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Blog : Why Your Customers Don’t Renew and What You Can Do About It

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Why Your Customers Don’t Renew and What You Can Do About It

By Tom Sweeny May 25, 2021

Service organizations — and the businesses in which they operate – are relying increasingly on the subscription model to drive recurring revenue.

It is essential to understand why customers don’t renew AND take strategic action overcome customer objections to renewal.

4 Reasons Why Your Customers Don’t Renew Service Contracts

Among active product users, the most common reason for service contract cancellation is that customers do not perceive that the benefits outweigh the cost of continuing the service.  Others — typically customers using mature products — see little to no risk in not renewing their service contracts.

Here is a breakdown of the reasons — gleaned from our research — why your customers don’t renew their service contracts with you. In descending order, they are:

1. Cost / Value / Budget

The customer can’t cost-justify renewing.

2. No Longer Use Product

Was it a bad fit? Did they switch to a competitor?

3. Product Reached Maturity

Are they now looking at competitive products?

4. Poor Service Quality

Enough said.

What can you do about it?

  • Address perceived lack of value.
  • Minimizing service contract cancellations with Onboarding, Adoption, and Success Services
  • Optimize Renewal Practices

 

Renewal begins on Day 1 of the service contract.

From the day you sell a service contract you need to continually work on the retention of that customer relationship.  The worst thing you can do is wait until 90 days prior to the service contract expiration to send a renewal notice.  Each of the reasons for nonrenewal can be mitigated — or at least minimized — through renewal practices I’ve described above.

It’s basic business, but with the subscription model in ascendency, it matters more than ever: Keep the customers you have and find ways to prevent customers from canceling services in the first place.

Retention is paramount — make it a strategic priority!

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