Technology Resellers Have a Profit Problem — Poor Contract Renewal Management

Yeah. We said that.

Many resellers are leaving money on the table. Image credit Photo by Jack Harner on Unsplash

Maintenance contracts are a large part of many businesses' revenue stream. In fact, per the Gartner Group, contracts that provide recurring service revenues can yield between 70% and 80% of all revenue in a typical technology services company.

This is because it provides predictable income, builds defensible business models, and yields more customer satisfaction from long-term relationships. It is important for technology resellers to effectively manage OEM contracts in order to obtain the best OEM pricing, retain existing customers, and most importantly, increase profits.

The Opportunity

Technology sales executives looking to increase their renewal rates by at least 20% should take a more strategic approach to renewals, according to recent findings by industry analysts.

According to the report, taking a more proactive, customer-focused approach can result in renewal rates as high as 90%, compared to the 70% typical without a strategy. By engaging customers earlier and focusing on business value rather than product features, sales executives can improve their chances of success in renewing contracts.

For example, being able to articulate the financial impact of downtime or data loss can be a strong motivator for customers considering upgrading or renewing their technology contracts.

With the right strategy and execution, technology sales executives can see significant improvements in renewal rates and overall customer satisfaction.

The Problem

According to a report by Aberdeen Group, organizations that are considered “best-in-class” have 56% of their contracts renewed every year.

This means that even the best organizations have “leaks” in their renewal process.

This can lead to lost revenue opportunities for technology resellers that fail to take advantage of OEM renewal opportunities. It can also lead to existing customer dissatisfaction since OEMs are continuously looking for new customers.

The Solution

Technology sales executives should work with OEM partners who provide proactive OEM contract management services to increase customer retention rates above 90%. Technology resellers should implement a contract management process that includes the following:

1) Determining customer satisfaction levels

2) Providing customers with key messages for change-of-contract negotiation

3) Gathering stakeholder feedback to provide appropriate renewal pricing and terms

Conclusion

The OEM contract renewal process can be improved by utilizing contract management software.

For technology resellers, OEMs are a large revenue source and should be managed accordingly to increase customer retention rates.

Technology resellers should gather stakeholder feedback to provide appropriate renewal pricing and terms in OEM contract management processes.

If you're ready to fix your profit problem, schedule a call with our team today.