We’ve all heard the terms renewal, retention, expansion, net revenue retention. There are a ton of buzzwords for the financial side of B2B Customer Success. All the job descriptions mention it as well. “Must be willing to drive expansion and renewals.“ It kind of ends at that.
When you join the company, many times leadership or the founders will say things like:
“Build strong relationships, be there for the customer, delight them, give them what they need to be successful”
I’ve had these conversations with many people in the space, including customers of mine who have their own clients. A number of my roles have be B2B2B or B2B2C. So I’ve had customers tell me this, and their expectation about what it means to do “traditional account management” or “managing clients the way we’ve always have.”
(Side note: In speaking with other leaders in the space, we often hear the same thing. I think Customer Success, due to its general “newness” to the software space, has been one of those fields where everyone has an opinion on how to handle accounts, and what the “best” thing is for “their” customers. I can’t think of another role at any company where everyone thinks they can do it better than the people doing it. But that’s a separate conversation.)
It all sounds very romantic, and to be fair, it is incredibly important. You cannot take the way you treat people for granted. You must show respect, and provide value, and be accountable and be organized and consistently prove value both in terms of your role and the client’s usage of your product. That said, there is an effective way to manage a renewal, and ensure you’re have pricing integrity for your product.
Pricing Integrity
Why have a price on your site if the majority of your customers are discounted or don’t pay what is posted? Do you have a list price? Are you charging the right amount?
These are all questions commercial teams and finance departments are asking themselves. I’ve been at companies where major consultancies have been hired to do a pricing strategy discussion, and benchmarking is done and analysis is made.
I’m sure all of that can be very helpful in many situations. Yet, in the interim, a CSM should know whether or not their customer has been discounted, and whether or not that specific customer is deeply discounted.
There are certainly some things to consider:
- Is the customer discounted? If so why?
- How many of your products are they using?
- What was the circumstances of their initial sales?
- How long have they been using your product?
- What does their usage look like?
- If you are charging per “seat” what is their seat utilization rate?
So there are always some qualifiers. But it’s important to work with your team on this consistently and ensure they are considering price when it comes to renewal.
Once you’ve done you’re research on the account, notify the customer of the increase and let them know when they’ll be renewed (if automatic renewal is enabled, that is MUCH better). There is nothing nefarious about that if you let them know of the price change at least 2 months out, and are accessible to them to discuss if needed.
If there is pushback, handle the objections and work to get a face to face either on zoom or on the phone. Work through it and do not draw the negotiation out if you are in the SMB or mid-market space. That will not end well for you. You’ll lose credibility and if you are not an exepsnive product, or a non-essentially NICE TO HAVE product, you’ll likely lose the customer to another fast implementing product. (Who will deep discount them to steal them away)
If you are managing large enterprise level clients, you must be much more prepared with strong justifications, and be able to discuss the price (most probably with a procurement team). Treat the relationship with the respect it deserves though, regardless of the price.
Where I see CSMs trip up
- “The customer has 1 open support ticket, we can’t change their price”
- “They’re already paying a lot”
- “I forgot to respond to them once, they’ll be mad at me”
- “The product is broken all the time, we can’t charge them more”
- “They never use it, we can’t charge them”
Now, any of those can be handled with some really specific tailored objections. At the minimum it would spawn a convo between me and the CSM to find out how we got to this place.
That said, I think it’s important to determine whether it’s an actual issue or a fabricated issue. I trust my teams inherently, but I also consider that many CSMs are very empathetic people and are going to naturally move towards the scenario that causes the least amount of conflict or friction. No easier way to do that than a flat renewal.
I don’t believe that increasing price on a product is a conflict inducing scenario. The best case scenario it promotes a conversations and you can get into a negotiation, and the worst case, you can back track and renew the customer flat.
I have worked on countless renewals, and I can’t remember a single time someone flat out canceled and stopped talking to me or a CSM because we wanted to address their price.
It’s important to understand your approach, understand the customer situation, but its IMPERATIVE to consider this each time you go for that renewal.
And if you’re doing your job right, and your product is delivering, there is no reason the renewal won’t be a given.
As always, here is what Chat GPT has to say about this:
Increasing prices on renewal in a B2B SaaS company requires a strategic and customer-centric approach to ensure a smooth transition and maintain positive customer relationships. Here’s a step-by-step guide:
- Understand Customer Value:
- Evaluate the value your product/service brings to the customer.
- Highlight any improvements, features, or additional services that have been introduced since the last renewal.
- Customer Success Check-In:
- Conduct regular check-ins with customers throughout their subscription period.
- Gather feedback on their experience, identify pain points, and address concerns promptly.
- Communicate Value Proposition:
- Clearly communicate the value proposition of your product or service.
- Emphasize how it addresses specific pain points or contributes to the customer’s business success.
- Provide Advance Notice:
- Notify customers well in advance of their renewal date about the upcoming price increase.
- Clearly explain the reasons behind the adjustment and the added value they will receive.
- Customize the Offering:
- Consider offering tiered pricing or customized plans based on the customer’s needs.
- Provide flexibility to choose features or services that align with their priorities.
- Highlight Product Enhancements:
- Showcase any recent product enhancements or updates that directly benefit the customer.
- Illustrate how these improvements contribute to their overall experience and success.
- Leverage Success Stories:
- Share success stories of other customers who have benefited significantly from your product.
- Demonstrate the positive impact on businesses similar to theirs.
- Negotiation and Collaboration:
- Be open to negotiation and collaboration.
- Listen to any concerns or objections the customer may have and work together to find a solution.
- Renewal Meetings:
- Schedule renewal meetings with key decision-makers.
- Use these meetings to discuss the customer’s evolving needs and align your product with their future goals.
- Offer Additional Value:
- Introduce additional value, such as exclusive features, extended support, or training sessions.
- Frame these as complimentary additions rather than add-ons to mitigate resistance.
- Transparent Pricing:
- Maintain transparency in your pricing model.
- Clearly articulate how the price increase supports ongoing product development and support.
- Provide Options:
- Offer different billing cycles or payment plans to accommodate budget constraints.
- Provide options that allow customers to choose what works best for them.
- Customer Loyalty Program:
- Consider implementing a customer loyalty program that offers benefits or discounts for long-term commitments.
- Reward loyal customers who renew with additional perks.
- Continuous Relationship Building:
- Build strong relationships throughout the customer lifecycle, not just during renewal.
- A positive ongoing relationship can make customers more receptive to price adjustments.
- Post-Renewal Support:
- Provide excellent post-renewal support to ensure a smooth transition.
- Continue to engage with customers, addressing any issues promptly and reinforcing the value of their investment.
By approaching price increases with transparency, flexibility, and a customer-centric mindset, you can increase the likelihood of successful renewals while maintaining positive relationships with your B2B SaaS customers.
Robert Statsky 