To grow exponentially, what must a SaaS company do once it has established its customer base? It must shift its attention from retention to growth. And for successful and sustainable growth, one needs to increase revenue per customer. How does one do this? Either by raising the price of the products for new customers, or upselling to your existing customers. For SaaS companies, SaaS Upsell rates is important and the latter is the key to generating revenue by keeping customer acquisition costs minimal, and thereby, unlocking growth opportunities.
Upselling is essential
Now, upselling is essential for any SaaS company’s long-term growth and revenue generation. As growth consultant, Lincoln Murphy says, “The initial sale is critical, but it’s just the tip of the iceberg.”
- It ups customer lifetime value – it’s simple math. If your customer keep increasing his payment to you year on year, it reduces the impact of churn – if your existing customer keeps paying you more year on year, then a few churns will not hit your revenue that hard it’ll ensure you’re not under-priced – in other words, upselling will eventually align your prices with the value you are providing, as all the cost you are incurring for customer success will be somewhat taken care of.
Upselling is easier, right?
It should be – surveys show that existing customers are much easier to sell to: the probability of converting an existing customer is 60-70%, compared with only 5-20% for acquiring a new customer. This means, it costs five times more to attract a new customer, than keeping an existing one happy and loyal to you. The reason for this is,
Upselling has no other induced cost than the ones you incurred for product development. So, getting the customer, who has already bought into your brand’s USP, to upgrade, leads to a more profitable sale.
Particularly for SaaS customers, upselling or SaaS Upsell rates is also a measure of how well you’ve achieved your desired outcomes and customer success goals because only when the customer feels that he is achieving success and progression by using a certain software service, will he be further motivated to seek upgrades, even this cost him money.
But SaaS companies know that all this is easier said than done – most of them struggle in the upselling department, and most find little or no success. What is the reason for this?
It is because many don’t consider the key component for successful upselling: timing
When is the right time to upsell?
The when – is as important, if not more, than what.
The perfect timing would be right at that point when your customer is succeeding with your SaaS service or product. Are they getting continuing value from using your product? How do you measure this? By gauging what success means for them. Is your company meeting that one overarching desired outcome that the customer has? Have you value-added to that by helping him meet this outcome successfully? Track your customer success milestones to analyse these metrics – customer habits such as repeated logging in and inviting others to join to use a certain product are good indicators of this.
Once you identify these indicators of desired outcome and customer success, the next step is to identify those consumers who are most likely in the need for those very functions that you’re upselling. Once they see what functionalities they will benefit from by upgrading to your added services, they will opt for them.
Does an upgradation make sense to your customer now?
The most successful upselling endeavour would be when at the time when the customer is most in need of your additional features. It is the time when upgrading will make most sense to them.
Zoom is very good example of upselling the right product at the right time. They entered a market at a time when the COVID19 pandemic had most companies searching for video calls and virtual meeting options; at a time when entrepreneurs were searching for a platform that maximises their online reach, as physically accessing customers was no longer possible. Their freemium included almost all functions, and then, customers were looking for growing through Zoom, they introduced price points and packages for those wanting to reach out to larger audiences and value-added functionalities such as the mute-all button (a real life-saver for webinars). The result? A magical triple-digit growth for the company!
This goes to show that the best upselling opportunity is at the exact time when your customer has attained his success milestone, and is logically ready to work on expansion related to it
When will your customer benefit max from an upsell?
Random upselling never leads to desired outcomes for your company. Be laser-focused on your customer rather than your service or product and you’ll know the exact timing of when a SaaS upsell rates make the most sense to your customer. Look for answers to questions such as:
- At this point, what is my most loyal customer looking for from my service?
- What areas/functions will the customer be able to do better with my service upgrades?
- Analyse usage patterns – does the existing customer’s usage hint at him getting continuing value from the upsell?
There are many ways in which you can improve your company’s upselling strategies, such as tracking user segmentation, and using that behavioural data to provide continuing value to subscription customers, keep design and discovery at par in the R&D department, keep offering upgrades at regular intervals throughout the customer’s lifecycle, take customer feedback seriously and work on requirements generated by them, and focus on retaining revenues using upsell. But all of these hark back to the same thing – timing it right, giving the customer what he needs when he needs it. 14
Fact is, most SaaS companies focus on communicating everything about their product to their customers when, in fact, they should be communicating how it will benefit them. That’s the key to a great upselling strategy or SaaS Upsell rates – generating the need for a paid upgradation in the customer’s mind. Growth, for subscription business owners is all about hitting higher revenues and increasing customer lifetime value to reduce churn. And both require them to design and implement a robust real-time yet flexible upselling strategy.
Rohan has over 11 years of experience in client services, marketing and hospitality field. Previously, he was head of digital marketing for a hi-tech mobile application. Rohan is driven by new challenges and the possibility of making an impact on individuals and businesses.
Published June 22, 2020, Updated December 30, 2020