When it is time to think about contract renewal, what is the first question you ask yourself? It is probably something like; How are we doing right now?
That is a good place to start. Revenue and satisfaction scores will help you to assess that.
But there is more to this question. It will be your client who decides whether or not to renew the contract. So, the best place to start thinking about contract renewal is to answer the question: “How does our client think we are doing?”.
Even when your performance is great, you should answer this question both from today’s and a future perspective. In a multi-year service contract, perspectives will change. Although you might be performing great according to the KPI’s in the contract, chance is your clients’ priorities have changed. In other words: They might no longer care as much.
This is actually a common effect. When you solve the problems you were hired to solve, these problems are no longer a high priority for the decision makers at the client. This is what is known as the service life cycle: Although what you do for the client is still the same, the value perceived by your client has diminished. Your service has progressed in the service life cycle.
So, the first question you should ask yourself when aiming for renewal is: How valuable is our current solution to the clients’ future?
Indicators that your service is progressing in- or nearing the end of the life cycle, are things like:
- The agreed upon performance is more and more considered just a basic performance
- The client is asking you to be innovative
- The client expresses a wish for you to be a proactive business partner
- The client is looking for additional solutions to progress even more
- The client wants to review costs
- The client expresses concerns about price
- The level of personal involvement of the decision makers in your service is in decline
- Decision makers are no longer keen to learn about the progress that is being made
- The decision makers are less interested in meeting you
- Meetings get cancelled or pushed forward
- There is less talk about long term partnership
- The client meets with your competitors
So how are you doing? Is your client showing signs of continuation? Signs of high interest in what you are doing for them? Do they still consider your service to be of high value for their future?
This analysis is the place to start when thinking on contract renewal. It is also the first question on the Contract Renewal Canvas. If you have not downloaded it yet, do it now. It’s free and it will guide the thinking of your teams!