Service Contract renewals are vital for a steady stream of service revenues. Renewal Rate is also a key performance indicator for service revenues, customer satisfaction, and customer loyalty.
In a recent study with professionals involved in extended warranty and extended service programs, representatives from a broad array of companies have shared about their practices about Service Contract Renewals. The best practices from the study can help companies identify strategies and tactics to keep renewal rates high.
Service Contract Renewal Rates
While the majority (59.5%) of companies experience renewal rates of 75% or more, only 22.5% have achieved renewal rates greater than 90%.
Renewal Notifications to Customers
Most companies notify customers that agreements are up for renewal/about to expire more than 75 days in advance
Customers are usually notified about service contract expiration and renewal by email.
Frequency of Customer Contact about Renewals
The frequency of communication is also a critical driver when it comes to influencing attachment and renewal rates. Approximately one-third of respondents indicate their companies provide 3 or more notifications that contracts are up for renewal.
Best in class companies
The survey findings suggest that best in class companies follow a structured and disciplined approach to marketing and selling extended warranties and service programs. They have implemented the right systems and processes to facilitate high attachment and renewal rates.
These companies do not view sales of these programs as a one-time event to be made only at the product point of sale. Indeed, they sell beyond the original point of purchase and align attachment and renewals with the customer entitlement process. Furthermore, they promote their programs through a wide array of marketing communications tactics and rely on frequent and timely communication to get their message across. Most importantly, they ensure their programs are designed to meet the needs of their customer and are very specific about what the customer can expect to receive in terms of service features, resources, and coverage.