What is Renewal Automation?

Renewal automation can be defined as the automation of the renewal process for customer subscriptions or service agreements using software tools. In this case, instead of manually tracking subscriptions, businesses implement automated software to notify customers, send reminders with regard to payments, generate renewal quotes, and process payments. This in turn saves the hassle of manual intervention in renewal processes, thereby facilitating businesses and saving risks of errors.
In the SaaS industry, where recurring revenue is the base of stability, renewal automation is important to scale, grow, reduce churn, and maintain predictable revenue streams.

Main characteristics of renewal automation

The most important features of renewal automation are automated reminders and notifications, quote generation and processing, payment processing and customer communication workflows.

Automated notifications

In automated renewal, the system sends automated renewal reminders to customers at regular time intervals prior to the expiry of their contracts/subscriptions. These reminders can be customized according to customer segments, contract value, and renewal period. If customers receive reminders and notifications on renewals of subscriptions, they make payment commitments prior to the due date and go ahead with continuous services.

Quote processing and generation: Automated solutions produce renewal quotes with revised pricing, terms, and service levels. This reduces any need for manual quote processing.

Payment processing: Integration with payment systems allows automatic billing and payment collection for renewals, thereby reducing friction in the customer experience.

Customer communication workflows: Automated email sequences and follow-up campaigns help to stay in contact with customers via the renewal process; they also help in addressing common concerns and highlighting value propositions.

Why is renewal automation necessary for subscription businesses?

In the SaaS ecosystem, revenue is important and relies on customer retention, account expansion, and recurring subscriptions. SaaS businesses depend on renewals to maintain and thrive alongside their customer base. This in turn makes renewal processes a crucial point in the customer lifecycle.

Automation renewal ensures that this process is consistent and efficient, thereby reducing any chance of errors and delays that can lead to a churn scenario. With an automated renewal mechanism that allows sending renewal reminders, generating quotes, and updating billing details, SaaS businesses can gain operational efficiency and an advantage over other competitors.

Further, renewal automation gathers insights on upcoming renewals and customer behavioral trends, allowing finance, sales, and relevant teams to actively rule out risks and identify any upselling opportunities. Also, in the SaaS ecosystem, renewal automation leaves a direct influence on customer lifetime value and revenue predictability.

What are the benefits of renewal automation for businesses?

Renewal automation provides revenue predictability, a reduction in revenue leakages, increased customer lifetime value, scalable growth infrastructure, and reduced billing errors.
Following is an explanation of each of the above-mentioned benefits.

Predictability of revenue

By virtue of automated monitoring, renewals occur as a matter of course and on time. Finance and sales departments are able to reliably project revenue with certainty and precision with the help of automation.

Reduction of revenue leakage

Automated systems tend to incorporate data on product use, customer actions, and history of contracts, enabling detection and avoidance of loss of revenue due to missed renewals or payment defaults. The automation process aids in dealing with any loopholes or gaps that cause revenue leakages, thus protecting the cash flow cycle from revenue loss.

Elevated Customer Lifetime Value (CLV)

Through increasing retention and enabling growth, renewal automation directly adds to greater CLV. When customers remain longer, renew on time, and increase their contracts over time, the return on the initial cost of acquisition grows immensely.

Example: A SaaS organization uses automation to manage customer subscription renewals. Using personalized reminders, auto-renewal options, and timely upsell offers, the company reduces churn and increases average contract size over a 2-year period.

One customer initially subscribes to a $500/year plan, and with renewal automation, they renew each year without fail. Just after one year, they upgrade to a $1,000/year plan, and stick around the business for 5 years, resulting in total revenue of $4500 from this customer.

Infrastructure for scalable growth

As SaaS companies expand, handling renewals manually becomes impossible. Automation allows the handling of thousands of renewals with the same care and precision as a few. Such scalability is essential for businesses with high growth without corresponding increases in personnel.

Fewer billing mistakes

When renewals are processed manually, they tend to result in miscommunication, expired cards, faulty billing procedures, and more, which lead to declined payments and chargebacks. Automation of renewal minimizes such risks by connecting with payment gateways, verifying billing details, and kicking off timely reminders for updates on payments.

What are the downsides of subscription renewal management?

Manual renewal management can pose a significant number of challenges for a business, such as sending manual reminders, challenges with resource allocation, card expiration, payment process barriers, access issues, customer forgetfulness, friction in payment processes, discount complexity, and subscription upgrade/downgrade management.

Here is an overview of each of the stated downsides of renewal management.

Sending manual reminders to customers

If reminders for renewals are not automated, businesses have to create and send them to customers on their own. This makes it arduous to personalize renewal invoices as per the needs of each customer segment. Manually sending reminders can be difficult as well, especially if customer bases are large with varying renewal dates.

Manual intervention is necessarily required on a per-day basis to make this renewal notification possible. In this process, employee productivity is often lost, leaving a negative impact on the overall goals of the business.

Challenges with resource allocation

If a business has an extensive customer base with varying renewal dates, then staff has to spend a good chunk of their time sending reminders every day. This creates a significant operational strain that scales poorly with business growth. This often leads to businesses requiring additional staff, leaving other critical tasks at stake.

Payment process barriers

Renewals can become hard if customers have to fill in their full payment details every time. This makes their payment process slow and tough. The complexity increases when customers must navigate through a variety of steps that can create frustration and abandonment points.

Login and access complications

If customers have to log in to their customer portals to pay or have to undergo a complex checkout process, it holds them back from paying any further. These friction points can hinder renewal consistency and discourage renewals completely.

Card expiration issues

Expiry of cards can lead to payment failures, and they in turn cause involuntary churn. In this type of churn, customers drop their subscriptions without realizing it. This creates a problematic scenario where businesses lose potential customers and also those who actually intended to continue with their subscriptions.

Discount complexity

If a business has rendered discounts to various customers of varying segments, then discounts must be calculated separately. The complexity escalates when businesses offer personalized pricing, as discount calculation is not precise; it can cost businesses either customer happiness or profitability.

Subscription complications

If customers have made or requested adjustments in their subscriptions, they must be adjusted before the renewal date. Subscription renewal must be based on the modifications made. Managing these changes while continuing to address customer requests requires careful workflows. These actions in turn can leave room for errors and miscommunication, thereby rendering the subscription renewal erroneous.

Forgetful customers

Customers can often forget to pay for renewals, mainly when they have several subscriptions running simultaneously. This is particularly a challenge for the modern-day subscription market, where several subscriptions are ongoing and need to be paid for.

How does SubscriptionFlow help with renewal automation and management?

SubscriptionFlow addresses renewal management challenges through three main automation features, i.e., one-click renewals, one-click reactivation, and early renewal and advanced payments.

Here is a thorough breakdown of each of the mentioned features.

One-click renewals

These help to address any barriers to renewal by allowing businesses to send renewal links to their customers via email. As soon as customers click on the given links, their subscription is easily renewed. This feature removes payment forms, complex checkouts, and login requirements, making renewal simple while also maximizing retention.

One-click reactivation

This feature enhances convenience by allowing customers to resume their cancelled or paused subscriptions with one single click. The platform saves original payment data and account information, enabling customers to return without recreating new accounts or re-entering payment information.

Early renewal/advance payments

This provides flexibility for customers who require subscription renewal early for various reasons or secure current pricing before rate increases. This feature also helps customers consolidate billing cycles across multiple subscriptions.