Earlier this week, I discussed three common mistakes made by Account Managers and Customer Success Managers when negotiating SaaS contract renewals. Here I look solutions to these mistakes and best practice to avoid them entirely!
Mistake 1. Do not gather sufficient information before they plan for their negotiations
Yes, Account Management and Customer Success are relationship management roles. They involve regular touch points with the customer to get the most from the product and ensure the relationship is moving in a positive direction.
HOWEVER, these regular customer interactions and catch ups present invaluable opportunities for information gathering. As a contract renewal negotiator, it’s imperative that you are able to understand how they truly view the product, its importance to their business, the direction of travel of this dependency and the aspects and features of the service on which they rely most heavily. You need to understand if the user base is growing or in decline, the financial health of the business, whether they are spending freely or initiating a cost cutting drive and many other key pieces of information pertaining to your upcoming renewal negotiation.
In the months before your renewal, consider: how can I play detective, whilst also going about my regular catch ups?
Use pre-prepared ‘open questions’ as opposed to ‘binary yes/no questions’
What are they really saying? – listen for the meaning behind their words
Prepare follow-up questions to dig deeper and seek elaboration
Orchestrate ‘unplanned, relaxed conversations’ where the sharing of information is often less guarded and more free-flowing
Triangulate your findings with other data points and other individuals speaking to that business
Mistake 2. Overestimate the power of the customer
In order to enter your negotiations with a good assessment of the balance of power, there's a variety of factors you must explore and consider. All that information and data you’ve been gathering can now be put to use. Your aim is to assess their true dependency, reliance and commitment to your product or service, relative to any risks of moving providers or reducing their custom.
Factors to evaluate:
Product engagement and usage stats
Bespoke or custom integrations, APIs modifications to the product to ensure a strong (sticky) fit to their business
Deep integration into their tech stack
Sticky features unavailable elsewhere
Strategic importance of your product in their growth plans
Real user feedback (perhaps via your client/customer service team)
Credible alternative products they may be genuinely considering
Understanding of the true time/cost/inconvenience of replacing your product
Get to the bottom of the power balance and cut through any positioning they are doing regarding ‘considering alternative products’ in an attempt to lower your expectations!
Mistake 3. Lack of ambition in proposals
Now you have a stronger sense for what is going on inside their head and the balance of power, you must calibrate your proposals. Proposals must be designed to achieve several things
Shift their expectations, anchoring them to new levels (e.g. price, contract term)
Leave you space to concede, delivering satisfaction to them
Allow you to land as close as possible to their breakpoint (their absolute maximum)
Exchange low cost ‘gives’ (e.g. shared customer insights, training) for low cost, high value takes (e.g. case studies, referrals, social media releases)
Never give anything away for free – ALWAYS trade an item of value for something in return