My first blog in this software licensing renewals series (Tips 1-6) covered two factors that affect renewals: product- and purchase-related factors. My second (Tips 7-11) and third (Tips 12-14) blogs covered upgrade-related factors.
The final post in the series both summarizes the prior posts and covers renewal-related factors (Tips 15-20) as they relate to renewals processes and driving more revenue and improved customer relationships from higher renewal rates. Let's get those renewal rates up!
Tip #1: Provide a Valuable Product
You may follow every step below I’ll prescribe in this series and have the best renewal process in the world – but none of that matters if your product doesn’t provide value. Sometimes product managers and executives seem to forget this important rule.
Tip #2: Clearly define maintenance
Bundle “support” and “upgrade” together under maintenance. Don’t offer support separately to avoid customer’s just purchasing support but not maintenance.
Tip #3: Make maintenance purchase “automatic”
There are a number of tricks to make this happen:
- List price includes the license and maintenance (they aren’t separated)
- Ordering tools automatically add maintenance products in the shopping cart. Users must delete the maintenance line items (if you don’t want to mandate maintenance-just encourage it)
There is nothing more confusing to a high-volume buyer than to receive software license renewal notices every few weeks or months for different purchases. Several approaches avoid this “renew everything at different times”:
- Co-terminate to the first end date for each subsequent order. This is pretty common. It does require some type of “contract #” or “initial purchase #” with each purchase so sales can find that original date. The disadvantage is that each subsequent order is smaller.
- Move the date of the previous purchases to the new purchase. This does require that each additional purchase include a “renewal” for the previous purchases. The advantage is that each order is a little larger.
Don’t try to co-terminate on subsequent orders – only co-terminate at renewal time. Doing it at renewal time is more flexible but requires great entitlement/data tracking. The process needs to be done every year.
Tip #5: Make maintenance/renewal dates available for self-service so end customers can budget for them
To avoid the “but I didn’t budget for this renewal and my fiscal year is in 2 months, can you just push out the renewal until then,” it is critical that maintenance end dates are visible to the customer in a self-service mechanism. Showing something like this is important:
Tip #6: Consider making maintenance information as part of your license so end users can be notified
Consider making the maintenance end date part of your licensing technology so that end users or IT administrators can be notified in the product that their maintenance is expiring.
- For consumer-style products, we’ve seen some success in making the consumer aware that their maintenance is going to expire soon.
- For products that are expensive and often purchased centrally by people other than the users, this approach may be detrimental as notifying the end user instead of the IT or central purchasing, may upset your customers.
If you do go with this strategy – remember that you will need to get new licenses to the product upon renewal – which makes the “in-product automated software licensing” a critical component for good customer satisfaction.
We’ve recommended that producers generate “product maintenance” license features which carry the expiration date. This avoids accidentally turning-off a product or preventing an upgrade when some procedural error or except needs to occur.
Getting a software upgrade every 2-3 years make customers/enterprises start to think about “self-insuring” – where it might be cheaper to buy whole new licenses every 3-4 years than paying the maintenance for that period of time.
Tip #8: Upgrades should be on the customer’s timeline, not the producer’s – and it should be available for as long as the upgrade isn’t end-of-life’d
These are basic rules about upgrades:
- Don’t force your customers to upgrade. Make them want to upgrade.
- Make it easy for them to upgrade whenever they want to.
- Make it easy for them to “trial” the upgrade.
- Make the upgrade available even when they are no longer on maintenance (assuming it’s not a subscription). They should have access to every upgrade available during maintenance coverage.
Tip #9: Make sure your upgrades are only available to customers that pay maintenance
There are a number of strategies for this:
- Before allowing a customer to download an upgrade, check whether they were on active maintenance on the upgrade’s release date.
- When doing push delivery of upgrades (pushing to the device automatically), validate against maintenance entitlements.
- Change version numbers on your license keys. Do this once or twice a year, don’t do this for every upgrade. Best practice is to use “in-product activation” for a great customer experience.
Tip #10: Allow customers/enterprises to elect/identify upgrade contacts
Notification of upgrades often come from mass emails. Often those notices end up with the original purchasing agent or the budget authorizer that may have left the company. By providing a mechanism to say “Amy wants to receive upgrade notifications for product X and John wants to get notifications for product W”, producers are more likely to notify the right person.
Recently I was talking to an unhappy customer who said “we went live and then we never heard back from you.” This customer was using one of our first releases of FlexNet Embedded and thought we had abandoned the product! It turns out that the customer contacts from the initial purchase had all left the company. Once we provided them with a large number of release notes and updated their contacts, they were quite excited at the rapid pace of evolution of our products.
Tip #11: Make the fact that upgrades are available known in as many possible methods as you can
Send mass email notifications to the right folks. Make those software upgrade notifications polished – describes some key changes, perhaps add video links. Send those notifications in the recipients' native language.
Use your entitlement management system’s notification tool to promote your upgrade. If your product is a consumer product, push notifications directly to your application. Conversely, do not do this with enterprise-wide products as it will annoy IT and managers who want to control upgrade cycles.
Consider using in-product notification based on information from your software licenses, like posting upgrade-related messages on a management console. Be careful to avoid annoying end-users if providing enterprise-level products.
Tip #12: Make getting your software update easy
It amazes me that in 2015 I still hear producers who ship out upgrade CDs to their customers. My favorite story about physical software upgrades came from Livermore Lab which complained because they had received 10 pallets of boxes for a particular OS upgrade. Physical distribution of an upgrade is a guarantee that some customer will not receive it because they’ve moved or it was received by someone who only upgraded one box and forgot to give to the rest of the department or receiving didn’t recognize the name and threw it away or…
It’s simple – software upgrades must be available electronically - including firmware upgrades. Tesla has made a name for itself by providing electronic software updates to their cars - all producers should do the same.
Tip #13: Make your entitlement management system intelligent about upgrades
In your entitlement management system, upgrades should be managed. For end users/enterprises this means:
- Entitlements should be flagged as “upgrade available”
- When customers activate an older version of the product, let them know that a newer version is available
- Give customers tools to find all users who are running older versions
For your channel, this means:
- Receiving weekly reports with all customers on older versions so that they can proactively reach-out and offer training and/or installation help
- Being able to generate upgrade software licenses on their behalf
When your product managers are using your entitlement management system, give them the ability to view “upgrade adoption rates."
Tip #14: Involve your channel partners in the upgrade but don’t make them the ONLY conduit
Traditional reseller channel partners make little money from software upgrades. They might be able to sell some additional/beefier hardware or perhaps testing services or perhaps some training but they make far more money on new sales and therefore will spend their energy on that. Distributors will make no money on software upgrades and therefore have no incentive to be involved. From my experience, producers that rely entirely on channels for upgrades will find few customers on the latest version. Channel partners aren’t incented to prioritize this higher than their daily activities.
For software upgrades, I’ve always recommended that producers take the initiative of communicating availability and making it available. This shouldn’t be perceived as anti-channel – the company I mentioned in the first post (that grew from less than 40% to over 85%) sells almost entirely through channels.
However, I think it’s critical that channel partners be involved and be able to talk about the new capabilities that are available in the upgrades. In addition they should be able to go through the same experience of doing the upgrade (end-to-end) so that they can help customers that ask them about the process. This means:
- Creating not-for-resale (NFR) entitlements with maintenance
- Sending emails to these NFR contacts
- Having them download software like any other customer
- Experiencing the same entitlement management experience
In the example company I mentioned in the first blog in the series, we didn’t do this initially. Once we did it though the channel felt a lot more comfortable with the process and the experience.
Tip #15: Establish standards for how to handle late- and non-renewals
The common stages of late- and non-renewing customers are – establish how you'll handle each of these scenarios:
- Grace period, typically 30 days after expiration. Customers can renew without penalty.
- Late renewal period. Customer must pay from the expiration date (so backdate the maintenance) as well as a “late fee.” I’ve seen late fees as percentages (10-30%) as well as flat “processing” fees. I’ve seen the late renewal period between 6 to 12 months after expiration date. I’ve also seen the “late renewal period” to be indefinite with progressively larger late fees.
- Past renewal period. Customer is beyond the late renewal period and must purchase new software licenses.
Tip #16: Reduce renewal leakage by ensuring your products are protected
Several times a year, I talk to producers that have found that their software updates/upgrades are getting to customers who aren’t on maintenance anymore. This occurs because the channel partner will provide the new version to them (for great service) or they will find a copy on the internet. Simple solution – lock your products down and change the version numbers once or twice per year.
Tip #17: Renewal notifications often enough
Don’t send a software renewal notification once – send it multiple times. I recommend 90, 60, 30, 15 and 7 days before expiration. The notifications should change a little each time and should be professional looking. They should also include the list of entitlements that are about to expire. If the list is too long then add it as an attachment. They should include a call to action – links to an e-commerce site or the phone number of a sales or renewal representative or a channel partner.
I also recommend sending notifications one day after expiration and 30 days after expiration. The first one would tell the customer what they have lost access to. The 30 day notification is typically a last effort.
Tip #18: Make sure renewal notifications reach the right people
Same as with software upgrades – always give your customers an opportunity to nominate someone like a “contract administrator” or a “renewal administrator.”
Tip #19: Keep the channel involved
Unlike upgrades, the channel partners can make money with renewals so they usually want to be involved. Some producers rely on the channel to notify customers but I don't recommend that. Channel partners have thin margins and typically don’t have the tools for automation and can go out of business. Instead I recommend producers notify customers of renewals but they include the channel.
What I’ve seen/done:
- Enable channel partners to provide additional information, web site links and phone numbers so that producers can include them in renewal notices.
- The application producer sends the notification and includes the channel partner information. If the customer uses multiple channel partners, it’s important to split the notification by partner. This is to avoid the customer forwarding that notification with competitor information to the competitors unknowingly.
- Provide a user interface and/or automated reports to partners to get lists of their customer’s entitlements requiring renewals including “hot leads” (for renewals that are about to expire). I learned about a sophisticated distributor who would take this information and also send notifications to their customers directly.
- Provide a user interface where resellers can get statistics on how they are doing – number of customers due within 30, 60, 90 days, closure rate within 15, 30, 60, 90 days for expiration, number lost (post expiration), etc.
- Provide a user interface where end-customers can request a quote for items they want to renew and email the appropriate channel partners
Tip #20: Bypass the channel if you must
Not all channel partners are created equal. Some are stellar and will help producers drive renewals and others aren’t as active or effective. Sometimes producers need to take the renewal process back from the channel partner – but only if they stumble. So I’ve seen some producers who will add a “buy now” button on renewal notifications or renewal User interfaces (UI's) after giving the channel partner some chance to drive the renewal. These producers will then take the business directly away from the channel. As a compromise with the channel – some producers will add the “buy now” based on the # of units. So for less-than-five-unit customers, they will show a “buy now” after the channel has tried for 60 days but only after the renewal period has lapsed (-1 and -30 day notices) for larger customers. This goes back to the previous point that channels may not be able to automate as much as producers.
- Link to the prior blogs in the software licensing renewals series directly: Tips 1-6, Tips 7-11, Tips 12-14
- Watch "Best Practices for Ensuring Success with Software License Renewal Processes"