Why Customers Don’t Renew
There are many reasons why customers choose to cancel their service relationship. The most common reason for cancelation is that they do not perceive that the benefits outweigh the cost of continuing the service. Or, they do not feel that the risk is too great to cancel – this is a common perception by customers that use mature products. The least likely cause of customer cancelation is poor service quality.
For customers that cancel because they did not see the value in your services there is still hope for a win back. If these customers are still using your product re-engage them and attempt to convince them of the benefits of your service. You may learn a lot about why customers canceled in the first place (price, lack of use, etc.). Consider making modifications to the service to make it more appealing.
Within your active customer base chances are good that you have customers that would like to cancel but are not willing to accept the risks associated with lack of service or out of date software. In these situations, there is still time to protect the relationship. Work with customers potentially at risk to help them see the value.
The second most common reason for service cancelations occurs when customers stop using your products. Once this occurs – for whatever reasons – there is little to do to win the customer back. The best strategies to minimize cancelations due to lack of use is to develop good onboarding, adoption, and success practices to make sure customers can use and apply your products effectively.
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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If you are an executive at an information technology company you have a lot to think about on a day to day basis, but there are 5 more things that you need to be aware of.
Your service organization is an incredible source of metrics and measurements that describe ongoing interactions with your customers. They can tell you about the top concerns of your customers, the challenges they face using your products and the features they want to see in the future.
Service interactions with customers offer a wealth of insights into how to sustain and grow customer relationship value and create opportunities to differentiate your products. Of all the metrics your service team tracks there are 5 important areas that you should key a close eye on.
If you inventory all the metrics used by your customer-facing organizations – Sales, Marketing and Service – you will find an impressive collection of data elements that describe how you interact with your customers. Marketing metrics describe the ability to reach and influence customers; Sales metrics provide insights into the time and efficiency to book revenue; and Service metrics describe the volume, timeliness, and effectiveness of interacting with them. Add to this, insights provided from customer satisfaction assessment efforts. As an industry we have a lot of customer data, but does it tell us everything we need to know about how to engage and sustain long term profitable relationships?
The amount of recurring revenue a company receives may increase, stay the same, or decline for a given period. Recurring Revenue Rate indicates the percent change in the amount of recurring revenue at the end of a specified period compared to the recurring revenue at the beginning of the same period. Measuring recurring revenue rate is essential to help identify the factors that lead to revenue retention and attrition and provides an indicator of the overall state of customer relationship health.
We have become too dependent on electronic surveys and NPS/CSat scores to tell us that our customers are okay. These are fine indicators but do not always tell us why we lose customers.
Service renewal metrics indicate the level of performance for sustaining service relationships and retaining recurring revenue. Tracking both service contract renewal and recurring revenue retention is essential to help identify the factors that lead to customer and revenue retention and attrition and provide important indicators about the overall state of customer relationship health.