The shift toward a subscription economy has a lot of fascinating aspects to it – not only does it reduce the barrier for entry for new customers, allowing them to afford and justify purchases in a new way, but it expands the windows for customers to switch vendors.
Don’t panic – the subscription economy also gives vendors new opportunities to retain customers and to make each engagement more profitable. But that’ll come only if businesses really embrace what the subscription economy offers them. Those opportunities can be seen as burdens if viewed through the wrong lens. They aren’t burdens – they’re changes in the ways business does things, and those changes are almost all for the better.
First off, the subscription economy levels the bar between new customer acquisition and retention. Sure, new customers are still really important. But a cloud world means each customer’s investment is not all up front – it’s spread over time. If those new customers aren’t profitable until year three of their time with a company, losing them before that threshold means you paid for them to be disappointed. Thus, retention is clearly critical.
Not only is it a good thing when retention gets more love (and budget) within a sales and marketing organization, it’s a great thing when companies realize that there’s a financial value to building stronger and deeper relationships with customers. The pundits of the CRM world have been yelling about this for years, but the subscription economy pounds home the fact that creating legitimate, on-going, engaged customer relationships isn’t just a nice thing to do – it’s a lucrative pursuit that will directly impact your company’s bottom line.
Which brings us to contract lifecycle management (CLM). We outlined the basic reasons CLM is important in this era in an earlier post, but that looked at direct advantages of CLM. There are also some “softer” advantages of CLM and what it does to cement relationships and cut your churn rate. If you’re sincere in your assertion that retention is critical, and that you can’t have retention without solid relationships, you must also realize that the contract represents where the rubber meets the road for these concepts. Failing to be engaged around contract renewal dates or around customer obligations will cost you money directly, but it also sends a signal to the customer that damages the relationship: the signal that you don’t really care enough to pay attention to the most basic component of your relationship.
That’s what a contract is, in part: an agreement that codifies the most elemental parts of your relationship with a customer or partner. In the subscription era, in which relationships are ongoing and there can be many moving parts to how vendors fulfil their obligations to customers, there are more contracts than ever before, and more complex contracts. Managing these in a manual way is simply no longer possible; even the most conscientious account manager needs assistance in remembering important dates, events and opportunities to reinforce the relationship.
Instead of counting on brainpower to manage an increasingly complex web of contractually-mandated activities, smart companies are using CLM to manage administration and trigger actions. The result is that your employees become better at doing the things they should – the hard, transactional things like getting renewals signed, and the softer things like checking in with customers between renewals and sending marketing content to them to add value to the relationship. Either way, CLM makes it far easier to deliver an experience for the customer that makes them want to stick with your company and, at the same time, ensure that you keep customers far beyond the point at which they become profitable. In all these ways – and more – CLM contributes directly to your company’s revenue performance.
If, as Gartner says, 80 percent of your future profits will come from 20 percent of your existing customers, why would you allow a lack of automation jeopardize the relationship between you and that 20 percent?
To learn more about CallidusCloud CLM, visit our web page.