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Work that Channel!

16 April 2014  |  1446 views  |  1

We recently conducted a customer study into how well technology companies are managing their recurring revenue — and the results are disconcerting. It turns out that companies are leaving serious revenue on the table by neglecting their renewal processes. In fact, many companies overestimate the performance of their renewal and subscription businesses and discover their shortfall during quarterly earnings.

It’s understandable. Salespeople are more excited about bagging new customers than keeping the existing ones. And whether you’re renewing subscriptions for your SaaS offering or renewing hardware/software maintenance agreements, recurring revenue might seem like a simple, administrative task.

It takes a specialised skill set – along with different tools and metrics – to close recurring renewal sales. Yet in most businesses, managing renewals is a neglected and thankless task. Even though it requires distinct practices, only 21 percent of the businesses surveyed in our study have a sales team dedicated to renewals.

The secret to growing your recurring revenue? Look outside your own business to your channel partners.

For most businesses, the channel represents a significant, under-realised source of recurring revenue.

Don’t underestimate the opportunity

The actual channel renewal opportunity varies across businesses. For North American technology companies, over 68% of revenue is sold through the channel. Outside North America, that number jumps to over 80%. Even in SaaS firms, 16% of revenue comes from the channel on average – and that number will grow as companies use the channel to gain market share and global reach.

Research shows us that the channel leaves a lot recurring revenue untapped. On average, the channel under-performs direct sales teams by 12 percentage points on renewal rates.  If you’re already taking the steps to improve renewal rates in the previous ‘secrets’ posts, then that gap is widening.

It’s no surprise that channels don’t perform as well as they could. For many companies, “channel support” means sending opportunities by email once per quarter, and perhaps providing a quote template. If you don’t provide your partners with timely, actionable renewal data, they are less likely to take action on your behalf.

You can easily extend the work that you have done to improve your own renewal revenues (getting renewal-ready data  and using actionable analytics) to your channel partners.  Sharing the lessons and practices you learn in-house with channel partners benefits everyone.

Connect the channel to renewal data and analytics

Your channel, like your own sales force, needs access to renewal-ready data. Channel partners that have to hunt down renewal data are likely to work on other, easier sales instead of your renewals.

Analytics also play an important role in managing the channel.  You need the right metrics to track channel partner performance – and to compare renewal performance across multiple channel partners. A little competition in the channel can be a healthy thing, if you manage it well.

But you also need to support the channel.  With the right ‘root cause’ metrics, you can help partners identify potential barriers to renewals to improve their results.

Juniper Networks is one company that makes the most of its channel opportunity for recurring revenue.  It has thousands of channel partners.  Juniper significantly improved channel renewal rates using an approach that combined renewal data, analytics and accountability:

•    Providing channel partners with revenue-ready asset data in a partner portal
•    Giving channel partners the metrics to track performance and find root cause issues
•    Using those metrics to create a monthly ‘scorecard’ for each partner – and sharing that information with partners

Using these strategies, Juniper increased its channel’s renewal rates to over 80%  – a remarkable yet attainable number for renewals in the channel.

What’s the potential impact on your revenues of increasing channel renewals to over 80%?  Is it worth a little effort to support your partners? I’m guessing the answer is yes.



Comments: (1)

Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 17 April, 2014, 18:59

Once I got over the disorientation of seeing a post like this on Finextra - rather than LinkedIn Technology Sales Group or somewhere else like that - I found it interesting. I strongly suspect that sales incentive policies inherited from the onpremise days are responsible for sales people being more excited about new customer acquisition. After all, with renewal revenue restricted to AMC @ 18-20% of the license fee collected upfront in Year 1, onpremise companies didn't want their A sales teams to chase renewals. In fact, I know many companies where the field sales organization is not even allowed to handle existing accounts.

With SaaS, things are totally different: There's no pot of gold at the end of the sales cycle rainbow. Renewals are worth everything. The vendor is perpetually in the sales mode. In my experience, most SaaS vendors are near-startups and don’t have a mature incentive policy. But, when they get there, they need to make sure that renewals are compensated as lucratively as signups. That’s a critical success factor for SaaS vendors.

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