RevOps juggles optimizing revenue with maintaining customer satisfaction and engagement. Co-terming strategies offer a comprehensive solution for this. They reshape subscription renewals to meet both customer needs and your financial objectives.
This blog will explore the benefits of co-terming strategies for revenue operations. It discusses the alignment of subscription renewals with customer preferences and company financial goals. You’ll also learn how this approach simplifies contract management and billing.
Co-terming aligns the renewal dates of various subscriptions or services your company sells to the same customer subscription term length. Co-terming groups all renewals, like software licenses or support services, into a single date. The goal is to allow customers to expand or decrease their contracts while aligning renewal dates and payment schedules.
Co-terming eases the administrative burden and also improves cash flow predictability. SaaS companies often use this technique to enhance customer satisfaction and operational efficiency. You get a more streamlined process, and your customers enjoy the simplicity. It's a win-win.
Suppose a company starts with a software subscription on January 1, 2024, at an annual rate of $40,000. On July 1, 2024, they decided to add a service costing $20,000 annually. To align with the original contract’s end date, the additional service fee is prorated for the remaining term of the initial contract.
The prorated fee is calculated based on the days the additional service will be used until the co-term date (December 31, 2024). At the time of renewal, both the initial and additional services are set to renew together, and the combined Annual Recurring Revenue (ARR) reflects the sum of both services for a full year. The method makes renewals and billing easier for customers. It also allows companies to report and forecast revenue with more confidence.
Note: The prorated amount is $10,000, because the company is only paying for six months of service (July 1 to Dec 31) on product 2.
As you move upmarket and target bigger customers, your CAC payback periods grow in length. Co-terming helps you reduce the payback periods by opening doors to mid-term expansions, early renewals, upsells, and cross-sells. Here are some more benefits of co-terming strategies for RevOps teams.
Co-terming strategies can reduce price sensitivity during renewal processes. This method aligns the end dates of new and current services to streamline billing cycles. It eases the renewal process and helps customers grasp and agree to the cost of bundled services more easily.
Customers who see the value in a straightforward, unified renewal are less likely to resist the prices. This method smooths out negotiations, as customers appreciate the convenience and clarity.
Co-terming allows companies to secure renewal and expansion deals without waiting for renewal periods.
Suppose a business sees the need for better services in July, but their contract renews in December. Co-terming adds this service right away. This meets customer needs quickly and matches the service’s billing cycle to the contract’s renewal date. Customers and the company enjoy a simpler billing process.
Furthermore, this method enhances the perceived value of the company's offerings. It encourages customers to consider more substantial expansions or upgrades.
Co-terming makes expanding services easier and quicker. This strengthens relationships with customers and boosts revenue in a strategic, customer-focused manner.
Co-terming strategies significantly reduce customer churn, mainly when customers use two or more products.
When renewal times align, customers are likelier to see the value in a bundled offering. This enhances their commitment to your services. It transforms the renewal process into a more manageable event. Thus, it improves customer satisfaction and loyalty.
A positive customer experience greatly reduces the chance of churn. Customers prefer fewer renewal decisions. This preference leads them to continue their subscriptions.
Co-terming strategies improve SaaS renewal rates by aligning subscription renewals to a single date. When subscriptions co-terminate, customers face fewer individual renewal decisions throughout the year. This consolidation reduces the administrative burden on them and makes it more likely to renew.
Additionally, co-terming provides a clear overview of services. It facilitates easier upsell or cross-sell opportunities during renewal discussions. By making the renewal process more straightforward and less time-consuming, co-terming effectively increases the likelihood of subscription renewals.
About 48% of companies with a recurring revenue business model struggle with accounting and reporting challenges. Co-terming strategies help companies navigate through these challenges by streamlining operations for both vendors and buyers.
For vendors, this approach streamlines the renewal process. It makes account management and billing easier. Buyers enjoy a simplified billing cycle. It lessens the administrative load and makes budgeting easier for them.
When subscription end dates match, both customers and providers gain a clearer view of finances and improve how they operate. This makes co-terming a win-win approach.
Cacheflow aims to make subscription management as effortless as possible for vendors and buyers. It streamlines the management of co-termed subscriptions in several key ways:
Cacheflow offers an interactive buyer experience for renewing or changing SaaS contracts. It highlights changes in customer agreements and allows for quick sign-offs and payments.
This eliminates the traditional reliance on spreadsheets and PDFs. You get a functional dashboard to track renewable revenue and facilitate add-ons automatically.
Cacheflow makes the billing and renewal process smoother for both sellers and customers. Our platform automatically calculates pro-rated payment amounts for you, and bills your customers the new amounts.
Book a demo and see how easy you can make it to manage co-terming for your business.
