Multiplying Subscription Success: Understanding Renewal Metrics in Salesforce CPQ

The subscription economy has grown by 435% over the last decade and is projected to reach a market size of $1.5 trillion by 2025, signaling its permanence as a dominant business model. As businesses increasingly adopt subscription and servitization strategies, they unlock continuous revenue streams and offer tailored services that enhance customer loyalty and satisfaction.^[i]

Yet, amidst this growth, managing renewals becomes paramount. Without a robust system, you risk missing out on critical renewals, making pricing errors, and overlooking valuable upsell opportunities. 

This is where the Salesforce CPQ solution (Configure, Price, Quote) becomes crucial.

With Salesforce CPQ, you can streamline the renewal process and keep track of key metrics that directly impact your business’s ability to retain customers and grow revenue. Salesforce CPQ helps ensure that renewals are accurate, timely, and personalized. 

But how do you know if you’re on the right track? That’s where renewal metrics come in.

In this blog post, we’ll walk through the problems you might face with renewals, how Salesforce CPQ helps solve these issues, and why tracking specific renewal metrics is important for improving your overall subscription success.

Renewal Challenges You Might Face

Without a streamlined process, handling renewals manually can lead to several problems:

• Inconsistent Pricing: Customers may receive inaccurate renewal quotes, leading to confusion or dissatisfaction.
• Delayed Responses: Manually managing renewals slows down your response time, frustrating customers who expect quick and clear answers.
• Missed Opportunities for Upsell: Without clear data about customer usage and needs, you might miss chances to offer higher-tier services or additional products.

These challenges can cost you less revenue and lower customer satisfaction. That’s why it’s critical to have a system that not only automates the renewal process but also provides you with clear insights into how to improve.

Solving the Renewal Puzzle with Salesforce CPQ

By using Salesforce CPQ, you can automate and optimize your renewal process in several ways:

• Accurate, Consistent Quotes: Salesforce CPQ ensures that every renewal quote is accurate and based on standardized pricing models, reducing the risk of manual errors.
• Automated Workflows: With automated workflows, you can send renewal reminders well before the expiration date, speeding up the process and giving customers plenty of time to consider their options.
• Personalized Offers: Salesforce CPQ gives you access to detailed customer data, allowing you to personalize renewal quotes and include upsell or cross-sell opportunities tailored to the customer’s needs.

With Salesforce CPQ, you’re not just sending out renewal quotes; you’re managing the entire process in a way that enhances customer experience and improves your chances of retaining valuable clients.

Why It’s Important to Track Renewal Metrics?

Tracking renewal metrics gives you insights to optimize your subscription management and grow your business. Each metric highlights a specific aspect of your renewals and helps you understand where improvements can be made. Here’s a breakdown of what each metric means, with real-world examples, and why it’s important.

1. Renewal Rate

Definition: The percentage of subscribers who renew their contracts out of all contracts that are up for renewal.       

Example: Imagine your software-as-a-service (SaaS) company has a renewal rate of 85% over the past year. This means 85 out of every 100 customers are renewing their subscriptions. However, after further analysis, you realize that your lower-tier customers – who contribute less to a company’s revenue – have a renewal rate of just 65%, so you decide to enhance your value proposition for that segment by offering more affordable add-ons or features.

Why It’s Important: A high renewal rate suggests that your customer satisfaction and retention strategies are working well. It reflects your ability to reduce churn and maintain strong customer loyalty, which is essential for stable revenue.

2. Churn Rate

Definition: The percentage of clients who do not renew their memberships within a specified time frame.

Example: Suppose your company’s churn rate is 15%. After analyzing the situation, you discover that many of these customers were unhappy with the support they received during the onboarding process. This insight enables you to develop a stronger onboarding experience and implement dedicated account management, ultimately reducing churn over time.

Why It’s Important: Tracking churn rates helps you identify issues with your product, service, or renewal process. High churn may indicate customer dissatisfaction or competitive pressures that need immediate attention.

3. Renewal Revenue

Definition: The total amount of money received from subscription renewals.

Example: Suppose your company renews $5 million in contracts during the current fiscal year. Larger enterprise customers account for 70% of that revenue. You decide to focus your efforts on building stronger relationships with these high-value clients. You consider offering tailored solutions to encourage longer-term commitments.     

Why It’s Important: Renewal revenue gives you a clear picture of the financial impact of renewals on your business. Monitoring it helps you budget effectively and forecast future revenue streams.

4. Net Revenue Retention (NRR)

Definition: Net Revenue Retention (NRR) measures the percentage of recurring revenue retained from existing customers, including upsells and cross-sells, after accounting for churn.

Example:  Let’s say your company has a Net Revenue Retention (NRR) rate of 110%. This means you have successfully kept all of your existing customers. Additionally, you have generated an extra 10% in revenue from these customers through upsells or cross-sells. For example, this could happen when customers upgrade to a premium plan or add new services when they renew their contracts.

Why It’s Important: NRR indicates how effectively your renewal process generates additional revenue and minimizes churn. A higher NRR demonstrates satisfied customers and the success of your upselling and cross-selling strategies.

5. Customer Lifetime Value (CLV)

Definition: The total amount of money a client is expected to generate over the course of their relationship with your company.

Example: Suppose the average customer spends $1,000 per year on your service, and the average customer stays for three years, giving you a CLV of $3,000. If you improve your renewal process and customers stay an additional year on average, your CLV increases to $4,000, leading to higher long-term revenue.

Why It’s Important: CLV helps you evaluate the long-term value of retaining customers. A higher CLV is a sign of strong customer satisfaction and well-executed renewal strategies, guiding decisions on customer engagement and retention.

6. Time to Renewal (TTR)

Definition: The average time it takes to complete the renewal process from start to finish.

Example: Let’s suppose that you discover that it takes your team an average of 30 days to finalize renewals. With  CPQ automation, you can simplify tasks like generating quotes, managing approvals, sending reminders, removing manual steps, and minimizing delays in the process. By streamlining this workflow, you can reduce the renewal time to just 10 days. This acceleration not only boosts internal efficiency but also enhances the customer experience by providing a faster, more seamless renewal journey.

Why It’s Important: A shorter TTR indicates a more streamlined and efficient renewal process, which reduces delays and helps maintain a positive customer experience. A slow TTR could frustrate customers and lead to potential cancellations.

7. Renewal Upsell Rate

Definition: The proportion of renewals that result in upsells or cross-sells, such as customers upgrading to higher-tier plans or adding new features.

Example: Suppose, out of 100 renewed contracts, 30 included upsells such as premium support or additional features, giving you a 30% upsell rate. This increases immediate revenue and strengthens customer relationships by offering them more value.

Why It’s Important: The renewal upsell rate shows how well you leverage the renewal process to introduce customers to new products or services, which helps you grow your revenue and increase customer value over time.

8. Renewal Discount Utilization

Definition: This measures the percentage of contracts that are renewed using discounts or special pricing. 

Example: Imagine a company that offers a 10% discount to customers who renew early. By analyzing the data, you find that 20% of your renewals were closed using this discount. However, the margin analysis reveals that the profitability of these renewals remains high, making the discount strategy a success.

Why It’s Important: Understanding discount utilization allows you to assess how your pricing strategies affect revenue and renewal rates. It ensures you’re not overly reliant on discounts, maintaining a balance between customer retention and profitability.

Using Salesforce CPQ to Boost Your Renewal Metrics

Implementing Salesforce Configure, Price, Quote (CPQ) can dramatically enhance how you track and manage renewal metrics. By leveraging it, you can automate processes, streamline workflows, and ultimately, drive higher customer retention rates. Here’s a closer look at using Salesforce CPQ effectively to improve your renewal metrics.

1. Automate Renewal Tracking

Utilize Automation: By harnessing the power of Salesforce CPQ, you can automate the tracking of renewal dates, ensuring timely follow-ups and minimizing administrative burdens. Set up automated reminders to alert both your team and customers in advance of renewal dates, significantly improving the chances of a smooth renewal process.

Data Integration: Integrating renewal metrics into your Salesforce  CPQ system allows you to collect and evaluate data effortlessly. This integration provides a comprehensive overview of your renewal performance, enabling you to make informed decisions based on accurate data rather than assumptions.

2. Enhance Reporting and Analytics

Custom Reports: Create tailored reports within your Salesforce CPQ system to track renewal numbers and unveil performance trends. By leveraging these insights, you can make data-driven choices that enhance your renewal strategies and drive better outcomes.

Dashboards: Utilize dashboards within your Salesforce CPQ system to visualize key indicators related to renewals in real-time. This visual representation helps you quickly assess renewal challenges and respond proactively, ensuring you stay ahead of potential issues.

3. Optimize Renewal Processes

Streamline Workflows: With the capabilities of your Salesforce CPQ system, you can simplify and streamline renewal workflows. This optimization reduces the time and effort required to complete renewals, allowing you to focus on higher-value tasks.

Customer Communication: Automated communication tools in your Salesforce CPQ system enable you to maintain regular contact with clients, ensuring you’re always attuned to their renewal needs. By anticipating their requirements, you can facilitate a more seamless renewal experience.

4. Analyze and Improve

Feedback Loop: Prioritize gathering feedback from each renewal cycle to identify areas for improvement. By analyzing this input, you can refine your renewal strategies and develop targeted initiatives to enhance customer satisfaction.

Continuous Improvement: Regularly analyze renewal metrics to stay vigilant regarding trends and areas that require optimization. By committing to continuous improvement, you ensure your renewal process remains effective and efficient over time.

5. Training and Support

Educate Teams: Provide your customer success and sales teams with comprehensive training on the importance of renewal KPIs and the effective use of Salesforce CPQ tools. This knowledge equips them to leverage the system’s capabilities to the fullest.

Support Systems: Ensure ongoing support and resources are available for your teams, helping them navigate the complexities of renewals and maximize the features of Salesforce CPQ for optimal efficiency. Continuous assistance fosters a culture of success and empowers your teams to excel.

Conclusion

Using Salesforce CPQ for renewals is a game-changer for subscription-based businesses. Not only does it streamline the process and eliminate manual errors, but it also provides valuable insights through renewal metrics. As you implement Salesforce CPQ into your renewal strategy, tracking these metrics will be essential for continuously optimizing your approach and ensuring your business thrives in the long term. Whether you’re managing 100 subscriptions or 10,000, having the right metrics in place will help you stay ahead of the curve, ensuring that renewals are handled with precision and care.