Cross-Selling and Upselling?
It might not be right to go rushing in
Photo by Lucas Davies on Unsplash
Like a lot of us right now, I just booked a budget flight for me and my family. Once I’d chosen the flights and wanted to pay, I was then taken through a series of pages asking me if I needed to add extra baggage, then if I fancied getting their insurance, then parking, then car hire, then hotels… when all I wanted to do was get to the end and pay. They’re a budget airline. They don’t care that it was annoying, they know I’m committed by that stage and statistically, I’m probably more open to be crossed-sold/upsold given that I’m there with my credit card in my hand. And, to be fair, they have a limited window: between the time I book a ticket and the time I fly represents an ever-diminishing window of opportunity.
But what about when you’re selling B2B SaaS? Does constantly bashing customers over the head to spend more work? Should you focus all of your efforts to extract as much as you can from the customer from Day 1 or should you be more measured?
Existing customers : second class citizens?
It’s crazy not to consider existing customers as a key part of your revenue growth strategy. Anyone who has been reading this newsletter for a while, may remember that a particular bug bear of mine is that the resources and attention for commercial teams often seems disproportionately focused on new business: with revenue growth from existing customers almost like an unexpected bonus when it comes along. The best paid people are the ones that bring in the new customers. And customer success teams often don’t have a revenue target they are responsible for.
This is weird when you consider the impact that even a small percentage improvement in Average Contract Value can have on the overall business, especially as you get larger. This is because expansion/contraction is a function of your total ARR, whereas new revenue isn’t.
On top of that, your Customer Acquisition Costs are almost non-existent and tying people in will decrease churn and increase Lifetime Value. what’s not to love about that?
Assuming we all think generating additional revenue from your existing customers makes a whole lot of sense, the next question is ‘how do we go about it?’ Do we just put them into the mother or all drip campaigns for the whole time they are a customer, or is there a better way?
Cross-selling vs Upselling
Firstly lets just look at these two terms. The prompts for them happening are the main difference.
Cross-selling
The offer of additional products or services on top of the one they’re already paying for.
Normally takes place after the initial purchase decision, when customers trust the company and consider whether they would get the same experience solving a different problem.
Increases Average Order Value because the customer has bought more ‘things’ from you.
Upselling
A more expensive version of the thing they already have, such as a premium tier.
Normally takes place on renewal or as the customer starts to see the value that increased usage would deliver for them. Think, adding family members to your Spotify account.
Increases Average Order Value because the customer has decided to buy a more expensive version of the service from you.
A targeted approach is important
The problem with a scattergun approach to customer expansion is that it’s inefficient and, worse, runs the risk of annoying or unnerving customers.
Some mistakes that SaaS companies make might include:
Randomly emailing people with an offer to buy something else in your portfolio without understanding the customer segment.
Desperately pushing a higher tier once the prospective customer has said they want to go ahead.
Putting a new customer into a drip campaign that encourages them to either upgrade or buy other products from the portfolio without any regard to their other behavior.
Pushing customers to buy licences today that they probably won’t need for a few months as they roll the project out internally.
Given you have a limited amount of attention you can demand from your customers, isn’t it better to make your attempts more targeted? You don’t want to be the budget airline throwing everything you can at your customers in the hope that for some of them, something will stick. And you really don’t want your newly acquired customer to be getting buyer’s remorse so soon into your relationship.
Let me explain what I mean…
Self-discovered Limitations
Buying software for your company isn’t a pleasurable experience. It can be pretty terrifying. At the time of purchase, customers are probably at their highest anxiety level. What if they’ve just signed their company up for the wrong thing? What if they’re over-paying? What if the product isn’t up to the job?
So, the last thing you want to do at the point at which someone is about to sign on the dotted line, is try one last heavy attempt to get them to change to a premium tier. How would you feel? Imagine being sold a new car, you’d been convinced that this is an awesome car and the right one for you and your family, then just as you are about to sign, the sales person starts suggesting that in fact you need a bigger engine or more security. You’d be thrown into a panic… I thought the original car was good but now I’m seeing its shortcomings? Am I basically signing up to something that I will have to replace in a relatively short space of time?
The difference of course is that it’s much easier to go from a ‘Core’ tier to a ‘Premium’ tier after six months than it is to swap your six month old car for a better model. BUT.. as a customer you really don’t want to feel like you’re part of some sort of bait and switch: that you’re being lulled into a false sense of security that you can have the service for $xx, when in reality you’ll end up paying more as the tier you’re on isn’t good enough.
What we really want people to do is to derive a load of value from the product and then discover the limitations themselves and for that to convince them that they need to spend more. We want them to conclude that the product is great, but as an experienced user they can see how more data, or more seats, or more integrations would make their experience even better.
Cross-selling, not cross selling
The same applies to cross-selling. I’ve got a Mac, an iPhone and an Apple Watch. I’ve been cross-sold to. But I didn’t get them all on the same day. I didn’t one day decide to buy an Apple product and think “I’m an Apple guy now and every device I own from now on needs to be from that company.” Instead, I kind of got hooked in over time. Over time I trusted the brand enough to spend what is a stupid amount of money on something that tells me the time.
But imagine if when you bought a new Mac you ended up getting cold called by an angry sales person desperate to get you to spend more money on the newest iPhone or Apple TV. It would annoy you. You’d be like, “Hey, I’ve just given you a load of my money, was that not enough?”
So how do you do it?
I think it comes down to two distinct approaches:
Showcasing Value
Finding the Signals
Let’s have a look at each of these in turn.
Showcasing Value of different options
Sometimes, SaaS pricing pages focus on a feature set. And of course, this is to give customers a clear indication as to how the tiers differ. But while it’s important to show the features, we also need to nail home the value of the different tiers.
With Hubspot, you can see the value of the Starter tier is around shortening sales cycles and improving close rates, but the Professional tier also includes automation of processes.
Now, when you scroll down you see a massive long list of features and a checklist for what appears in each tier (I think I counted 82). But the initial focus is on showcasing the value. In that way, customers self identify as being in one of the tiers, rather than being harassed about the fact that they are signing up for something that is devoid of features. It’s a subtle but important difference. One is saying ‘this is perfect for you if….’ the other is saying ‘and here’s what you’re potentially missing out on’.
Another way to showcase value is by creating a regular update which is about what you do as a company. It could be under the guise of a newsletter or a company update. But the focus is more on being helpful and informative, rather than badgering.
Announcing a product launch or update. There is a genuine reason why your customers would want you to tell them about these things. You are effectively saying, we’ve been working on something that provides you with even more value.
Finding the Signals
Customers will want to upgrade and potentially might be interested in other products because something has changed. When they first signed up with you they chose the solution they did because they thought it was right for what they needed. Today, something has changed that makes them want to spend more. These reasons could include:
Ended up using the product more than they thought and have hit some sort of usage limitation
Your solution has delivered more value than they expected and they want to double down
They have recognised that the value so far could be made better with additional features
Your product has been successful and the customer wants to roll out it further to maybe other divisions or territories.
They’ve started to really trust you as a company and realised that they could replace some other tools they use that they are unhappy with your other solutions where they would assume a similar level of satisfaction (and maybe some costs savings too).
You’ve created something in addition that they want.
What if you knew that these things were happening? Then you could start pushing an upgrade or a cross-sell. Well, maybe you can. And the way you do that is to look at your current customers who have expanded and find out if there were any leading indicators that they share.
An obvious example would be around usage data. What was happening with regards to usage in the weeks and months leading to an upgrade? Were they starting to do things like switch seats in and out to different people so they didn’t bust through their limit?
Is there a link between frequency and upgrades? If someone uses your product once a week and someone else uses it once a day, does that indicate anything?
Is there a link between a high NPS and cross-selling? Are you seeing trials or demo requests from other people with an existing customer’s company? Are people who leave positive reviews more likely to be a buyer or another of your products?
Is there anything around renewal time that indicates whether a customer will downgrade, renew or upgrade?
Has a certain segment of your customers been requesting a feature or improvement that others in that segment should also want? Maybe an integration that is used by one of your verticals?
You will have a good idea on what things to check. But my point is, this is how you plan your strategy. If there are behaviors that indicate a higher likelihood that people will upgrade, then how do you encourage that behavior? For example, if there is a link between number of accounts added and upgrades, then how do you encourage existing customers to add more of their colleagues to the account?
If you have found a link between behavior and upgrade, then that is the prompt to reach out and find out whether they can be encouraged to upgrade. For example, if you know that people switching out colleagues in order not to bust through their tier’s seat limit, precedes an upgrade, then what can you do at that point to encourage and reassure them?
And if your new integration for a particular vertical has finally come online, how do you get that group most excited about the value it will unlock?
