The Best Defense is a Good Offense: How to Proactively Reduce Downgrades and Contraction

Staring at a spreadsheet, the red of the projected contraction numbers practically burning a hole in the screen. It’s a feeling every SaaS leader knows, especially in a shaky economy.

I've been in your shoes. Three times, actually—2016, the early days of COVID, and the contraction we saw in 2022-2023. Each time, I watched the same pattern unfold: budgets freeze, CFOs start circling expenses with red pens, and suddenly your champions are coming to you with "the conversation." You know the one. "We love your tool, but we need to cut 30% from our tech stack."

For early-stage founders and revenue leaders, this is the moment of truth for your post-sales strategy. The reactive, "wait-for-the-renewal-email" approach doesn't cut it anymore. In today's climate, securing your revenue base isn't about defense; it's about getting on the offense. It’s about proving your value so undeniably that your customers would rather cut costs elsewhere.

As a VP of Customer Success at multiple startups through these cycles, I learned something critical: downgrades and contractions aren't inevitable. They're symptoms of a misalignment between the value you're delivering and the value your customers can clearly articulate to their finance teams.

If you're an early-stage founder or head of revenue at a B2B SaaS company under $100M in ARR, this is for you. Let's talk about how to prevent downgrades and contractions before they happen—because retention needs to be your primary growth engine.

Why Downgrades Hit SMB Harder (And What That Means For You)

First, let's be honest about the stakes. If you're in the $15k-150k ACV range selling to heads of sales, marketing, or RevOps, your logo retention rate is your lifeblood. Unlike enterprise accounts where you might weather a downgrade and still have meaningful revenue, SMB and VSMB customers don't have much room to contract. They either renew at full value, downgrade significantly, or churn entirely.

I've seen companies with 90%+ gross retention rates in enterprise struggle to break 75% logo retention in SMB. Why? Because when a 50-person sales team needs to cut costs, they're not reducing your licenses from 50 to 45—they're evaluating whether they need you at all.

But what does a downgrade actually mean? When a customer asks to downgrade, what they're really saying is, "I don't believe the value I'm receiving is worth the price I'm paying." The problem is, most companies wait for that conversation to happen before they try to prove their worth. By then, it’s too late.

This is why you need a Value Realization Framework.

The Why, the Metrics, & Communication. The 3 steps of the Value Realization Framework.

Don’t let the fancy sounding name intimidate you. It's not a 50-page document. It's a simple, ongoing process to define, track, and communicate the value your customer is getting, in their terms.

• Step 1: Re-confirm the "Why." Go back to the sales notes. Why did they buy your tool? Was it to increase the sales team's pipeline by 15%? To reduce marketing's lead response time by half? This initial pain point is your North Star. Is your handoff between sales and CS not solid enough to support this? Don’t worry, we’re going to cover handoffs in an upcoming post because, sadly, you’re not alone. 

• Step 2: Define Success Metrics—Together. On your next call, align on the specific, measurable outcomes that matter to them. If your buyer is a Head of Sales, they care about quota attainment and pipeline growth don’t be afraid to ask them for a hard number, i.e. how many leads do you need to get each month to call this a win? If it’s a Head of RevOps, they care about process efficiency and data integrity. Your job is to connect your product's usage to those business outcomes. 

• Step 3: Track and Communicate, Relentlessly. This is where the magic happens. Don't save the results for a once-a-year QBR. Weave them into every conversation. "Hey Rachel, I saw your team’s usage of our sequencing feature went up 30% last month. That’s awesome, because our data shows teams who do that typically see a 10% lift in meetings booked. How are those numbers looking on your end?"

By constantly reinforcing value, you change the narrative. You're no longer just a software vendor; you're a partner in achieving their business goals.

Your Insurance Policy: The Executive Sponsor Program

I've seen it happen a dozen times. Your champion, the person who loves your product and uses it every day, leaves the company. Suddenly, the renewal is in the hands of a new VP who has no relationship with you and a mandate to cut costs. The result? A churn that you never saw coming. It’s actually heartbreaking both for you but more importantly, your CSM. All that time they’ve invested is now at risk.

This is where an Executive Sponsor Program becomes your most powerful insurance policy. It's one of the most effective, yet underutilized, customer retention strategies out there.

The goal is to build relationships above your day-to-day contact. You need a connection with the economic buyer—the VP or C-level executive who ultimately signs the check.

Here’s how to build a lightweight version:

1. Identify the Sponsor: This is typically the person who was the economic buyer during the sales process or your champion's boss. We were lucky, at Apollo we actually dogfooded our own product and used Apollo to do exec/stakeholder mapping.

2. Schedule a Strategic Business Review: Once or twice a year, schedule a 30-minute meeting with them. The key is that this is not a standard product check-in. I always ask our CRO to join these for our largest accounts. You need to title match here, the payoff is worth it. 

3. Align to Their Goals: The agenda should be entirely strategic. Don't talk about feature usage. Talk about how your platform is helping them achieve their top-level objectives for the year. Frame your value in terms of their MBOs or OKRs. For example: "Ryan, I know one of your key goals this year is to expand into the enterprise market. Here’s how our platform has helped your team increase their average deal size by 22% this past quarter, giving them the traction they need."

Activate your executives to build relationships with their executives. Your CEO probably isn't talking to enough customers. Your CRO definitely isn't. Create structured programs where your leadership engages with customer leadership. When that executive sees your company as a strategic partner helping them hit their numbers, your renewal is no longer at the mercy of a single point of contact.

Get in the Trenches: Proactive Usage and Consolidation Plays

When budgets get tight, your customers will start auditing their tech stack. This is where you can shift from being a line item on the spreadsheet to being a partner who helps them optimize the spreadsheet. This is how you proactively reduce downgrades and contractions.

Play 1: The Usage Optimization Play

Low usage is the leading indicator of churn. But simply telling a customer to "log in more" is useless. You need to connect usage to value.

• Identify Your Stickiest Features: What are the 2-3 features that, once adopted, make a customer unlikely to ever leave?

• Monitor for Gaps: Run reports to see which customers are not using these sticky features.

• Run a Targeted Play: Create a simple outreach campaign. It could be an email, an in-app guide, or a proactive offer from their CSM to run a 30-minute workshop. The messaging is key: "Hi team, we noticed you aren’t yet using our call recording analysis feature. Our customers who do are typically able to cut sales ramp time by 3 weeks. Can I show you how to set it up?"

Play 2: The Tech Stack Consolidation Play

This is my favorite play in a downturn because it feels counterintuitive but is incredibly powerful. When customers are cutting budgets, your goal isn't just to save your tool—it's to help your customers save money by replacing other tools with your platform.

I saw this work firsthand when I was at Apollo. We had a multi-product platform: dialing, email sequencing, data, and call recording. Our typical customer also used tools like Gong for conversation intelligence at roughly $1,600 per license per year.

When COVID hit and budgets tightened, we didn't just fight to save our seats. We ran tech stack consolidation plays.

Here's how it worked:

1. We proactively reached out to customers we knew were using competitors alongside our platform. Not with a sales pitch—with a cost analysis.

2. We positioned Apollo's call recording and conversation intelligence as "85% of Gong's capability at a fraction of the cost." Was it as feature-rich as Gong? No. But for most sales teams, it covered the core use cases: call recording, snippet sharing, and basic analytics.

3. We helped them do the math. If they had 20 reps, switching from Gong to Apollo's built-in features saved them $32,000 annually. That's real money—often enough to hire an additional SDR or 2 if overseas.

4. We positioned ourselves as partners in their cost optimization. Instead of defending against downgrades, we became the reason they could confidently cut other vendors.

The results were transformative.

1. We Immediately Saved Deals: Customers on the verge of downgrading saw a path to save significant money without losing critical functionality.

2. We Increased Stickiness: By embedding our call recording into their workflow, we became even more integral to their daily operations. We weren't just a data tool anymore; we were part of their core sales process.

3. We Built Unbreakable Trust: We showed that we were a partner invested in their success, not just a vendor trying to protect our own ACV. In many cases, customers were so grateful for the savings that they reinvested that budget into hiring another sales rep who, of course, needed an Apollo license.

The lesson? Audit your product for consolidation opportunities. What tools do your customers use alongside yours? Where can you provide "good enough" functionality that eliminates a separate vendor? And remember there’s a cost with vendor management as well that goes beyond what they pay per license. Be sure to build that into your customer retention strategies.

You Can't Be a Passenger

In an uncertain economy, you can't afford to be a passenger in your customer relationships. You have to be in the driver's seat. Waiting for the downgrade request is a losing game. The only way to win is to get ahead of it.

By building a clear framework for value realization, securing high-level buy-in with executive sponsors, and proactively running plays that optimize both usage and your customers' bottom line, you can turn a period of economic uncertainty into an opportunity. An opportunity to prove your value, deepen your partnerships, and build a resilient customer base that’s ready to grow with you when the market turns.