Last Friday, we had Alex Hesterberg from Pure Storage in to the studio to chat about renewing customers. He discussed the increasingly important topic of preparing your customer renewal strategy which is becoming incredibly important given the number of competitive companies in SaaS these days. Alex has been a leader on the customer success and professional service side with a number of stints at Riverbed, Sailthru, CSC, and Veritas as both an AE as well as a leader of these organizations. His current team is over 300 on the customer success side and he shared a number of important tips and tricks when thinking about renewing customers.
(1) It All Starts With A Balanced QBR – Most folks know to have a Quarterly Business Review (QBR) in place, but Alex finds that many folks are not asking a balanced set of questions or form an incorrect opinion based on limited data as it relates to renewing customers. It is fairly obvious to know what success looks like for the customer and map that against where they are at today looking at positive signs like revenue increase, user growth, and cost savings. Less obvious and really important though are the negative trends. Things like support tickets that the customer opens, the specific questions that are asked to the account executives, analyzing the worst users, and other negative trends help in building a more holistic picture for renewing customers. Whether it is difficulty in usage, difficulty in adoption, or a customer just doing things the wrong way these negative trends are as important as the positive.
(2) 180 / 30 Are Your Numerical Cues – You should begin the discussion on renewing customers roughly 180 days out in your second QBR with a customer. You’ll want to first get a temperature check of the customer and second understand where they are at in terms of the positive metrics we mention above. Start weaving in questions like “what does next year look like for you here?” to really implant the question into the mind of the customer. You will also want to run a check on whether or not you are still the incumbent with the customer as many SaaS contracts will have a 90 day out and if the customer is going to evaluate other options you’ll want to know that in advance. Think in 30 day increments from the 180 day mark and 30 days later (150 days left) start to introduce pricing into the equation and 30 days beyond that (120 days left) ensure you have a contract in their hand. 30 days beyond that (90 days left) you really should be wrapped up and finalized with the discussion.
(3) Increase Frequency During Times Of Distress – Alex has seen firsthand that increasing frequency of on site visits, emails, and phone calls during times of distress or issues really helps when renewing customers and maintaining appropriate customer success. Do this even if you don’t have anything to say other than “I am here and you are important to us.” It may sound a bit odd, but there is a substantial emotional component to a sale that always is at play and the number one thing he believes customers care the most about is whether or not you are going to be there for them. Software breaks and sometimes marquee accounts are unhappy with you. When the renewal comes up time and time again he has seen that always being there for the customer mattered more than any specific module, product feature, or price.
(4) Handling Procurement Takes Practice – One of the biggest issues that Alex sees around renewing customers is when young SaaS founders go up against marquee account’s designated procurement teams. These people have been trained (and most times are compensated) to ensure the marquee account pays the least amount, has the most leverage from a legal standpoint, limits concessions, and overall tries their hardest to get the best deal. Alex recommends trying to interview or spend more time with folks who have direct knowledge of procurement teams and their capabilities. This will ensure you “stick to your guns” when renewing customers and better understand the scenarios and tricks that get played in renewals. Many times founders don’t do this work up front to understand procurement and end up with an unprofitable account as a result.