Retention versus renewal – is there a difference?

Let’s start with reflecting on the difference between churn and retention.  Churn reflects the customers you lost, it’s a passive activity when the customer has already made a decision to leave your business, and it’s a very tough place to win customers back from.  At Workshare, we use our customer success executives to re-engage with churned customers to help understand their decision and discover whether we can help them to re-achieve value, but it’s not a place we want our customers to be.

On the flip side, retention is all about keeping your customers, proactively nurturing relationships, addressing issues and ensuring customer adoption is successful.  Retention should start from the moment the deal is signed all the way through to renewal of contract.  For businesses like Workshare, traditional customer support efforts are backed up with the proactive technical project management skills of the customer success team.

For me, traditional businesses who focus primarily on their churn numbers are missing a trick – lack of focus on customers BEFORE they decide to churn means the business looses customers unnecessarily and often with little insight into why the customer churned.

Furthermore, this drives businesses to focus on expensive acquisition initiatives, deep discounting and aggressive competitive marketing.  Examples of this can be seem in the mobile phone markets and in cable / satellite TV markets, where new customers receive better pricing and better service than long-standing customers.  Hopefully, you’ll agree with me that retention focus is a much better way to grow a profitable business than churn focus!

A number of businesses I’ve spoken to see the words “retention” and “renewal” as interchangeable. The action of getting a customer to sign up for another fixed term – including the steps the customer goes through and the outputs the customer receives – do not reflect retention.  This is the action of renewal.  A renewals function should be focused on a specific administrative process of contacting a customer due to renew, introducing changes (price increase, contract term changes), processing the renewal and updating systems.  Renewal is a small part of retention.

All too often, the renewals function is held to account for getting the money in, without the necessary skills and support.  Unhappy customers may not be willing to renew or accept a price increase, which drives a culture of discounting and give-aways.  Exacerbating this is the practice of setting sales-style targets and commission on achieving numbers, driving the renewals function to get customers renewed at any cost.

Contrast this with a healthy retention approach, starting from a supportive deployment and adoption approach (driven by customer success), ongoing structured health checks during the life of the contract (both human and automated), a solidly high availability support function (the Workshare customer support team fixed almost 8 out of 10 technical issues same day this month) and an effective administrative renewal process (the renewals function at Workshare sits within the customer success team, rather than the traditional approach of being a part of the sales team) and you’ve got a retention strategy.  This involves sales (commercial relationship), customer success (operational relationship), customer support (technical relationship) and renewals (finance / procurement relationship.) In high value / complex customer accounts, a virtual team plans a retention strategy, for smaller accounts, automation supports the retention goals.

SaaS and technology businesses tend to see the value in this approach, understanding that retained customers are more likely to become advocates and drive viral growth. But even if your established business is churn obsessed, it’s not that difficult to start looking at a retention focus.  There’s plenty of steer and advice online to create a groundswell in your business to make the shift (a great start is Jean Bliss’s Reality Audit). This could be your first major step toward getting the customer back to the heart of your business!

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