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Is this simple mistake costing you renewals?

10 June 22

Picture the scene: you’re on vacation and you’re out for dinner. The meal was fine - not bad but nothing special either. Then out of nowhere the waiter reappears at your table with a surprise dessert, coffee, or glass of exotic liquor on the house.

You travel back with a warm glow and perhaps even leave a good Tripadvisor review the next day. You might not know it, but that free treat at the end of the meal is a trick used in the restaurant industry to positively influence your memory. It’s based on a psychological phenomenon called the Peak-End effect, which means your recollection of an experience is shaped by how you feel at its most intense and at the end.

But hang on, this is the Reachdesk IQ blog, right? What does this have to do with renewals? Read on…


What is Reachdesk IQ?

Reachdesk IQ is where we take a deep dive into the numbers behind gifting. We call on our data science team and the Reachdesk Insights tool to harness the data from the Reachdesk platform to help you take a smarter approach to gifting, sharing our findings through insights, recommendations and this blog series. We share tips backed by data to help you take your gifting strategy to the next level, no matter if you’re a Reachdesk power user or you’re just taking your first steps into sending gifts manually.


If you read our first Reachdesk IQ blog (and if you didn’t, you can find it here), you know that gift redemption has a major impact on your deal close rate, making your opportunities 1.44x more likely to end up closed/won than where a gift is offered but not redeemed.

This insight is focused on new business deals, but you’d naturally expect it to translate to other deals further along the commercial journey such as upsells and renewals, right?

Surprisingly, it doesn’t.

Although gift redemption makes a big difference to your close rate for new logos, when we examined our data we found it barely makes a difference when it comes to renewals (1.03x more likely to end closed/won). Similarly, while gifting to power gives you a greater chance of winning a new business deal, for renewals it actually corresponds to a slightly lower close rate (1.05x less likely) than those deals where you don’t gift.


So is gifting to clients a waste of money? As you might expect, the answer is a little more complex…


When we first looked at the data on gifting for renewals, we treated it exactly the same as we treated the data for new business. That is, we looked at when a gift is offered while the renewal opportunity is open. But the relationship with a client isn’t (and certainly shouldn’t be) just built in the months running up to a renewal contract being signed.

With this in mind, we changed our analysis to cover gifts offered in the 12 months before the renewal closing. The difference was huge. As the graphic below shows, renewal and upsell opportunities where gifts are redeemed earlier in the process have a 1.11x higher close rate than those where gifting only occurs in the last month before the opportunity closes.

However, let’s not rush to the conclusion that the optimum time for gifting is at least six months before a deal. The story behind this data is actually about the importance of building a deep relationship with your client.

Unlike in the restaurant in the introduction, if you lavish gifts in the run up to a contract signature and then vanish off the face of the earth until a renewal or upsell is on the table, it’s unlikely that your client is going to feel valued. The Peak-End effect doesn’t work in this scenario because it’s a relationship, not an experience.

If you’re regularly engaging with your client to celebrate successes, recognize moments that matter, and reward them for completing projects, your relationship is going to be much stronger. As the graphic below shows, there are plenty of opportunities to build your relationship with your client, from onboarding all the way through to expansion.

“That’s all very well” I hear you say, “but here in the real world we don’t have an unlimited budget for client gifting.” This is a fair point. When we dug further into the data we found that the closer you gift to an opportunity’s close date, the higher the average total spend on gifting, with late gifters spending almost 50% more per deal. So not only does gifting earlier increase your close rate, it also means less spend per win.

So what have we learned?

  1. Gifting to prospects and gifting to clients are two different games - don’t assume what works for one will work for another.
  2. Good relationships are one of the most valuable investments you can make - a consistent drum beat wins over one big bang.
  3. Big spend ≠ big returns - you don’t need a bottomless budget to get great results.
  4. Free desserts help average touristy restaurants get good reviews - but for repeat custom, the experience has to be strong from start to finish.

For more top tips on when to gift to your clients, check out our fantastic blog 10 ways to use gifting and direct mail for customer engagement.

Andy Willetts Product Marketing Manager @ Reachdesk

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