Renewals in Competitive Markets
Today, a bit more of a niche post, but important topic. How do you manage renewals in competitive markets?
Picking up on previous themes of cheap capital and low barrier to entry, it's likely that your customers have multiple alternatives in the market. And, If they don't, they soon will. While new business development is essential, expanding and keeping existing accounts is essential for viability (its the power behind your U-shaped cash flow model). Per our usual methodology, we'll discuss a few principles that will help you identify renewal risk for strategic and growth accounts, methodology for uncovering information critical to retention, and how to coordinate different internal functions to align on a single goal - getting a signature. For this article, I'll only be discussing accounts that might be considered "strategic" or "growth accounts". We can solve for run-of-the-mill churn in another post.
Principle 1: Understand Your Underbelly
If we think in terms of "next best action", our first step is identifying our strategic segment, and specifically, what might identify renewal risk. You should already have some idea of who these folks are. Usually, other companies who raised mega-rounds early, and have a venerable team of ex-Whoever's scaling GTM and product. Much of this information is publicly available, and it's important to operationalize.
CSMs should be staying up to date on who recently completed a raise, or who signed a new executive. If it's on the PR wire, you should know. A quick google search or google alerts can automate some of this process. The upside of good client news - you can leverage this to get into an early conversation about strategy changes, and potential new use cases. The downside of client news - your competitors can get into an early conversation about strategy changes, and potential new use cases. And, when that happens, they usually send the big guns. After an initial meeting is set, it's not uncommon for your frenemies to send CEOs and VPs to poach your business. This doesn't have to be a bad thing. You should expect your clients to take calls with competitors. After all, with the strategic importance of technology and service partners, a good executive is a leader that understands the ecosystem and levers they can pull to hit their metrics. The best way to counter this is to also send your big guns. CEOs and VPs, if you're not meeting with these clients well before renewal, you're gonna have a bad time. The Hard Problem of Strategic Renewals can only be solved as a team sport.
Principle 2: Selling Dreams and Selling Schemes
If you have a good relationship with your strategic client CEOs and decision makers, you probably don't have much to worry about. The Salesforce "Customer for Life" thing has legs. You run into (big) problems when you don't have these relationships, which compounds if you have any gaps in product-fit, or past service delivery problems. A good way to understand this is food envy. Most of us have been there. You're out to lunch. You get a Cobb salad, your buddy gets a grilled cheese. Yes, your salad looks good. But damn, that grilled cheese does look tasty. It doesn't matter that your meal is farm-to-table, and all the toppings are free-range, and live in a avian condo that would make Kanye blush. It's not cheesy, gooey deliciousness. Your product is a Cobb salad. It's probably pretty good. But, your competitors get to sell the dream of of golden-brown crunchiness. And, while your feature-set is probably 90% similar, I'm not overly keen on the notion of buyers (even in B2B) being completely rational. Sometimes, a new tool or new executive relationship can be a good lense to solve a problem for clients, even if it's not cost effective. In this sense, it's important to know when your competitors are selling dreams, or selling schemes. If you have proper differentiation, you should be able to point to this at a product and service level. Niche expertise, or robust features in target areas should align with your strategic segment. Because early-stage metrics are highly dependent on upmarket movement, your product and service team should be keenly aligned in this area. Last note, if you're not properly differentiated, consider firing the client after a thorough exploration. If its a bad fit, they are going to churn next period anyways, and its going to take resources that could be better spent elsewhere to keep them on life support. As Jason Lemkin says, "If your goal is $25m ARR, it doesn't matter if they churn now or later. Once they're gone, they disappear from the balance sheet." That's not an exact quote, but the essence is there. Principle 3: Don't Get Caught Offguard If you're actively renewing against a competitor, there is a 50%+ likely-hood you already lost the account. Surprises signal weak relationships at the DM level, and by the time you hear about the potential deal, your customer is 80% of the way through the sales process. As I've mentioned before, if the client information-highway isn't a two-way street, you're gonna have a bad time. Executives need to support CSMs. While it may be dumb, you can have conversations that CSMs cant. This is another interesting topic. Super interested in how CSMs can have executive-level conversations. My initial thought is a mixture of eduction and service model. Anyways, a bit tangental. But thats how executives think. The good ones, anyway.