Modern B2B Marketing
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January 29, 2010
Marketing PSA: Beware of the “Evergreen Renewal”
Posted by Patrick Donnelly
A company signs an agreement, typically for a year or two, and when the service performs below expectations, they look to make a change and start an evaluation for a new vendor. Fast forward to the end of the evaluation when a new vendor is chosen, pricing negotiated and excitement is high to correct the mistakes of the last evaluation. The company picks up the phone to notify the current vendor they are being replaced and then the shoe drops. “Your contract has already renewed for an additional year Mr(s). Customer.”
Full disclosure: In past lives I have sold my share of contracts that included Evergreen clauses. The good news is that I am reformed and have seen the light. What is the big difference between then and now? Our customers are truly excited to be Marketo clients in year one and beyond. The pressure is on us to get them implemented successfully and not rely on one line in the agreement to keep them as a customer.
Whenever reviewing a contract be sure to keep a look out for the evil Evergreen Renewal clause and have that removed right away. When they push back on you it should be a big red flag. Let them know that if the service delivers the value they promise then you will be happy to remain a customer for another term. You should not be comfortable with any clause that automatically locks you into anything based purely on time, and in fact 10 states have laws that in some way limit renewal language.
Glen Garry said on January 29, 2010 at 1:04 pm
This is standard language in almost EVERY SaaS contract template and every legal savvy customer will look for it and have it removed. No need for reform or for seeing the light and an auto-renew clause should never be used as a tool to “handcuff” customers – that’s just B.S. A customer who does not read the contract and who enters into an auto-renew should get plenty of notice on when the contract expires and what the terms are that they must consider. That’s part of any self respecting Customer Success process and one Salesforce.com, Netsuite, and Workday all deploy. Great companies by the way. Ones we can all learn from across all aspects of their business including leaving auto-renew clauses in and making customers aware of what they are and how to manage them.