Why It’s Time To Focus On Your Retention Message

At a time when renewal business is critically important to the long-term success of so many B2B organizations, don’t give short shrift to your retention messaging.

Why It’s Time To Focus On Your Retention Message

A sales leader at one of the biggest global tech companies recently told me the software renewal rate in his Asian market was only 10%. Unfortunately for him, it was the market he managed.

“I have to close the back door,” he said. “The back door can’t be as wide open as the front door.” (Or something to that effect.) He added, “An improvement of just 5% in our renewal rate would have an enormously positive impact on the bottom line, greater than 5% in new business.”

This anecdote illustrates the growing importance in B2B of securing renewals, which is especially magnified for companies that rely on service or subscription models to drive recurring revenue.

Why? Because in truth, it’s often only after the first renewal that companies with such models typically make their money. During the first section of the contract, you might incur so many costs involved with acquisition, implementation, and over-servicing your new customer that you might barely break even.

Renewal Messaging Missing In Action

In my previous column, I presented the results of an academic study we ran to determine the optimal framework for a renewal message. But since then, we’ve conducted an industry study only to discover that for most companies, the renewal messaging process is missing in action. (Note: Access to report requires a short registration.)

In the survey, we found that 80% of companies spend less than 30% of their time and budget on retention and renewal messaging. In fact, nearly half of the companies said they spend less than 10% on this part of the customer lifecycle.

That’s not the only challenge companies are facing when it comes to developing and delivering an effective renewal message.

Who Owns The Renewal Story?

Creation and control of the renewal message is a story of divided ownership, particularly when you compare it to its counterpart message on the demand generation/customer acquisition side of the customer lifecycle.

Our survey found that nearly three-quarters of marketing teams own or share ownership of messaging and content for the demand generation part of the customer lifecycle. That’s no big surprise. But when it comes to the customer retention side of the lifecycle, ownership gets a bit murkier.

For instance, marketing only exclusively owns the renewal message at 19% of companies and is involved in less than half. Meanwhile, for the other half of companies, marketing isn’t involved in creating or executing the renewal message at all. In those cases, ownership and accountability fall to either sales/business development/enablement (28%) or related account teams (20%).

With ownership of the renewal message so fragmented at many companies, you risk having less accountability and fewer guardrails around the creation of a critically important story. It’s not a stretch to believe this will have negative repercussions in terms of message quality and impact.

For companies where renewal business is essential to driving growth and long-term value, stakeholders need to take it upon themselves to clarify ownership of the renewal story and apply an effective messaging process and framework to its development.

The upside of defining ownership and applying a messaging framework to this story is substantial. And it will make your messaging more impactful when it’s time to deploy your “why stay” story in the field.

Mixed Messaging?

Divided ownership and underinvestment are the tactical problems around the creation of an effective renewal story, but the survey also suggests a missed opportunity in terms of messaging strategy. Turns out nearly 60% of respondents don’t see the need for message differentiation between their customer acquisition and customer retention stories.

But this flies in the face of the research I keep mentioning, which found that provocative messaging—of the sort typically used to generate demand and acquire new customers—is not as effective when it comes to securing renewals. While you have to overcome the status quo bias when you’re trying to win new customers, you actually have to reinforce the status quo bias when you’re trying to retain existing ones.

In other words, using a disruptive message may work wonders when acquiring new customers, but it could backfire within the context of renewals.

The industry survey data, along with the academic research, shows there’s a big need for companies to:

At a time when renewal business is critically important to the long-term success of so many B2B organizations, it’s not safe to give short shrift to your retention messaging.