SaaS companies have the opportunity to increase revenue by turning to their existing customers. It’s not all about new customer acquisition, which can be expensive and time-consuming. Sometimes, your loyal customers will be ripe for an upsell, and then it is up to your customer success managers (CSMs) to step in.
While it’s important not to bombard your customers with the hard sell, you want to find opportunities for customers to purchase extra services or upgrades. CSMs are in the perfect position to find these opportunities because they know your customers best and understand what it takes for them to succeed.
With a keen eye on those customers who are striving for success, your CSMs can strike while the iron is hot and show them how your SaaS business can further help them. Upsells benefit both SaaS businesses and their customers because it is all about providing more value – in exchange for a price.
What is Upselling?
Upselling means persuading the customer to buy an additional product or service during the same selling interaction, thereby increasing the customer’s value to the business. Usually, upselling refers to a customer purchasing a higher tier of the present service that they are currently subscribed to.
What is Cross-selling?
Cross-selling is very similar to upselling, but it actually means selling an additional product or service to earn more revenue.
Upsell vs Cross-sell
While upselling and cross-selling might seem interchangeable, they have some important differences. Upselling is upgrading the same product or service or adding extra features, while cross-selling involves expanding customers’ usage through wider services.
For example, upselling might involve convincing the customer to go from the Intermediate to the Advanced software plan, thereby increasing revenue and upgrading the customer. Cross-selling might involve selling an add-on software service to customers, allowing them to integrate a suite of tools. Upselling is concerned with the product’s depth while cross-selling is concerned with breadth.
3 Phases of Upselling
1. Identifying upselling opportunities
CSMs first need to develop their skills in identifying relevant upsell opportunities in their customer base. For example, it’s no good approaching new customers who have yet to see the value that your software can bring to their business. You’ll want to focus on customers who regularly use your product and are potentially reaching their usage limits. Customer support tickets can also show you those customers who are seeking solutions from your software which may only be possible through an upsell.
2. Pursuing those upselling opportunities
Once a CSM finds a relevant upsell opportunity, they’ll want to focus on pursuing those customers who have been identified as a good targets. Whether that’s picking up the phone and having a conversation with a customer or writing highly persuasive emails to potential upsells, CSMs need to hone their abilities to have these high-stakes conversations with customers and show them how further upsells or cross-sells can benefit them.
3. Closing the upsell opportunity
Like catching a fish, CSMs must become adept at reeling these customers in after embarking on a successful upsell conversation. Whether that’s handing the customer over to sales or closing the opportunity themselves, CSMs need to close the deal with customers to ensure that the upsell is complete.
The Benefits of Upselling for SaaS
1. Increase the Customer Lifetime Value
Long-term customers will regularly pay their subscription fee and bring in revenue to your business, but upsells can increase the customer lifetime value of each customer and ensure that they become more valuable. SaaS businesses can experience significant growth while still supporting the same customer base.
2. Better return on investment
When SaaS companies are acquiring customers, they typically spend a lot on customer acquisition costs. They expect to recoup that investment throughout a customer’s time spent with the business, and upselling offers much better ROI for SaaS companies that can generate further purchases through their customers.
3. Enhance customer loyalty
When customers spend more with your SaaS business, the product becomes more embedded with their daily practices, and customers feel more deeply committed to your service. Deciding to upgrade to a higher tier plan shows your customer is likely to stay with your business in the long term and regard your products as worth the investment.
Cross-selling and Upselling Strategies
1. Understand your customer’s needs
Right from the beginning of your relationship with your customer, you need to understand their needs and goals. Customer success means they will be able to use your software to gain value in a way that they are unlikely to achieve with any other solution.
A good upsell opportunity is one that is beneficial for both the SaaS business and the customer. When a customer’s usage of your product is falling short of their goals, you may offer upgrades or expansions that help them be more successful.
2. Conduct NPS and other surveys
Surveys like the Net Promoter Score will tell you which of your customers are most happy with your product and consequently would be ripe for an upsell. Promoters (customers who are willing to recommend your product or service) are already gaining tangible value from your software and might be willing to try a new plan.
Passives feel neutral about your software but may be open to an upgrade to improve their experience with your product. These customers are not using your product to its full capacity, so CSMs can use this as an opportunity for an upsell.
3. Monitor their usage limit
Make sure to monitor how customers are using your software to find out who is reaching the usage limits. For example, you might be able to identify those customers who have reached their data import limit or hit their email-sending capacity.
If customers are reaching capacity, you can suggest an upgrade to help them expand their operations. Instead of looking for a new tool, they can simply move to a higher plan and continue their loyalty to your SaaS product.
4. Track customer support tickets
Customer support tickets are a goldmine for customer pain points that can be turned into an upsell opportunity. If customers have contacted support to find out why they can’t add another integration to their platform, you can step in and let them know that feature is only available if they upgrade to your higher plan.
Although it can be demoralizing to deal with customers who have problems, focus on the solutions that your SaaS business can provide through upsells. While customers may initially be resistant to the higher cost, the business benefits your upgrade should bring will outweigh the reservations.
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5. Show customers the results
Customers won’t be interested in upgrading their plan if they don’t see how it justifies the extra cost. Instead of simply telling them that they need a particular feature to improve their business, help them understand why and how this extra functionality will increase their ROI.
Remember, customers usually have to win approval to upgrade their software, and this won’t happen if the results don’t feel tangible. Case studies can be a great way to showcase how a particular plan can improve results for the customer and bring your product to life.
6. Pay attention to timing
You may see an upsell opportunity, but customers might simply see a salesperson trying to line the company’s pockets. There has to be harmony between the customer and the point in the customer journey they are in before you can approach them with a new business opportunity. If a customer has only recently purchased your product, then they are unlikely to be open to an upsell.
Equally, customers who have recently had a bad experience with your business (think CSAT surveys) are likely to be aggrieved if your business approaches them for an upsell. Timing is crucial, and you need to be sensitive to customer context before you begin the conversation for upsell.
7. Use a tool like Churn360
A satisfied and happy customer who is embracing the product at its full capacity is the ideal candidate to upsell new services. That’s why we created Churn360, which helps your CSMs by identifying these customers automatically and enabling your company to increase their lifetime value.
By tracking the customer throughout the customer journey, CSMs will be alerted when they have moved to the upsell stage and are prompted to start a conversation with them. Instead of having to track every customer manually, Churn360 does the hard work for you.
Upselling to customers is a great way to expand your revenue and recover customer acquisition costs. Customers may not be aware of their needs themselves and might be grateful for your customer success team’s intervention in helping them achieve more with your software.
It’s all about ensuring that customers are subscribed to the most appropriate plans and services for their particular use case. Remember, customer needs are likely to change over time, so a product they signed up for in the beginning may no longer serve their requirements. Your CSMs are doing them a favor by highlighting upsell opportunities.