Are you a SaaS org with plenty of users, but struggling to improve your revenue? The reality is: Just because you have a fantastic product with tons of users, it doesn’t necessarily mean you're turning a profit. As a result, SaaS companies need to do whatever they can to get the most value out of their customers.
This is where cross-selling and upselling comes in. It’s estimated that 10% of SaaS revenue is generated from cross-selling and upselling. But what do these terms mean and how exactly do you master them?
That’s what we’re here to find out.
our agenda:
- What is cross-selling and upselling?
- What are examples of cross-selling and upselling?
- Why is upselling and cross-selling so important?
- How to improve your upselling and cross selling
What is upselling and cross-selling?
There’s a lot of overlap between cross-selling and upselling, and both can yield a considerable amount of revenue for your org, but in order to forge good relationships with your customers, you need to know the key difference between the two.
The essential balancing act that SaaS orgs always walk is being able to constantly offer more value to customers while still being mindful of the fact that not all customers are going to respond well to upselling and cross-selling. You don’t want to create friction with your customers by pushing upsells on a customer who isn’t likely to be receptive.
So let’s get to grips with the terms…
Cross-selling is offering additional features or products to what your customers are already getting, while upselling is offering an upgraded or premium plan. This can be a boost from a basic plan to a professional plan or from professional to enterprise.
The important thing is that you know your customers. Who’s primed for an upgraded plan? What needs do they have that you can cater to? What are their pain points and how could your product or service help?
Additionally, ensure the customers you’re targeting have experienced the value of your product. If a customer is particularly disengaged it’s unlikely they’re going to be receptive to an upselling message.
What are examples of cross-selling and upselling in SaaS?
Let’s say you have a customer who’s curious about your SaaS product, and one of your sales reps hops on a discovery call with them. After hearing about their pain points and business needs you manage to not only get them on board with your product, but successfully persuade them to sign up for a premium subscription.
Congratulations, you’ve succeeded at upselling!
Now alternatively, let’s imagine you get a customer who’s pretty happy with your standard package, but they have a few bespoke needs that demand a little extra. You might then be able to sell them on some additional products, plugins, or integrations at an extra cost.
Great job, you’ve successfully cross-sold to your prospect!
Why are upselling and cross-selling so important for SaaS companies?
There are some important metrics you need to familiarize yourself with in order to understand the full weight of this question.
Customer acquisition cost (CAC): How much it costs to turn prospects into users and customers
Customer lifetime value (CLTV): How much value customers are providing to your org over the whole customer lifespan
For SaaS companies looking to make a killing in today’s oversaturated market, it just won’t cut it anymore to have many users enjoying the benefits of your product. Acquiring users is costly, and if you’re not converting those paying customers, you aren’t reaping the rewards of your hard work. And, more importantly, you’re more likely to be seeing a loss on your spending.
But the crux of the problem is this: How do you get customers in the door when there are so many competitors out there with quality freemium offerings? Sure, you can shout about the incredible benefits of premium, but that’s far more challenging for brand new customers.
It’s much easier to sell existing users, who have already enjoyed your product. They know the benefits and will be able to see the advantages of becoming premium customers or investing in additional features.
But waxing lyrical about the benefits of cross-selling and upselling is easier than actually putting it into practice.
So now that we’ve defined our terms let’s dive into how you can improve your upselling and cross-selling efforts.
How to improve your upselling and cross-selling
There are several actionable strategies you can implement to make customers open to an upgrade. Let’s delve into them here.
Reveal limitations over time
If you start pushing premium packages on your customers immediately upon signup, you’re definitely going to encounter friction. One of the best methods is to let customers discover the limitations of your offering themselves.
This is a tricky balance to strike because you have to ensure that your more basic packages offer enough value to be tantalizing so that customers will naturally want to unlock more of what your software has to offer. From that point, a bit of gentle prodding can lead to a customer purchasing additional features or signing up for a premium package.
Master customer segmentation
Harnessing vital data on your customer base will enable you to discover who your prime targets are for upselling. You can really get into detail and see how customers are using your product. From here, you can look at the features that you offer and match them to customer behavior.
If a particular customer is using a feature that’s quite limited in your basic package, for example, this may be an opportunity for you to sweep in and offer them the gift they’ve been waiting for.
Bake continuous discovery into your design
The possibility of upgrading should be baked into the customer journey. When a customer first signs up, you showcase the most fundamental features on the welcome page. That way you get customers to the value moment straight away. Then you reveal more features and possibilities over time, with helpful hints to how customers can get more out of your product.
This is where upselling comes in. But the most important thing is to allow customers to “stick” to your product before you reveal its limitations. If you immediately confront customers with paywalls, you’re going to repel them.
Allow discovery to be self-guided
A nifty trick for getting customers to upgrade is to make it seem like it’s entirely their decision. This follows on from the previous point, by integrating upselling into the customer journey, customers arrive at upgrades on their own. In this way, you don’t deal with the same friction that comes from customers feeling pushed into upselling or cross-selling.
Engage with customers
By keeping an ear open to customer feedback you can ensure your upsells and cross-sells don’t feel inauthentic. It might sound obvious, but customers will upgrade when they feel like what you’re offering is actually going to help them. This way you can make your upselling efforts seem more targeted; a direct response to their struggles and needs.
Q+A
What is cross-selling and upselling in SaaS?
In the world of SaaS, cross-selling and upselling are two great ways to boost revenue by focusing on your current customers. Cross-selling is all about offering additional products or services that complement what the customer is already using. On the other hand, upselling is about encouraging customers to upgrade to a higher-tier plan or add premium features.
What are examples of cross-selling and upselling?
In SaaS, an example of cross-selling could be a company that offers a project management tool suggesting additional services like a time-tracking tool or a CRM system. An example of upselling in SaaS would be encouraging a customer on a basic subscription plan to upgrade to a premium plan. For example, if a user is on a basic plan that includes limited features and support, you might highlight the benefits of the premium plan, such as increased storage, advanced analytics, or priority customer support.
How do you identify upsell opportunities?
- Usage Patterns: Monitor how customers use your product and identify those who are reaching the limits of their current plan, such as hitting storage or user limits.
- Feature Requests: Track customer requests for features that are only available in higher-tier plans.
- Support Interactions: Use data from customer support interactions to spot users who might benefit from advanced features available in premium plans.
- Customer Feedback: Analyze feedback and surveys to identify customers expressing a need for more advanced functionalities or better support.
- Behavioral Data: Look for customers frequently accessing certain features, indicating they might benefit from more comprehensive tools available in higher plans.
Final thoughts
The most important factor to bear in mind is value. When you create the kind of product that customers really can’t do without, upselling and cross-selling opportunities are a foregone conclusion.
Secondly, foster great relationships with your customers. That way, you can make your customers receptive to your upselling efforts and you’ll be well on your way to maximizing that sweet revenue.
