A smooth (and successful) renewal process is essential for customer success and business success in general. But for most companies, knowing whether a customer decides to renew or not feels like a guessing game.
One of the primary reasons for that decision-makers aren’t aware of how to take advantage of their available data. Other reasons include a lack of time and effective tools.
Forecasting renewals is a fine art that needs to be learned. Fortunately, you have come to the right place for that.
So, let’s get started.
Utilize machine learning and artificial intelligence
Machine learning and artificial intelligence can help you see if a customer is on track in their journey. You can assess customer data, know at-risk customers, and generate a renewal likelihood score. You’ll also have access to data that’ll help you notice whether your customer is satisfied with your product and what accounts need attention. While artificial intelligence can improve customer success outcomes, human interaction will still remain at the core of your relationships.
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Ascertain crucial metrics
Forecasting renewals can be done with certain key metrics.
The churn rate is the attrition rate and lets you know how many customers are canceling or unsubscribing from your service every month. By keeping track of this data, you’ll know how long customers stay with your company and can use this information to reduce churn.
Annual/monthly recurring revenue (ARR/MRR) & GRR
Annual recurring revenue or monthly recurring revenue is where your recurring revenue is calculated on an annual or monthly basis. It helps you see which segment of the business is performing and lets you forecast how your business will earn each month and year.
Customer Lifetime Value (CLV)
Customer lifetime value is calculating what each customer is worth to your business. You can use this data to understand the actual cost of acquiring a new customer compared to keeping an existing one.
Use a dashboard to centralize renewals to get accurate forecasting
To forecast renewals and updates, you need a centralized database to clarify where each customer is in their customer journey. It’ll help you get a clear picture of your customers, what type of customers are likely to renew, and how to identify those patterns and trends.
Scrutinize your business for potential risk
You need to analyze the business for risks, which can present themselves in various forms. They can also be anything from internal to external risks. You can minimize risks with some proactive measures. Common risk factors in businesses include the following:
- Problems with upselling or cross-selling opportunities
- Not having access to key metrics and their statistics
- Difficulty building accurate forecasts
Use quick-turnaround, dynamic modeling
Another way to forecast renewals in customer success is through dynamic modeling. In dynamic modeling, a customer can belong to any segment at any time, and customers can change segments as time progresses. When you focus on dynamic modeling, you send the right message to customers. You can perform the best action to get the right results. For instance, if the customer is approaching renewal and is not performing the intended action. You can identify the driver of adoption and send relevant coaching material that highlights the key points of the product feature.
Precisely tracking renewals is crucial
Tracking renewals will help spot trends, growth backlogs and help increase renewal rates. Customer renewal rates show customer satisfaction trends and even predict customer loyalty. You can also measure how many customers want to continue doing business with you. Customer satisfaction by tracking renewals will help arrest churn and increase renewal rates.
A customer success software can help keep track of renewals, customer health scores, churn rates, etc. You’ll know what customers are doing, what problems they face, renewals, upgrades, new acquisitions, and churn.17
Ultimately, having a concrete renewal management process can help you get the information you need to accurately forecast your renewals. And once you do, you’ll be one step closer to a business that’s not only scaling successfully but one that’s also helping more customers reach their desired outcome. And who doesn’t want that?
Dattatraya Shetty is an IT Professional with 2 Decades of experience in areas of Product Development, Implementation & Service Delivery Management. As the Head of Implementations and SOC Compliance in Smartkarrot he is on a mission to provide relishing customer experience.
Published December 29, 2021, Updated March 02, 2023