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Maintenance Renewal Rates
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Maintenance Renewal Rates
Publication date: 9/05
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Executive summary
In mature software companies, maintenance contracts now produce a
third or more of total revenues and an even larger share of total
profits. These numbers have put a spotlight on the marketing and
pricing of maintenance plans, usually with positive results. But
these efforts sometimes neglect the most important profit and revenue
variable of all—the contract renewal rate. Unlike traditional product
sales, maintenance generates recurring revenue. At least in theory, a
maintenance contract can produce a revenue stream for as long as the
customer keeps using the vendor's software.
Surprisingly often, however, this powerful economic engine sputters
along in low gear. Sales reps "can’t be bothered" to call customers
whose contracts are expiring, renewal anniversaries are overlooked,
and a whole year may go by with no human contact between the support
team and the customer. Invariably, this kind of benign neglect has a
negative impact on a company’s renewal rates and on the revenue stream
from maintenance.
But even companies that recognize the importance of high renewal rates
sometimes find themselves in uncharted territory, looking for
benchmarks and data about industry best practices. To address these
questions, the ASP queried 187 software and technology companies about
their maintenance contracts. The ASP's Maintenance Renewal Rates report
covers the following topics:
- Basic benchmarks for renewal rates
- The impact of key variables, such as product price, lost customer
rate, and sales model
- Required vs. optional plans
- Calculation methods: Contract units vs. dollars
- Maintenance renewal best practices
Copies of the survey are free to ASP members in the
members-only area.
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