Abstract: This article on Renewals focuses on the topic of Measuring Renewals Sales Performance when your primary go-to-market is via the channel. It outlines some of the analytics that can be employed to gain insights into how Renewals Sales are performing and trigger corrective actions when needed.
In a previous article “Renewals-sales-via-the-channel”, we reviewed some of the challenges with managing a Renewals Sales process when selling primarily through Channel Partners. This article will elaborate on Key Performance Indicators (KPIs) or Performance Metrics and Analytics commonly used to measure the effectiveness of Renewals Sales.
Renewals Sales performance should be a relatively predictable entity. Especially when comparing to net new sales, as it’s being based on a known opportunity size. In addition, end-customers have something to lose by not renewing their service. However, given the challenges outlined in the prior article, this is not a certainty and without measuring the process, over time, the health of the process cannot be determined.
One characteristic of the Renewals Sales process, that differs to net new sales, is that there is a fixed minimum target to aim for in terms of both value of the sale and timing of closure, those being the value of the original service recurring revenue and the expiry of existing service contract. Therefore, as illustrated by the diagram below, it is logical that time plays a big part in how we typically set out KPIs for Measuring Renewals Sales.
1. “On-time” Renewals i.e. the customer places their order for the Renewal on or shortly before the expiry date.
2. “Early” Renewals i.e. the customer places their order for the Renewal well in advance. For example, several months/weeks ahead of the expiry date.
3. “Late“ Renewals (often referred to as “Trailing” Renewals), meaning the customer eventually places their order, say several weeks or months late. However it is still within a fixed tolerance, depending on the industry/segment norms expected.
However, time is not the only dimension of the Renewal Sales Performance process in need of measurement. As such, we need others, equally as important metrics to note, related to the “completeness” or value of the sale.
1. Unit Renewal Rate (also referred to as “Close Rate”). A simple calculation of the number of opportunities closed vs the total number of opportunities.
Note – Need to discount cases where the service is no longer offered in the market (i.e. has reached “end of sales” or obsolescence). So the Renewal was inevitably not going to happen and should not be counted as part of the total Renewals opportunity.
2.“Weighted” Renewal Rate, which takes the value of the quote on the opportunities closed vs the value of the original service contract. This considers factors such as ‘upselling’ additional or higher value services in the sales process.
3. “Lost” Renewals or “Customer Churn“, meaning the customer did not renew, they simply weren’t convinced or interested.
4. Sales Rep Response Rate, the timeliness of response to queries and quotes sent promptly etc.
5. Renewals Revenue Growth measures overall Renewals Sales growth. Of course when you begin measuring this, it could be a negative result!
Note – This metric cannot be used in isolation. Net new sales could be pushing this metric up over time when the Unit Renewal Rate for the existing customer base could be declining. Or the Churn rate could be going upwards. This is especially important for vendors who are going through a very high net new customer sales phase. Here they may be masking a problem with customer retention. This is why it’s vitally important for companies to measure their Renewals process effectiveness right from the start.
Depending on the scale and geographic spread of customers, sales teams and Channel Partners, it is important to perform the measurement of the KPI’s at a company (global), regional (country) and Channel Partner level. Also, if the vendor has several product lines, it’s key to measure by product family/line too.
It is noteworthy to point out that due to the elongated period (referencing the diagram above again) required to fully measure the outcomes of the Renewals Sales Process, the above KPI’s only make sense when measured over multiple Renewal sales-cycles. That way conclusions will be based on a continuous set of analytical trends.
By “slicing and dicing” the data for multiple dimensions of the business, areas of both exceptional high performance and of high concern will come to the surface.
Only by creating a multi-dimensional suite of Analytics, can any issues with the process be pinpointed. The insights created by a rich dataset, when presented in a consumable way to each of the internal and external (i.e. Channel Partners) audiences, as illustrated below, can be a catalyst for targeting a set of improvement actions in an effective and logical manner.
When heavily dependent on Channel Partners as part of the Renewals Sales process, it is also worth noting that there are certain ‘levers’ that a vendor cannot pull. For example, a vendor is not in control of the performance or training of the individual sales reps within the Channel organisation. Therefore, in designing any Incentives for Channel Partners to improve Renewals performance, consideration needs to be given to determine the relevant metrics/KPIs that are published to the Channel Partners vs internal audiences. Incentives for Renewal Sales is covered in this post, so check it out. Incentives should be part of the consideration for which measurement tools makes sense, as the two topics are closely linked.
Our Top Tips for creating an Analytics scheme for Renewals Sales Performance tracking include: