Abstract: This article on Renewals Sales focuses on the complexities of handling renewals when your primary go-to-market motion is via the channel. Additionally, it highlights how the fragmentation of the model can lead to revenue leakage, aka, lost renewals.
At the start of this series on Renewal Sales we looked at “Renewal Sales 101 |The Business Opportunities and Practical Challenges“. In this second piece, we talk about the “broken chain” of the end-to-end Renewal Sales Process. In this context, we look at vendors who employ either a “Direct Sales” and/or a “Channel” (Indirect Sales) go-to-market motion. Further posts will explore the Importance of Data for Securing Renewals, Measuring Renewals Sales Performance and Incentives for Renewals.
Let’s start with the simpler case of a vendor who exclusively goes to market with a direct sales team for both their new business and their renewals business. In this scenario, their business workflow may look something along these lines:
We can all agree this is a fairly simple linear renewals sales workflow. If everything works as expected along the “happy path”, the customer will receive the first renewals notification email and the expectation is that they will start a dialogue with the renewals sales rep requesting a formal quotation. They should then receive a Quotation and confirm that everything is correct. After this, if the price is acceptable, they can kick-off their internal process for payment. This may be as simple as paying with a credit card at the appropriate time. Or alternatively, working with their internal procurement or finance team to generate a Purchase Order.
Unfortunately the “happy path” is not always the smooth route that happens. If you, as a vendor, have a formal sales and order management solution stack, it is highly likely that you have detailed records of the original purchaser of your products and/or services that are now due for renewal. But what happens if the original purchaser of your offerings is no longer with the company? You may receive bounced emails. Now your team has to devote time and effort to finding out who the new contact should be.
These “exceptions” create additional work and processing steps for your renewals sales team. Something that needs to be factored into your calculations for how many renewals you can secure in any given period. In addition it will have an impact on how many people you need in your team to manage all renewal sales in a timely manner. Depending on how you structure your “customer facing” functions – such as “Field Sales”, “Inside Renewal Sales” and possibly “Customer Success or Support” teams, you may struggle to identify the right contacts in the customer organization that you need to work with to secure the renewal. This is typically more of a challenge for renewals sales where the items to be renewed are either hardware or on-premise software licenses.
If you are providing a SaaS solution you are more likely to have the most up to date customer contact information. This is because you should be in more frequent contact with your customer teams during the lifetime of the service term.
When selling through the channel (Distributors, Dealers, Sales Agents, Resellers, etc) the process is further complicated. This is because the vendor/manufacturer is one step (or sometimes two) removed from the buyer or end customer. Let’s therefore examine the complexity of the channel model in relation to renewals sales.
If you as a vendor have an ecosystem of partners then devising and implementing a scalable and systematic methodology for your Renewals Sales process, that is easily consumed by the Channel, is critical to nurture and grow this revenue stream. There are 4 key process elements to maximize renewals sales. All of which can be problematic in the Channel, due to the fragmentation of the information needed.
Let’s look at the most complicated business workflow in a 2-Tier model. Here, the vendor goes to market via distribution with a network of reseller partners servicing the end customer. In this model for renewals sales, responsibilities are shared.
Because the vendor is the provider of the product or service that has been “bought” by the end customer , they will have a very firm viewpoint that they “own” the customer. Therefore, by default, it is imperative that when the original sale is made, the vendor records key customer contact information for future renewal sales outreach.
The vendor is ultimately responsible for maximizing their revenues and renewals revenue. As mentioned in our first article, Renewal Sales 101, for hardware and perpetual/on-premise software sales, the financial value of the renewal sale is usually significantly lower than the original sale amount. Moreover, most vendors also offer a much lower margin to their channel partners for renewal sales than for new sales.
Therefore, to achieve success with renewal sales, vendors must take a lead position and ensure as much of the heavy-lifting is done for the channel.
Distributors who see renewals sales as a critical component of their revenue stream engage platforms. These platform, either bespoke or procured from specialist vendors, manage and automate all their renewals. They do not rely on their vendor “renewal sales” teams for providing the renewals due list. The distributor must be proactive. They have all the data already and should therefore generate the renewals lists for their reseller network to go after. In this instance, the distributor has prime responsibility for managing the bulk of the renewals on behalf of their vendors.
Because the reseller is ultimately “customer facing”, they have responsibility for frequent outreach to the customer to ensure they understand the renewal due date, the renewal price and where and how to buy their renewal. Often, they will engage with the customer across a number of communications channels: email, phone or for very large financial transactions, face to face.
Ultimately, the customer, should they decide to proceed with the renewal purchase, has the responsibility to raise the Purchase Order and ensure payment (possibly even via credit card for small transactions) for the ongoing Support & Maintenance contract or subscription renewal.
To learn more about how market leading vendors automate and manage their renewal sales programs, contact Channel Mechanics today and transform your channel tomorrow.