TAS®) opportunity management methodology to 150 days before the contact renewal date.
to your renewals, thereby connecting the method to the
process. To read more on the subject of sales process, see the White
Paper from The TAS Group called ‘Sales Process Equals Sales
Success’.



Knowledge and Sales Tools
It 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 Knowledge & People &
to ‘do nothing’?
Sales Tools Skills
Key Features
7x24
Knoelefgebase Pro

Many of the companies we have worked with did not have
Proactive Services gram
at-a
User groupssp Glan
Re ce
Product Casesonse Time
updates
Resp Seve FAQ se
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on rit
Case se Time y Level & C ’s

a strong value story for renewals. Companies always have
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ion on

Coverage
ve
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rg
Pa e Sm
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great messaging for selling their products and services in
Susa es espwiff s

Model
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ty Ca
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the first place, but when it comes to renewal, the messaging
ve
l

is typically not as good. In this scenario, customers have
additional objectives that can’t be handled, the renewal sales
Sales Process
cycle elongates, the renewal lapses, and the knock on effects

Seller
to revenue and cash flow can be significant. You need to do
Solution Solution

Awareness

the homework, developing in-depth competitive research
Defined

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 on and made specific to your customer. Especially towards
regarding your customers: industry knowledge, specific the top of the pyramid, you have to understand the specific
customer results as available, and their product history with value that each customer gets from your products and
you – what they’ve purchased and dropped, what products services. You should point to concrete results, like renewal
and services they are currently using. Good renewal sales rates, customer satisfaction scores, and the other metrics
people will also listen to earnings calls and strategize with where you have collected the actual results to compare with
their counterparts in field sales to determine if there are the target results established at the outset of the contract.
additional opportunities they might listen for or focus on Companies who have renewal roles focused on the customer,
when talking to customers. not the selling team, will generally achieve better satisfaction
scores.
It’s important to have a call plan before you make your
renewal call to your customer. As well as the basic details As we have mentioned before in this White Paper, there has
of the customer contacts you’re calling, you should prepare to be an ongoing coaching process. Just like in the sports
the questions you will ask to elicit the information you need, domain, people need observation and feedback from coaches
detail out the objections you anticipate for this customer, in order to develop skills. Be proactive about your coaching,
what expectations you have already set, and what your based on what you are measuring, so you can adapt the
objectives and desired next steps are for the call itself. development plans for your people. Finally, there will almost
always be things you are doing well within the enterprise.
You should equip your renewals teams with a range of sales Don’t re-invent the wheel needlessly. Capture the internal
tools. These might include typical objections, preferred best practices you have, bring in the best practices you don’t
answers, job aids, and generic value stories that can be built have, and coach to them both relentlessly.



TOP 5 TRANSFORMATION
BEST PRACTICES
1. Start with a Solid Renewal Sales Process 5. Recognition of the Investment Required
Document and ensure that internal systems are in place When there’s change involved, there’s investment, and getting
and everyone is trained accordingly on your renewal sales the right renewal systems, processes, people and tools in
process. Remember to coordinate activities with the intent place is no different. Investigate what’s going on in the
of subscription customers renewing before their contract market, and how you compare. There’s nothing wrong with
expires, and maintenance customers paying before their being more expensive, you have to be able to understand
contract expires. why and explain why you are worth more and defend it.

2. Avoid Competing Priorities of Renewing and Sales Furthermore, pricing analysis of renewals rates involving
Revenue complexities like bundles may lead you to see if there is any
Here we are talking primarily about compensation plans. If elasticity to the pricing that will drive greater acceptance and
you are compensating renewal sales reps for new sales of adoption.
product or service, on top of renewals, make sure that that
compensation is weighted so that they are not sacrificing a Segmentation is important and does take time. The biggest
single customer renewal in order to make a sale at another challenge can often be your systems and extracting the data
customer. Examine your compensation plans and look for you need in the form and detail you need it.
where you might be incenting sub-optimal behavior.
In short, developing your systems, processes, people, and
3. Have Realistic Renewal Expectations tools requires investment. If you make the investment, and
You might have one overall renewal rate goal you are execute correctly, the benefits are better coverage, better
striving for, but make sure it is realistic within your industry, customer satisfaction, improved revenue, improved renewal
and recognize that there should probably be different rates, and renewals ahead of time, which in turn improves
expectations for each customer segment in the pyramid and cash-flow.
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 Discipline
If 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.



DEALMAKER SMART
RENEWALS MANAGER
Dealmaker Smart Renewals Manager from The TAS Group • Find a partner with the necessary knowledge and
helps you maximize renewal rates for subscription or experience of the maintenance business
maintenance recurring contracts. The smart renewals sales
process and playbook outline the proactive steps to take to Smart Renewals Manager presented Lawson with a range
anticipate potential cancellation of contracts. Automated of solution components to address their specific business
deal coaching, applied in context, identifies risks and requirements:
vulnerabilities in upcoming renewals, and helps you to defend • Consultative selling from the buyer’s viewpoint
the value of retaining your solution. Call planning techniques • Completing and using discovery techniques and tools
help you optimize each sales call, and anticipate and answer to expand their footprint in and navigation through
objections and tough questions. Dealmaker Smart Renewals their customer organizations
Manager helps you standardize your approach and maximize • Handling objections more creatively and successfully
predictable and profitable revenue from subscription or • Avoiding competitive traps that delayed the sales
maintenance recurring revenue. process
• Avoiding feature/function discussions which inevitably
In order to achieve sustained benefits from Dealmaker Smart led to commodity-based discussions about price, in
Renewals Manager, we offer a blended learning approach, favor of value-based discussions which commanded a
including eLearning, instructor-led web sessions and higher price
workshops to increase your knowledge and skills.
This approach yielded the following quantified results:
The proven effectiveness of Smart Renewals Manager is • Increased number of customers on the ‘Silver’
exemplified in our work with Lawson Software (now part of maintenance program from 50 to 87 within a year, a
Infor). Lawson set a number of challenges for their initiative: 74% increase
• Grow the maintenance portfolio of each support or • Improved an already excellent renewal rate by 3
maintenance manager percentage points
• Improve on an already excellent renewal rate • Increased up-sell amount by 20%
• Take a more customer-focused approach to selling • Exceeded NetPromoter customer satisfaction target
• Meet their NetPromoter customer satisfaction targets scores in all categories
across the business

“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 “The TAS Group brought to bear their experience, depth of
and non-revenue effects of The TAS Group programs, and knowledge and understanding of our business, against a
they really work.” very aggressive timescale. Our teams are now experts of
positioning the value of our services, and understand the
Jaymie Cater, Global Director, Silver Maintenance dangers of feature/function dialog which inevitably leads
and Business Development, Lawson to price- or commodity-based discussions.”

Mick Ling, Global Director,
Maintenance Business, Lawson



CONCLUSION
The renewal sales model has evolved over time, to maximizes the probability that the transformation
the extent that progressive organizations realize that of your Customer Renewal teams will be a success.
selling renewals requires genuine selling approaches The TAS Group’s Dealmaker Smart Renewals Manger
and skills. Transforming a Customer Renewals team provides an automated and intelligent skills blueprint
into a high-performing sales team requires attending proven to protect and grow renewal revenues.
to renewal customer segmentation and coverage,
the people and skills needed to deliver the renewals, For more information on The TAS Group, Dealmaker
sales process and best practices that underpin the Smart Renewals Manager, or anything else discussed in
company’s renewal function, and finally the right this White Paper, please contact us at
knowledge and sales tools. A number of best practices info@thetasgroup.com.


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 DEALMAKER
Dealmaker 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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