Keely Lords
Brand Manager
Securing a steady stream of recurring revenue and building strong, lasting customer relationships is a must for any business.
That part is clear enough. But what you really need to do is have an action plan in place to ensure that contracts are renewed with ease and customers stick with you for the long haul.
Here, we’ll cover the critical components of a contract renewal strategy, what’s included in it, why it might succeed or fail, and how to grow your renewal rate.
How renewals impact your business
A strategic contract renewal process ensures a more reliable revenue stream. This is especially the case for subscription-based or recurring services. This helps in longer-term financial planning.
Renewals are also, of course, more cost-effective. It’s widely regarded that keeping your existing customers is cheaper than acquiring new ones.
Finally, when customers renew with you, it indicates that they’re happy with what they’re getting from you. It means stronger loyalty, better reviews, and more word-of-mouth referrals – in which case you can meld your renewal strategy with a customer referral program.
Factors that result in missed contract renewals
Not all contracts will be renewed - and many of the reasons for this are within our control. Let’s look at the areas in which a strategy may not be as good as it could be.
1. Lose track of timing
If you don’t fully understand your customer satisfaction metrics or you don’t have insight into key expiration dates and touchpoints with your success team, crucial renewal opportunities can be missed.
If a company doesn’t track expiration or renewal dates, it’ll miss out on crucial opportunities to engage with customers ahead of time. Those customers may have already started looking elsewhere, meaning the ship will have sailed by the time the date for renewal arrives.
2. Poor customer service and relationship management
Challenges in accessing services or resolving issues can frustrate customers. A customer who runs into repeated issues with support – including being put on hold for lengthy periods – might seek other providers who promise better service.
Your connection with your customer is a business relationship and it should be treated as such.
3. Better alternatives and competitive offers
You’re in a competitive space. As such, if your competitors offer better value or features, your customer will bolt. Stay informed on market trends and anticipate threats before they arrive – this is key to retaining your existing customers. A race to the bottom on pricing isn't always required if you can do a good job of demonstrating why your product deserves a premium price tag.
If a competitor is more appealing than you are, your contracts will be at risk of fizzling out.
4. Changes in client’s needs and internal dynamics
Structural shifts within a company or strategic business realignments can affect renewal decisions. That can be inevitable in many sectors, especially those that are rapidly evolving and changing.
A client undergoing a major internal reorganization might no longer require your services or might need different contract terms. That doesn’t mean you’ve lost out on them – it just means contract review needs to happen more regularly to better understand their shifting needs.
5. Service and contractual issues
Trust is built on reliability and responsiveness. When clients notice lapses in service, they're less likely to renew. Missed deadlines or unfulfilled promises erodes trust in your brand and can significantly reduce the likelihood of contract renewal.
It’s not just that one customer – their negative experience may spread to other audiences through negative reviews.
Steps to implement to improve contract renewal strategy
Fortunately, there are tangible steps you can take to improve your contract renewal strategy. Be proactive with these contract renewal process best practices.
1. Assess current contract and client status
Review existing contracts and client performance metrics to understand current terms, value delivered, and areas for improvement. Keep track of all this, and ensure your teams are equipped to do the same.
Gather feedback from clients to identify any issues. For instance, conduct regular performance reviews with clients to ensure they are satisfied with the service and identify areas for improvement.
2. Establish a renewal timeline
Create a schedule for renewals, including key milestones and deadlines for engagement, proposal submission, and follow-up.
Implement automated reminders for both internal teams and clients to ensure timely renewal discussions. For example, use CRM software to set reminders for renewal discussions 90 days before the contract ends – this way you have ample opportunity to connect with the client just as they start thinking about next steps.
3. Automate contract renewal workflow
Streamline the process to avoid manual steps, ensuring smooth processing and relevant client communication. Examples of automated messaging can include renewal proposals, reminder emails, and contract status updates. Using Postal's integration with your CRM, you can also automate the sending of a thoughtful gift to a customer a certain number of days before a renewal meeting to increase engagement.
For example, an automatic renewal system can send a personalized renewal proposal with just a few clicks or at preset trigger points in the customer journey. This ensures no opportunities are missed.
4. Analyze product usage during the previous period
Collect data points and track metrics to generate reports on key contract-related metrics, revealing insights for better client management.
For example, analyze customer usage data to understand which features are most valuable and tailor your renewal proposals accordingly. And look at this as a chance to discuss new contract terms with the customer.
5. Identify key stakeholders
Assign specific tasks to employees in your company who play key roles in negotiation strategies for contract renewal, relationship building, or feedback conversations. It never hurts to align your internal team with a specific member at your customer's org who they can work on building a 1:1 relationship with, tailored to their expertise and level of position.
Train your account managers, salespeople, customer service representatives, and even executives so they’re aligned on renewal goals and strategies.
6. Provide renewal incentives
Encourage your customers to renew their contracts with you by offering discounts or additional benefits. For example, provide a discount on the renewal fee or include extra services at no additional cost as an incentive.
You can also develop loyalty programs to encourage longer-term relationships – the longer a customer is with you, the more perks and rewards they get. For instance, customers earn points for each renewal, which they can redeem for pricing discounts, free services, or exclusive access to new features.
7. Personalize every touch point
People love it when you connect directly with them. As such, tailor your interactions to individual customer needs. Include gifting, such as sending personalized gifts to celebrate milestones or renewal anniversaries.
It’s a powerful gesture when you send a small gift accompanied by a personalized thank-you note to clients who are renewing contracts with you.
8. Share data at every touch point
Quantify the value of your services by providing performance metrics, measurable results, and clear outcomes to reassure customers.
For instance, share a report detailing how your service has helped the customer achieve their goals over the past year. It’s a nice reminder of the value you bring, and helps customers make a more informed decision.
9. Implement a feedback and improvement plan
Actively seek feedback and use it to identify areas where you can get better. Build plans to enhance service quality and improve client satisfaction – and more importantly, act on them.
For example, conduct surveys after each project or at the end of each quarter to gather feedback and make necessary adjustments. Meanwhile, keep a finger on the pulse during your regular syncs with customers who have customer success teams dedicated to them.
Most of all – this is not a one-and-done system. Contract lifecycle management should be continually improving – even when it appears to be healthy. There are always ways to be better at what you do.
How Postal helps with engagement of key stakeholders in the contract renewal process
At Postal, we know the value of a personalized gesture when you’re looking to establish long-lasting, positive customer relationships.
And we can help strategize a personalized, yet scalable, plan.
We offer gift collections specifically tailored to individual stakeholders. Our automations can trigger gift sends at a specific point before the renewal conversation. You can congratulate clients on another year of partnership with personalized items like champagne bottles.
Everyone can appreciate a thoughtful gesture. Reach out to Postal and hear about our renewal gift ideas you can start sending now!
