February 21, 2023

SaaS Renewal Management: How to Optimize your SaaS Renewals?

Ever been stuck in the limbo of SaaS subscription renewals, feeling like you're constantly sailing with no direction?

Congrats—you're ready to take the plunge into optimizing your SaaS renewal management strategies!

The process isn't always easy, and sometimes it can feel like you're being unceremoniously dragged through the wringer. But don't worry - with enough preparation, renewal management can make all the difference for your business.

Tune in for our blog post on optimizing your SaaS renewals for maximum success - knowing when to 'cash out' can make all the difference!

What is a SaaS Renewal?

A SaaS renewal is a business term that refers to the process of renewing existing SaaS subscriptions. During this process, SaaS businesses renew their customers' existing contracts or agreements, and these are typically done on an annual or biannual basis. It is important to note that SaaS renewal management involves more than just signing up new customers – it also includes:

  • Managing customer churn
  • Maintaining customer relationships, and
  • Optimizing revenue opportunities through SaaS-based solutions

Organizations around the world are constantly dealing with SaaS renewals—whether they're manual or automated. It is believed that an average-sized organization typically experiences at least one renewal every single working day. It's a great opportunity to take stock and review usage. Pre-empting when your subscription will up again open the door for future planning and rebalancing spending accordingly. What’s more, you can ensure you're using each application to its fullest potential!

Therefore, SaaS renewal management is a critical process for SaaS businesses. To maximize their SaaS renewals, SaaS businesses must understand the importance of subscription optimization and have the right tools to make sure they are getting the most value from their SaaS investments.

What are the Goals of a SaaS Renewal Strategy?

Implementing a successful software-as-a-service (or SaaS) renewal strategy can be difficult, especially when trying to meet the diverse needs of customers. And while there's no single recipe for success, understanding the key goals of an effective renewal strategy is key to creating an effective and profitable SaaS business. By properly aligning your offerings and incentives with customer needs, you'll be well on your way to building a successful SaaS renewal strategy. So, what are the main objectives of such a strategy? Let's discuss each goal in more detail below.

1. Establish visibility

A successful SaaS renewal strategy should ensure visibility into every party administering a SaaS application. This helps to avoid any unnecessary costs associated with not recognizing or distinguishing ownership, as well as identifying exactly what is up for renewal and when the renewal date is due. 

2. Reduce risk

Proactive management can help reduce potential risks associated with SaaS investments. By instituting an efficient renewal strategy, organizations can identify renewals before they expire and mitigate the risk of missed deadlines and costly fees that could potentially occur if left unaddressed.

3. Streamline processes

By developing a process designed to routinely track upcoming renewals and notify stakeholders in advance of expirations, organizations can streamline their processes and gain better control over their SaaS investments by ensuring that all renewals are properly handled on time. 

4. Maximize cost savings

An effective SaaS renewal strategy should also include cost savings initiatives such as negotiating better pricing for long-term contracts or exploring alternative vendors in order to get the most out of each renewal opportunity and ensure that businesses are getting the best value for their investment.

How to Prepare for a SaaS Renewal?

Preparing for a SaaS renewal can be a little daunting, particularly if you are unfamiliar with the process or how to get the best deal. But it doesn't have to be a stressful experience. By following these simple steps, you can ensure that your SaaS renewal process goes smoothly and get the results you desire.

1. Understand what you have

Achieving optimal SaaS usage starts with uncovering the full picture of your assets. Without understanding what exists, it's impossible to manage them successfully. With transparency in place, you can identify and track ownership and usage trends at each level within your organization - IT, Lines of Business (LOBs), and individuals. Then, it all makes way for optimization, allowing you to drive utilization up to the desired 90% rate for the best return on investment.

2. Rationalize and rightsize

In order to get your Software-as-a-Service system up to optimal efficiency, the first step is to identify who is using which applications. This process allows you to determine where resources are being overused and establish overlapping areas. You then can streamline these elements in preparation for the next renewal or even sooner if circumstances allow. Making sure you understand your system inside and out will potentially save time and money when it comes time for a solution refresh.

3. Create a renewal calendar

Regularly reviewing your software renewal strategy puts you in the driver's seat and can help you reach your organization's long-term goal. With the aid of a visibility tool, companies can better track and plan their renewal timelines. This ensures that unanticipated renewals will no longer take them by surprise. Furthermore, businesses are enabled to review their contract terms in good time before signing off on anything. Through timely evaluation, organizations not only support efficient decision-making but also garner assurance for sound investments that fuel foreseeable success.

The Step-by-Step Process For SaaS Renewal 

Regularly reviewing your software renewal strategy puts you in the driver's seat and can help you reach your organization's long-term goal. With the aid of a visibility tool like Spendflo, companies can better track and plan their renewal timelines. This ensures that unanticipated renewals will no longer take them by surprise. 

Furthermore, businesses are enabled to review their contract terms in good time before signing off on anything. Through timely evaluation, organizations not only support efficient decision-making but also garner assurance for sound investments that fuel foreseeable success. You can start with the actual renewal process that is abstracted in the following steps.

1. Look for the auto-renewal clause

It's essential to know the renewal window of your SaaS contract, considering it usually begins a subscription cycle. Auto-renewal for another term can kick off without attending to it if the renewal window isn't acknowledged. Thus, before anything else, ensure you are familiar with the auto-renewal clause set by your SaaS vendor to prevent being bound to them for yet another period.

2. Evaluate SaaS usage

As a business manager, it is imperative to ensure that you are not paying for applications and licenses that employees and customers do not use. However, with the ease of access offered by SaaS- and shadow IT options, it is difficult to stay on top of who uses which programs. Therefore, before renewing software packages and subscriptions, evaluate actual usage in comparison with what you are spending - for this, vendor analytics or SaaS management platforms such as Spendflo can be invaluable tools. Keeping track of software will save both time and money in the long run.

3. Understand license types and needs

Once you've gathered data on your SaaS usage patterns, take the time to study and compare the license types offered by your vendor. There is always potential for companies to be paying for more than what they actually need, so do your research and communicate with a sales rep about pricing and licenses before committing to a purchase.

Microsoft's Office 365 changes serve as an example of how vendors may change their subscriptions over time, potentially providing better offers down the road. Perhaps, don't hesitate to negotiate – the SaaS marketplace is highly dynamic and drives competition between vendors, so there's a good chance you can land a great deal if you try!

4. Explore vendor's success metrics

Understanding your vendor's objectives is invaluable when renegotiating or renewing a contract. As a result, customer Success Metrics (CSM) are of significant importance to SaaS providers and their stakeholders, particularly in the area of Customer Lifetime Value (CLV). Essential for CLV to maximize is that the customer renews for subsequent cycles, delivering the vendor an obvious incentive to keep that customer.

Alongside this, upstanding also is a metric known as Churn Rate – the percentage of clients who pull out before the contract ends. Considering onboarding new clients necessitates more time and investment than maintaining current ones, getting to grips with effective contract negotiation tactics prior to moving onward is essential.

5. Support from a sales representative

As the deadline for renewing, canceling, or renegotiating your SaaS contract draws nearer. It is important to take the necessary steps to secure access to any vital info you may need. You'll want to reach out to the sales representative handling your contract and also avail yourself of customer success teams if they are available.

This can make it easier on both sides as you enter into negotiations about changes or modifications. All-in-all, proper communication leads to a smoother transition and an overall successful business relationship with your vendor.

What are the Challenges in SaaS renewals?

As SaaS products become popular, retaining and renewing customers is becoming an increasingly important goal for SaaS companies. Yet, with many corporate executives growing more cost-conscious as time goes on, it can be hard to ensure that enterprises across industries stay committed to subscriptions. With that being said, there are certain issues associated with SaaS renewals that businesses seeking customer retention should be aware of. They must assess how to best address these challenges to maximize their customers' lifetime value and protect their bottom line. We invite you to come along for a deeper exploration of the realities of SaaS renewals and how you can use them to your advantage.

1. No or zero database recording of customer information

Keeping track of customer information and staying in close contact with customers throughout the year can be a challenge for SaaS renewals. Companies need to build trust and develop relationships with customers to ensure that they remember to renew their subscriptions when the time comes. Additionally, suppose customers have any questions or concerns about the service. In that case, it is important for the company to be aware of those issues and be prepared to address them before renewal time.

2. Overwhelming users with too many updates

Consistently introducing new features into their products can present another challenge for SaaS companies in terms of renewals. Customers may need more convincing that these features are worth the price increase, so effectively communicating why certain features are beneficial is important for customers to stay on board and continue using the product.

3. Unable to make users aware about new updates/ upgrades

Another challenge related to SaaS renewals is getting customers to upgrade from one level of subscription service to another in order to get more value out of the product or service they're using. Again, this requires an understanding of customer needs and how different subscription levels could benefit them, as well as clear communication about what each level offers and why it would be beneficial for them to upgrade rather than just renew at their current level.

4. Struggle with price bracket

Many SaaS companies struggle with pricing when it comes time for renewal, either raising prices too much or not enough being two common pitfalls here. It's important to keep things competitive while also ensuring that you're making enough money off your product or service; this requires companies to understand market dynamics and research customer reaction before setting a final price point for renewal periods, which can be difficult if these things constantly change in fast-paced markets. 

5. Poor customer engagement and retention

A major challenge that many companies face with SaaS renewals is customer churn: losing existing customers due to inadequate service, bad customer experiences, or other factors that lead people away from using their product or service altogether before renewal time rolls around again. To combat this issue, it's important for companies to stay on top of feedback from their users and continually improve upon their product offering so that clients don't feel like they're stuck in a loop where nothing changes between renewal times - instead, they should feel like there's enough innovation happening throughout the year that makes remaining a customer worthwhile even after multiple renewals.

What Are the Ways to Avoid SaaS Renewal Pitfalls?

Starting a SaaS Company is a dynamic learning process where businesses must constantly adapt to an ever-changing market. No SaaS business enters into its endeavor without wanting to offer solutions to people's problems, but unfortunately, some mistakes will be made along the way. While many SaaS companies have flourished and created the best products, others have encountered costly issues due to miscommunications or bad strategies. These include a lack of user feedback, pricing errors, and technical complications resulting from ill-planned development processes - with these five key areas addressed properly; any SaaS company will be able to determine its strategy flaws and address the pitfalls. Read more below:

1. Lack of understanding of the SaaS model

SaaS may seem simple on the surface; however, it involves quite a lot of responsibility. It covers the development and maintenance of the database, servers, and software and provides pricing plans and packages that customers can select depending on their needs.

One of the major advantages of the SaaS product architecture is that users can:

  • Opt for any combination of packages they want and don't need to install anything
  • They can just use the cloud-based software on any device with an internet connection.
  • Instead of one large payment upfront, revenue is earned in regular installments on a monthly or yearly basis.

As a way to maintain success within this business model, customer satisfaction and loyalty are key components that need to be prioritized by companies.

2. Bad market research

Before launching a SaaS company, it is essential to conduct market research. This will ensure that the venture is likely to be a success, as any lack of due diligence may result in the project running over budget and not meeting its objectives. Research should include:

  • Identifying software trends
  • The available features and associated pricing points
  • One must also know who their target customers are and
  • Their interests are in order to know how best to serve them.
  • Don't forget to check the level of competition in your field, as dense competition could mean you need more resources than you have accounted for.

As a result of this research, analyze problems facing potential customers and decide how your software can address these issues to provide people with a solution they can trust and rely upon.

3. Contract framing mistakes

When reviewing a contract, it is essential to be mindful of the conditions laid out in that document for long-term success. A SaaS company should always keep an eye on:

  • Renewal clauses,
  • Payment terms and price points as this help dictate how favorable a particular contract setup will be.
  • While not all companies can negotiate with their business suppliers, being aware of the terms could save them from potential future pricing issues or give them an opportunity to look for better contracts.

Conscientiousness pays off in the long run, so pay attention to the boundaries outlined in your contract and review any prices you deem unreasonable to get the best deal possible.

4. Unaware of audience requirements

Understanding a customer's needs can mean the difference between success and failure for a SaaS company. It is important to identify:

  • The pain points of the customer
  • Develop a better solution,
  • Track potential customers,
  • Understand the market size and segmentation, and
  • Narrow down an ideal customer profile.

The market opportunity should be focused on catering to customers' specific needs along with mapping them, understanding and predicting their behavior, evaluating possible substitutes or competition in the market, and finally speaking with them directly to customize an appropriate strategy tailored to them. In addition, companies must stay competitive by offering meaningful upgrades and strategies that satisfy customer needs if they want to remain successful.

How to Decide If You Need SaaS Renewal?

One of the most important decisions businesses have to make is whether or not they need to renew their SaaS subscription. A SaaS renewal can be a costly commitment, so it's essential that businesses are able to assess their needs accurately and select the most appropriate option. Here are some tips on how to decide if you need SaaS renewal:

1. Analyze your usage

Before committing to a SaaS renewal, take some time to analyze your current usage of the service. How often are you using the software? Are there any features or services that you aren't taking advantage of? Do you think it's worth paying for renewal for what you're currently using? This will help you determine if the SaaS subscription is really worth investing in for another term. 

2. Consider alternatives

It's also important to consider other options before committing to a renewal. Are there any cheaper alternatives out there that might provide better value for money? It's always worth shopping around and seeing what else is available in the market before making a decision. 

3. Assess cost benefits

Another factor to consider when deciding if you need SaaS renewal is cost-benefit analysis – this means looking at potential savings versus costs associated with renewing the subscription. Weigh up how much money would be saved or lost depending on whether or not you decide to renew – this will help inform your decision-making and make sure you're getting good value for money with each subscription. 

4. Speak with your team

Before deciding on a SaaS renewal, remember to speak with your team about their needs and preferences – different team members may have varying requirements from the software, so it's always best practice to get everyone's opinion before making a final decision.

5. Review customer feedback

Finally, don't forget to review customer feedback online before committing to a SaaS renewal – customers who have previously used the service will often provide invaluable insight into how useful or beneficial the service has been for them, which can be extremely helpful when trying to decide whether or not it's worth renewing your subscription for another term.

Wrapping Up!

Ultimately, SaaS renewal management can be a complex and time-consuming process. However, organizations can streamline the process by utilizing tools such as Spendflo and gain greater visibility into their software investments. With Spendflo, organizations can save time and money while ensuring compliance with all relevant laws and regulations.

To learn more about how Spendflo can help your organization manage SaaS renewals, contact us today. Book a Demo for a free demonstration and consultation. Grow your business without worrying about your SaaS stack and maximize growth, success, and promising returns.

Ajay Ramamoorthy
Karthikeyan Manivannan

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