What Auto-Renewals Miss
Jason Moore
An important aspect of being a true SaaS model is the ability for your customers to become a paying customer without the need to interact with someone directly. Many SaaS companies also utilize the efficient practice of auto-renewing their clients with an easy option to cancel their subscribed services. The advantages to this are lower acquisition costs due to the absence of man-power, and -- if your cost structure is low enough -- an almost “under the radar” effect for the renewal.
We approach this transaction differently, though, for our HelpDesk ticket software for specific reasons.
NOTE: One key aspect that should be considered when making this decision is the size of your average transaction. If you have a $2.00/month subscription, an auto-renewal system is a must. This is vastly different than a $2,500+/year subscription relationship.
Our clients predominantly choose an annual contract versus a monthly subscription based on the impact to their business. Switching costs are high when you are serving as the backbone for an entire department or across multiple departments.
Due to the nature of our clients and how they use our products, we view renewals as a chance to build upon our relationship with them as well as look for opportunities for cross-selling, up-selling, or identifying needs not being met with their current subscriptions. This is where renewals go from merely keeping the lights on to being a growth stream for your company.
Many of our clients are also education and government organizations. Many times, having a credit card on file is not something they prefer when buying.
There is more than likely a formula that can be derived based upon some key factors:
- Renewal amount/frequency
- Number of clients
- Compensation of employee responsible for renewals
- Internal opportunities for cross- and up-sells
- Do clients need PO process associated with invoice?
Although auto-renewals are an extremely valuable addition to most SaaS offerings in the consumer marketplace, be aware of some of the opportunities that your company may miss out on when not utilizing the opportunity to build on your personal relationships.
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