Standardizing renewal increases

Options
sarahcs
sarahcs Member Posts: 1 Newcomer
edited August 2023 in CS Org Conversations

Hi all! New member here. Looking forward to interacting with you all.

I found some related posts, but wanted to start a new thread about standardizing renewal price increases for annual contracts.

Not the process of securing the renewal, but rather how to internally standardize rates of increase. There's not a ton of best practice content out there on the "gold standard" rate of increase—especially in this climate.

I lean towards LTV and relationship value—proposing we max our renewal increases at 10% and vy for growth through pricing levers. My head of sales, being a revenue guy, prefers to go in at a minimum 20% increase to get older contracts up to par with newer contracts—a strategy that has succeeded on most occasions, but has left one or two sour customers.

The other benefit of standardizing this will of course be cross-functional clarity on expectations and forecasts.

So I ask this of you, fellow CS folk: What rate have you standardized for flat annual renewals? Is there a benchmark or best practice here that I'm missing? Cheers.

Tagged:

Comments

  • Sabhar Jain
    Sabhar Jain Member Posts: 6 Navigator
    First Comment First Anniversary Name Dropper Photogenic
    Options

    Hey,

    I believe 10-15% is a decent number and would be accepted easily.

    Getting a number 20% and above we have shown the business value to the customers and the at par support our team has.

    So what we believe is a mix of both, depending upon the customers and business value.

  • rdesmarais
    rdesmarais Member Posts: 14 Navigator
    First Comment 5 Insightfuls Photogenic
    Options

    20% is aggressive. At Talkdesk, we had a default revenue uplift of 12% as default. CSMs had the ability to negotiate if needed. The previous revenue uplift % was 9% so you had room to maneuver if needed.

  • Adam Ince
    Adam Ince Member Posts: 7 Navigator
    First Comment Photogenic
    Options

    10% is a fair place to start. I see 5% to 12% most commonly coupled with an autorenewal clause.

    At 20% you're introducing a price increase that's out of the norm and will either have it removed from the agreement by prospects, illicit a cancellation of the autorenewal immediately to avoid the increase, and/or an increase of cancellations post autorenewal due to the increase that is outside their budget.