Software companies invest significantly in acquiring new customers. But too often, once the licenses are sold, attention wanes and customer renewals are taken for granted. Few companies apply their analytical capabilities to understanding how to improve renewal rates and upsell. This deficiency fails to recognize the importance of renewals, which can represent up to half a software company’s revenue and as much as 80% of its profits. Investment in data and analytics, customer success and renewal management programs can lift renewal rates, dramatically improving profitability.
Thierry Depeyrot and Simon Heap are partners with Bain & Company’s Global Technology practice, and both work in the firm’s Silicon Valley office.
Hacking Software’s Rule of 40
Software companies need to balance growth and profitability to create lasting value.