In the world of B2B SaaS, ensuring customers get full value from their contracts is key to maximizing retention and expansion opportunities. However, a common challenge arises when an Enterprise customer consistently underutilizes their contract entitlements - either because their use case doesn't require high consumption or their business model inherently limits their demand.

This situation poses a risk: If the customer sees their contract as excessive for their needs, they may push for a downgrade at renewal, impacting Annual Recurring Revenue (ARR).

A customer who isn't using your product to its full potential isn’t just missing out—they’re not growing, and neither are you. That’s an opportunity lost.

Ryan Smith, Co-founder and CEO of Qualtrics

Understanding the Root Cause of Underutilization

Before taking action, it’s crucial to understand why the customer isn’t fully leveraging their contract entitlements. In many cases, it comes down to:

• Mismatch in contract vs. actual needs: The contract was structured based on assumptions that haven’t materialized.
• Limited application scope: The customer’s usage is inherently lower due to their specific business model.
• Lack of awareness of full benefits: The customer may not realize all the ways they could be using the product.

Let’s take an example:

Case Study: An Enterprise Customer with Low Usage

Imagine an Enterprise SaaS company offering a cloud-based data processing platform. A large financial services company (the customer) signed a contract that includes processing capacity for 100TB of data per month.

However, after six months, their actual usage hovers around 30TB per month, and it’s clear that their application (focused on lightweight analytics) will never demand significantly higher usage.

The renewal is coming up, and the customer is questioning why they should continue paying for 100TB when they use less than a third of that capacity.

How do you handle this without risking an ARR reduction?

Strategies to Retain Value Without Encouraging Downgrades

1. Shift the Conversation from Usage to Business Value

Rather than focusing on utilization as the key metric, steer the conversation toward the value the platform provides.

• Highlight Business Outcomes: Show how the platform enhances security, reliability, compliance, or operational efficiency.
• Demonstrate ROI: Emphasize savings in infrastructure, personnel, or development costs that would otherwise be needed.
• Benchmark Against Industry Peers: Provide insights into how similar companies use the platform and derive value, reinforcing the decision to maintain the contract.

Example:

Instead of saying, “You’re only using 30TB, let’s rightsize your contract,” position it as:

“Your team is achieving real-time financial insights with ultra-low latency, ensuring compliance with regulatory requirements, and avoiding the need for costly on-prem infrastructure. These benefits extend beyond just data usage.”

2. Expand Usage via Adjacent Use Cases

If the current workload doesn’t demand full utilization, explore other departments or use cases within the customer’s organization.

• Internal Advocacy: Identify other teams (e.g., marketing, compliance, or risk management) that could benefit from the platform.
• Cross-Departmental Expansion: Offer proof-of-concept trials for additional business units.
• Feature Utilization Campaigns: Highlight underutilized product capabilities that align with the customer's broader goals.

Example:

“We’ve seen financial institutions leverage the same platform for fraud detection, regulatory reporting, and even customer analytics. Would you be open to a discovery session with those teams?”

This shifts the conversation from downsizing to expanding usage in a way that aligns with the customer’s business.

3. Offer Value-Added Services Instead of Discounts

If the customer is resistant to expansion, avoid immediate price reductions and instead offer value-added services that enhance their experience.

Consider:

• Exclusive access to premium features (e.g., advanced analytics, security enhancements).
• Enhanced support or consulting to optimize their setup.
• Training or workshops to maximize value from the platform.

Example:

“To help your team get even more from the platform, we’re including a dedicated solutions architect for quarterly strategy sessions at no additional cost.”

This approach preserves revenue while increasing stickiness.

4. Future-Proof the Contract with Flexibility

If the customer remains hesitant about maintaining their full commitment, introduce structured flexibility rather than outright downsizing.

Options include:

• Usage-Based Scaling: Allow the customer to allocate unused capacity across different workloads over time.
• Carry-Forward Credits: Let them roll over unused entitlements into future periods.
• Tiered Growth Plans: Keep their current pricing but offer incremental increases based on predefined triggers.

Example:

“We can adjust your contract to allow reallocation of unused capacity toward new initiatives in the next fiscal year, giving you more flexibility.”

This approach maintains the ARR commitment while making the contract more attractive.

5. Strengthen the Partnership Narrative

Finally, positioning the relationship as a strategic partnership—rather than just a vendor-customer transaction—can reinforce the value of maintaining the contract.

• Executive Alignment: Arrange QBRs with senior leadership to discuss long-term goals.
• Co-Innovation Opportunities: Offer collaborative pilots, beta testing, or industry research participation.
• Customer Success Roadmap: Build a tailored strategy to help them achieve business milestones.

Example:

“We see this as a long-term collaboration, helping your company drive innovation in financial analytics. Let’s align on a roadmap that ensures continued value for both sides.”

Conclusion

When customers underutilize their entitlements, the immediate reaction might be to offer a downgrade—but that often leads to revenue erosion. Instead, by focusing on value, expansion opportunities, added services, contract flexibility, and strategic alignment, you can retain the customer while protecting (or even increasing) ARR.

The key is to shift the conversation from how much they’re using to how much value they’re getting—and finding ways to expand their engagement rather than reduce their commitment.