How to Avoid the SaaS Auto-renewal Trap
One of the fundamentals of SaaS contracts is "auto-renewal", which allows software companies to automatically charge customers monthly or annually without having to repeat the sales process. This billing model often leads to unnecessary hassle between customers and companies. A contract can become a serious problem in case of the customer was not intending to auto-renew but rather adjust, downgrade or terminate it entirely. But when it is all aligned, you will never have to worry about actively renewing a critical tool each month or year. Just imagine the panic if you got blocked from your CRM software because you failed to make the renewal date.
On one side, some SaaS companies use unethical tactics to force subscriptions by not sending invoices for each charge, eliminating the cancellation button, continuing to charge despite inactivity, and much more. On the other side, some customers end up with unwanted contract renewals because they fail to pay close attention to the terms of their contracts, including the renewal cycle. They often feel taken advantage of by auto-renewal arrangements that they have never fully comprehended in the first place.
The SaaS business is highly dependent on auto-renewal, a core principle of any pricing model. For vendors, it is reliable cash flow that guarantees existing customers and leaves time for pursuing new ones. Auto-renewals are an obvious technique to increase the expected value of future SaaS revenue. For customers, it is an uninterrupted service for all key tools without further paperwork. However, there is always the risk of forgetting the non-renewal deadline and being locked for sequential self-renewing terms – even if they may not want the service anymore.
The typical SaaS auto-renewal scenario
According to Flexera's State of ITAM 2022 report, nearly 29% of SaaS spend is underutilized, overlapped, or wasted. Migrating to another software can have unexpected effects on the whole workforce. Companies often pay more and keep current plans running rather than look for cheaper alternatives that might not perform satisfactorily. To them, it is better to stick with what they know and come to terms with auto-renewal clauses to maintain the features they love.
Now, take a company that is successful, significantly growing in size. You cannot expect SaaS vendors to come to you and simply offer you better prices for more licenses. The only way to keep your prices low as your company scales is to proactively negotiate your contracts.
Our SaaS Buyers Guide explains in detail the challenges of negotiating SaaS contracts. Here is how it usually goes: the first time you ask for it, you get a discount. The second time, it gets tricky and requires notable effort. You will need to prepare, test countless demos, collect quotes, and study viable options that will minimize impacts on your workforce. Then your contract runs for another year or two, and the cycle repeats itself.
In terms of saving time and money, outsourcing SaaS procurement should be a no-brainer for hyper-growth companies. It is the ultimate solution to keeping tabs on every SaaS contract and renegotiating at any growth stage.
How does Sastrify fight the auto-renewal hassle?
Both sides of the issue, software companies and customers, are guilty in one way or another of miscommunication. But it does not have to be that way as they could have a win-win situation that could satisfy them both. Sastrify provides you with full support to avoid the unwanted contract renewal trap. Our approach to retaining customers is to have a well-planned renewal process. When it is time to renew your subscription, we want you to be content, not hesitant. SaaS auto-renewals are only accepted when you have the best contract conditions. Enjoy a mixture of human and automated contract process that guarantees you stay top of your tech stack.
Here is how we make no room for any traps:
- Knowing customer needs
Get your purchase history and usage requirements fully analyzed by our team of experts. For a better negotiation outcome, learning about your scope of work is a crucial step before any SaaS renewal.
- Negotiating the best deals
Leave SaaS negotiations and renewals to our team for full optimization. We have market data from thousands of tools and cumulative million-dollar spend to get you fair terms year on year. A support system that will right-size your contracts and subscriptions.
- Using every minute
Secure a solid plan for the renewal of each tool, personally created in advance. This allows smart decision-making for you as our team reviews data, predicts value, and showcases potential interests.
- Sending reminders
Sync your data in our SaaS contract management platform to track purchases and never miss a renewal date. This will also provide you a comprehensive overview that can increase visibility and shorten future renewal approval processes.
Auto-renewal considerations to keep in mind
Recognize that the list above is only how we try to keep you informed and prevent you from ever being stuck in an unwanted renewal situation. Remembering important dates is all on you! In order to get out of a renewal situation, you must first find a fault to cancel without penalty. Always review your rights and make sure the SaaS vendor met their obligations before taking any action. Does the contract mention certain activities from the vendor before renewal? If you can catch an incomplete requirement, you might be able to turn this around for your benefit.
The Sastrify team likes to think of any renewal as a celebration of an ongoing partnership. Instead of just focusing on incremental revenue, our attention is on personalizing communication for the best customer experience.
With a database of over €150M of SaaS spend, Sastrify knows the fair price in the market. Our SaaS procurement will make sure you never overpay or fall into the auto-renewal trap. Ready for your SaaS optimization? Start with us.