Measuring Renewals Sales Performance: Insights and Analytics
Abstract: This article on Renewals focuses on the topic of Measuring Renewals Sales Performance. In particular, when your primary go-to-market is via the channel. It outlines some of the analytics that can be employed to gain insights into how Renewals Sales are performing. And as such, trigger corrective actions when needed.
In a previous article “Renewals-sales-via-the-channel”, we reviewed some of the challenges with managing a Renewals Sales process when selling primarily through Channel Partners. This article will elaborate on KPIs or Performance Metrics and Analytics commonly used to measure the effectiveness of Renewals Sales.
Renewals Sales performance should be a relatively predictable entity. Especially when comparing to net new sales, as it’s being based on a known opportunity size. In addition, end-customers have something to lose by not renewing their service. However, given the challenges outlined in the prior article, this is not a certainty and without measuring the process, over time, the health of the process cannot be determined.
Renewals Sales Process
One characteristic of the Renewals Sales process, that differs to net new sales, is that there is a fixed minimum target to aim for in terms of both value of the sale and timing of closure, those being the value of the original service recurring revenue and the expiry of existing service contract. Therefore, as illustrated by the diagram below, it is logical that time plays a big part in how we typically set out KPIs for Measuring Renewals Sales.
Renewals Sales Timeline Model
Time Based KPI’s
- “On-time” Renewals i.e. the customer places their order for the Renewal on or shortly before the expiry date.
- “Early” Renewals i.e. the customer places their order for the Renewal well in advance. For example, several months/weeks ahead of the expiry date.
- “Late“ Renewals (often referred to as “Trailing” Renewals), meaning the customer eventually places their order, say several weeks or months late. However it is still within a fixed tolerance, depending on the industry/segment norms expected.
However, time is not the only dimension of the Renewal Sales Performance process in need of measurement. As such, we need others, equally as important metrics to note, related to the “completeness” or value of the sale.
Non-Time Based KPI’s
1. Unit Renewal Rate (also referred to as “Close Rate”). A simple calculation of the number of opportunities closed vs the total number of opportunities.
Note – Need to discount cases where the service is no longer offered in the market (i.e. has reached “end of sales” or obsolescence). So the Renewal was inevitably not going to happen and should not be counted as part of the total Renewals opportunity.
2.“Weighted” Renewal Rate, which takes the value of the quote on the opportunities closed vs the value of the original service contract. This considers factors such as ‘upselling’ additional or higher value services in the sales process.
3. “Lost” Renewals or “Customer Churn“, meaning the customer did not renew, they simply weren’t convinced or interested.
4. Sales Rep Response Rate, the timeliness of response to queries and quotes sent promptly etc.
5. Renewals Revenue Growth measures overall Renewals Sales growth. Of course when you begin measuring this, it could be a negative result!
Note – This metric cannot be used in isolation. Net new sales could be pushing this metric up over time when the Unit Renewal Rate for the existing customer base could be declining. Or the Churn rate could be going upwards. This is especially important for vendors who are going through a very high net new customer sales phase. Here they may be masking a problem with customer retention. This is why it’s vitally important for companies to measure their Renewals process effectiveness right from the start.
Depending on the scale and geographic spread of customers, sales teams and Channel Partners, it is important to perform the measurement of the KPI’s at a company (global), regional (country) and Channel Partner level. Also, if the vendor has several product lines, it’s key to measure by product family/line too.
Making Sense of KPI’s
It is noteworthy to point out that due to the elongated period required to fully measure the outcomes of the Renewals Sales Process, the above KPI’s only make sense when measured over multiple Renewal sales-cycles. That way conclusions will be based on a continuous set of analytical trends.
By “slicing and dicing” the data for multiple dimensions of the business, areas of both exceptional high performance and of high concern will come to the surface.
Only by creating a multi-dimensional suite of analytics, can any issues with the process be pinpointed. The insights created by a rich dataset, when presented in a consumable way to each of the internal and external (i.e. Channel Partners) audiences, as illustrated below, can be a catalyst for targeting a set of improvement actions in an effective and logical manner.
Sample Renewals Sales Process Analytics Dashboard
When heavily dependent on Channel Partners as part of the Renewals Sales process, it is also worth noting that there are certain ‘levers’ that a vendor cannot pull. For example, a vendor is not in control of the performance or training of the individual sales reps within the Channel organization. Therefore, in designing any Incentives for Channel Partners to improve Renewals performance, determining the relevant metrics/KPIs to publish to the Channel Partners vs internal audiences, needs to be considered Incentives for Renewal Sales is covered in this post, so check it out.
Renewals Sales Performance Conclusion
Our Top Tips for creating an Analytics scheme for Renewals Sales Performance tracking include:
- When beginning the journey of creating a systematic approach to measuring the Renewals Sales process effectiveness, concentrate on two or three main “headline” KPI’s. For example, get a sense of the “On-Time” Renewals and the Unit Renewal Rate first.
- Run metrics for an extended historical period. For example over the last two years’ worth of data. Then you can build the trend graphs and set targets (by geographic / regional area, by Channel Partner, etc). This exercise will also enable the immediate identification of any problem areas at the outset and allow for benchmarking to identify “best-practice”.
- Identify and implement a communication mechanism, for both internal personnel and external Channel Partners. By actively communicating with the Sales teams involved in the process, they can see how they are performing.
- Make sure KPI information presented to each audience, is only relevant information. This enables them to focus on process improvement for their organisation. For example, regional based Sales teams should receive metrics for their region only; Channel Partners should receive metrics only as measured for their Renewal opportunities.
- Continue to refine the KPI’s and introduce additional measures as the measurement process gains traction. For example begin to consider Incentive programs to drive behaviors towards the targets.
Download our webinar: Best Practice for Maximizing Channel Renewal Revenue with special guest, Bryan Koyano, Global Partner Program Manager, Extreme Networks.