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October 9, 2019
Your Pricing Strategy Is More Than a Plan for New Logos—Why Renewals Matter
By: Chris Jenkins
At times it may seem that the shiny new toy is always better. A common mistake that many firms make is ignoring their existing customer base and focusing on marketing to and acquiring new logos. There’s still value in your existing customers, and your pricing strategy can make these customers assets for your long-term growth strategies. As stated in the 2020 SBI Revenue Growth Workbook:
“You can’t always meet your growth goals through new accounts. Creating a renewal strategy enables you to capture more market value. Growing your base business can be essential to making your number, particularly as your business matures.”
What does this have to do with pricing? Isn’t this all about customer success? Well, any good pricing strategy acknowledges and creates a plan for both capturing and assessing renewals. Having a good strategy will ensure one thing that is almost always true; you get more renewals, more upsells, and more net revenue retention from your largest customers. Companies can see 80% – 120% net revenue retention through renewals with best-in-breed being 95%. This is especially true for SaaS companies.
Download this tool to determine if your organization understands the key considerations necessary to craft an effective pricing strategy for renewals.
Today’s B2B World Is Continually Following the Pricing and Purchasing Patterns of the B2C World
The average consumer between the ages of 25-40 has 7 monthly subscriptions. This includes many non-traditional subscription models like shaving and wardrobe. Company’s like Amazon are able to upsell to consumers with good, better, and best service options like Amazon Prime. Could you imagine 10 years ago thinking about paying $100 a year just to be able to get anything you need sent to your doorstep in 1-2 days instead of 3-5 days? This upsell and convenience has led to loyalty and repeat purchasing. This is the same mindset your business should have with its customers. You can accomplish customer loyalty through many avenues: Customer Success, Account-Based Marketing, or even a well enabled sales force, but also through your pricing strategy.
Unlike the B2C environment where companies set a price, your customers often expect a discount in return for their loyalty. They are well informed on the market, other vendors, and expect you to be ready to extend discounts without a decline in service. This is where your pricing strategy comes into play. It is easy to discount your way to declining revenue.
Here are a Few Do’s and Don’ts for Your Pricing Strategy On Renewals:
The biggest takeaway is not to remain stagnant. Continue to grow revenue through existing customers by staying one step ahead of price leakage through a proper pricing strategy and annual planning. You must test the market and understand the landscape for Renewals in your industry. Download this tool to determine what key considerations you are ready to test.
Prior to joining SBI, Chris has been an IT Strategy Consultant, Business Analytics Consultant, Sales and Solutions Engineering. At IBM, Chris delivered high-level IT analytical analysis through for major IT strategy engagements which enabled his client’s c-suite executives to make business decisions based on the KPI tracks, component business modeling, and predictive analytics that he provided in order to drive growth and stability. Chris partnered with clients to create unique features using IBM BlueMix and IBM Watson integration into high-growth and high-priority enterprise and commercial product offerings. He conceptualized and implemented new marketing tools for sales enablement around Mobility Consulting for IBM that led to a 30% increase in engagement sales in 2015. Chris managed 27 customer accounts and grew sales by 14% to $1.3M in Sales at Kyocera by crafting a strategy to enter the internal medical device market. He also streamlined work processes and created work instruction documentation for Westinghouse Engineers that led to annual savings of $400,000 in wasted productivity.
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