Your Renewal Pitches Are Backfiring – Here’s Why

Tim Riesterer, Chief Strategy Officer, Corporate Visions

“Challenge your prospects and customers” has become a selling mantra in recent years, as companies look to use edgy messaging to create the urgency to change and differentiate their solutions. This is the recommended approach for when you’re the outsider trying to defeat the status quo. But I often hear the following question from companies that have significant market share: “What about when I am the status quo?”

In other words, what if you’re the insider and already have a large installed base, and you spend the bulk of your time and messaging energy trying to win renewal business and protect existing relationships? What these “insiders” are wondering is whether their “why stay” messaging approach needs to differ from their “why change” one. New research conducted by my company strongly suggests they do.

What’s in a great “why stay” story?

We teamed up with Dr. Zakary Tormala, a social psychologist with expertise in persuasion, to construct a test comparing various messaging approaches to renewal conversations. The big finding? Getting customers to renew with you requires the opposite approach that you might take when you’re the outsider trying to convince a prospect to change to you. To convince them to stay, you need to reinforce the causes of the status quo bias, not disrupt them.

It may sound obvious, but in this era of challenging and provoking customers, this research shows that using that same aggressive approach in a renewal selling scenario will backfire, decreasing their loyalty and increasing their willingness to shop around and possibly switch to an alternative.

The experiment, conducted online, included 402 participants who at the outset of the study were instructed to imagine they ran a small business and that about two years ago, had signed up with a 401(k) provider to help promote their company’s retirement plan to employees. The hope was that getting more employees signed up would boost employee satisfaction and retention.

Participants imagined that only 20 percent of their employees subscribed to the 401(k) plan two years ago. Their goal had been to increase participation to 80 percent. Now, two years later, participation had risen to 50 percent, a jump from 20 percent but short of the 80 percent target. Meanwhile, employee retention rates had improved, but it was difficult to know how much of that was attributable to promoting the 401(k) plan.

Three pitches

After being provided with this background information, participants were told to imagine they were trying to decide whether to renew and continue working with their existing provider. When participants clicked to continue to the next screen, they received a message (the pitch) from their provider. What they didn’t know is they were being put into three different pitch examples.

The opening paragraph of the pitch was identical for all participants. But then each of the pitches varied in important ways:

In the status quo reinforcement message, participants received an encouraging description of how the plan was working to date. They then read an additional message designed to reinforce the causes of the status quo bias, emphasizing how much effort went into selecting the current provider in the first place and highlighting the risks and costs associated with changing providers at this point.

In the provocative pitch, the message documented the results to date, but switched gears and introduced a new idea that challenged their current approach. In this case, the message noted that it can be harder to move from 50 percent to 80 percent participation than from 20 percent to 50 percent, and that doing so successfully might require different tactics, such as switching the plan from an “opt in” approach to an “opt out” one.

Finally, in the provocative pitch with upsell condition, the message was the same as the provocative pitch just described, with the addition of offering a series of online tools for employees that ostensibly would increase their engagement in reaching their goals. But these new tools would add 5 percent to 15 percent to overall program costs, with an anticipated payback in less than 12 months.

Participants in the provocative conditions were 10 percent more likely to switch or shop around than participants in the condition that documented success and reinforced status quo biases. Additionally, the status quo reinforcement message created statistically significant boosts in credibility, intentions to renew, and positive attitudes.