How To Build A Killer SaaS Upsell Strategy
Did you know that SaaS businesses get significant growth just by upselling?
According to Chargebee, 44% of SaaS companies say that over 10% of their new revenue comes from upselling and cross-selling.
But what exactly is upselling and how can you do it the right way?
In this article, we will talk about how you can have a winning SaaS upsell strategy.
What Is Upselling In SaaS?
First, let’s talk about upselling and what it looks like for a SaaS company.
Upselling is when you offer a more expensive or upgraded version of your product to your current customers. For traditional businesses, this might look like selling a customer a more advanced version of the item that they are about to buy.
For example, let’s say you’re selling computers and a customer is looking for something with standard specifications.
Upselling would look something like offering a higher-end version of that computer. Maybe something with higher specs and more processing power.
In SaaS, however, upselling is often done by offering a higher tier of your product with more features.
For example, Let’s say you have a Basic and Professional version of your SaaS product. Upselling would be getting your Basic plan customers to upgrade to the Professional plan.
SaaS upselling could also mean getting freemium users to subscribe to a paid plan.
Upselling VS Cross-Selling
Although upselling is usually paired with cross-selling, they are different in some ways
Sure, they can give you the same benefits. But the key difference is that cross-selling involves a product other than the one that your customer is already using or buying.
For a traditional business with tangible products, cross-selling is usually done at the point of sale. It’s where you offer a customer a related product or service before checking out.
Let’s take our initial example where you’re selling computers.
Cross-selling could be offering customers additional accessories for their computers like printers or external hard drives. Or it could be offering an extended warranty that covers the product for a longer period of time.
However, in SaaS, cross-selling is often done by offering complementary SaaS or other digital products. These are products that can supplement and enhance the use of your SaaS solution.
For example, let’s say you’re mainly selling a customer relationship management (CRM) SaaS solution. But you also have voice over Internet Protocol (VoIP) and social media marketing tools that seamlessly integrate with your CRM platform.
Cross-selling for this business would be offering your CRM customers the chance to purchase these complementary tools.
Both upselling and cross-selling can be beneficial for SaaS businesses. By increasing customer spending, you can grow revenue and expand your customer base.
Why Is Upselling Important?
Now that we’ve talked about what upselling is and how it looks for SaaS companies, let’s talk about why it matters.
There are a few key reasons why upselling is important:
Upselling Increases Revenue Per Customer
The most obvious reason why upselling is important is that it increases the revenue you get from each customer. This is also called expansion revenue.
By offering more to your customers, you can increase the average spend per customer and grow your recurring revenue.
This, in turn, increases your customer lifetime value (CLV).
With a higher CLV for each customer, you can afford to spend more on customer acquisition. You can also increase your marketing budget to attract new customers while still maintaining a profitable business.
Upselling Makes Up For Revenue Churn
When you offer more to your customers, you can reduce the effects of revenue churn.
Revenue churn happens when an existing customer cancels or downgrades their subscription.
You see, churn is an unavoidable reality in any SaaS company. All you can do is reduce it or make up for the losses due to it.
Upselling can help you do the latter. By bringing in expansion revenue from upselling, you can reduce the impact of revenue churn.
This is actually measured by a growth metric called the SaaS quick ratio. The more revenue you have from new customers, upsells, and cross-sells, the more you can grow despite your revenue churn.
Upselling Strengthens Relationships With Customers
If you do it right, upselling can strengthen your relationship with your existing customers. You can do it by showing that you’re invested in their success.
When you’re upselling, it’s easy to look like you’re just trying to make a quick sale and get more money from your customers.
But if you genuinely try to help them get the most out of your product and improve their experience, they will feel that.
This builds trust and strengthens the relationship between customers and businesses. As a result, customers are more likely to remain loyal and continue doing business with you in the future.
If you do it right. Let’s emphasize that condition.
But how do you do it right?
Let’s talk about building your SaaS upsell strategy.
How To Build A Killer SaaS Upsell Strategy
There are a few key steps and tactics to building a winning upsell strategy for your SaaS business.
Here are some steps that may help you do that:
Identify Upsell Triggers
First, you need to identify the triggers that may indicate that your customers are ready for an upgrade.
There are a lot of possible triggers. It can vary depending on your pricing model.
Let’s look at some possible upsell triggers you may use.
Usage Limits: One of the most common upsell triggers is hitting a usage limit.
For example, you may offer a basic subscription with limited features for $10 per month. But once customers hit a certain number of users, they need to upgrade to the next tier which costs $25 per month.
This is a common pricing model for SaaS businesses. You offer a low-priced entry-level subscription to get customers in the door. But once they start using your product more, they need to upgrade to a higher tier to keep using it.
This trigger also works for upselling freemium products.
Let’s look at Spotify, for example. Users who subscribe to the free version of Spotify only have a limited number of skips. Once they reach that limit, they get a call-to-action (CTA) to upgrade to a premium plan.
You can also use this kind of trigger for other types of limits such as the number of contacts, number of emails sent, storage space allocation, and more.
Time-Based Triggers: Another type of trigger you can use is a time-based trigger. With this, you simply offer an upgrade after a certain period of time has passed.
For example, if a customer has been using your product for six months, they might be more open to upgrading their service or purchasing add-on features and products.
Season-Based Triggers: You can also look at factors like seasonality or events related to your industry.
If it’s the holiday season, for example, many customers will be looking for ways to boost sales and employee productivity.
Offering them an upsell in this context will make sense to them.
Automate Your Upgrade Prompts
Once you have identified the right triggers, you need to automate your upgrade prompts.
It’s no use if your customers still have to wait for your sales or customer success team just to be able to upgrade their plans.
By the time your team reaches out to them, they may have changed their minds. Or worse, they may decide to switch to a competitor of yours.
Automating your prompts will help you upsell while your customers are in the heat of reaching the limits of their subscriptions.
And they will likely take you up on that offer because they still have a fresh awareness of their need for a more advanced plan.
Provide A Self-Service Upgrade System
Your automated upgrade prompts should be followed by a portal where your customers can do a self-service upgrade of their subscriptions.
Ideally, your customers should be able to switch to more advanced plans on their own. This way, they don’t have to wait for someone from your team to reach out to them.
Let’s look at an example with the scenario where you have a CRM solution.
Imagine having a customer that just reached their subscription plan’s limit. They just acquired fifty hot leads. But they’ve also reached the maximum number of contact records that their plan allows.
Imagine that these fifty new leads are the hottest they have ever generated and they need to add them to the CRM system so that they could nurture them immediately.
Your CRM platform gives them an automated prompt to upgrade their plan so they can add more leads. They click the CTA and go through the paywall. They switch to the next subscription tier easy peasy. And they manage to add the leads to the CRM platform.
See how convenient that is for the customer? They don’t have to wait for someone from your support team to reach out to them. They can upgrade on their own without any hiccups.
This is a winning upsell strategy that you should implement in your SaaS business. With the right triggers, automated prompts, and a self-service portal, you can boost revenue by providing upgrades to your customers at the right time and in the right context.
Leverage Third-Party Integrations To Boost Your Upsell Strategy
In addition to these steps, you can also leverage third-party integrations in your upsell strategy.
Ideally, your product should integrate with other SaaS solutions that your customers might already be using. And you can use those integrations to upsell to them.
HOWEVER, these integrations would only be available in your more advanced plans. So, you would need to offer these plans to your customers when they reach their limit.
This way, you can entice them with the benefits of using a more advanced solution while still offering a relevant plan that fits their needs at the moment.
By leveraging third-party integrations, not only do you give your customers more value with the upgrades. But you also provide additional functionality that can help boost sales and productivity for their businesses.
But be careful doing this strategy. It may come across as being stingy on your part.
A smart way to do this is to see what integrations your competitors are offering.
If they are offering key third-party software integrations on their lower plans while you only do on higher plans, your customers might decide to go with them instead.
Do NOT Bombard Your Customers With Upsell Offers
It is important to be careful not to bombard your users with upgrade offers.
This can turn off your customers and make them feel like you are being too pushy
Instead of offering upgrades for the sake of increasing revenue, focus on providing value to your customer first.
You want them to see the benefits that upgrading their plans would give them.
In other words, instead of focusing on what you can get out of an upgrade offer, focus more on how it will help them meet their goals or objectives more quickly or easily.
This way, they won’t think that you’re just trying to boost sales by bombarding them with upgrade offers all the time. But they will know that you genuinely want them to make the most out of your SaaS product.
Offer Free Temporary Upgrades
One way you can provide value to your current customers is to give them a temporary upgrade for free. This will allow them to experience the benefits of a more advanced plan without committing to upgrade.
You can offer this free upgrade for a limited time, such as one month or one quarter.
After the free upgrade period is over, they can decide whether or not they want to continue using the more advanced features by upgrading their plans permanently.
This is a great way to get your customers to try out the new features and see how valuable they can be without having to pay for them.
Plus, it’s a great way to show your appreciation for their loyalty to your SaaS product.
Speaking of showing appreciation to your customers…
Award Customer Milestones With Upgrades
Another way to show your customers that you appreciate their business is by awarding them with upgrades when they reach certain milestones.
For example, you can give them a free upgrade to your next highest plan when they’ve been using your SaaS product for one year.
Or you can give them a discount on an annual subscription when they’ve referred five new customers to your business. You would get new customers AND an opportunity to upsell to a current one. Two birds with one stone.
This is a great way to show your customers that you value their loyalty and that you are willing to reward them for their continued subscription to your SaaS product.
It’s also a great way to get them to stick around for the long haul.
Offer Personalized Upgrade Recommendations
Another way to build a winning SaaS upsell strategy is to leverage personalized recommendations.
You don’t always have to go through the automation route when upselling your SaaS product. Sometimes, it also pays to be more proactive and be the one to offer it.
But remember, do NOT bombard them with offers.
Instead, give them one powerful offer with the right message at the right time.
By giving your customers tailored upgrade offers based on their current usage patterns, you can help increase the chances that they will accept your offer and upgrade their plans as needed.
One way to personalize these recommendations is by looking at how your customers are using specific features within your SaaS platform.
You can analyze their usage patterns and then recommend upgrades if you notice that specific features aren’t getting used.
This way, you’re not just offering an upgrade for the sake of trying to boost sales, but rather because it’s a great fit for them based on their actual behavior.
Provide Top-Notch Customer Success Services
Whether it’s upselling, new customer acquisition, or customer retention, long-lasting customer relationships are built on trust. And nothing builds trust like excellent customer success services.
So if you want to see your saas upsell strategy succeed, make sure that you’re always offering your customers the support and assistance they need to get the most out of your SaaS product.
This means that you should provide them with a smooth onboarding process. Your customer support team has to always be there whenever they need help with something.
What’s more, you need to offer them training and resources so they can get the most out of your product.
In short, you need to do everything in your power to ensure that they are making the most out of your SaaS solution.
This is a great way to build trust with your existing customers. And when they do trust you, they would listen when you give them recommendations on upgrades that could benefit them.
Focus On Positive Messaging
When it comes to SaaS upselling, it’s important to focus on positive messaging rather than negative incentives.
Let’s go back to Spotify’s example. When free users reach their limit on song skips, you won’t see Spotify saying “Uh-oh! You’re out of skips. You need to upgrade to a premium account to get unlimited skips” or anything like that.
Instead, they say something along the lines of “You’ve discovered a premium feature. Upgrading to Spotify Premium will unlock it.”
By reframing the offer in a positive light and focusing on the value of upgrading rather than the disadvantage of not upgrading, you can help improve your upselling efforts.
Use Social Proof
When you’re trying to convince someone to upgrade their subscription, one of the best ways to do it is by showing them that other people are doing it too.
This is where social proof comes in.
There are a few different ways you can use social proof in your SaaS upsell strategy.
One way is to show customer testimonials or reviews from people who have upgraded their plans and are happy with the results.
You can also highlight how many people are using a specific feature or how popular an upgrade option is.
For example, you can say something like “97% of our customers who use this feature experience at least 30% growth after switching to the Pro plan.”
Then back it up with actual reviews and testimonials from that 97%.
By showcasing what others are doing and how it benefited them, you can help build trust and encourage more people to upgrade their plans as well.
Use Scarcity Marketing To Create An Urgency To Upgrade
Just like social proof, using scarcity marketing can help convince people that they need to upgrade their plans.
One way to use scarcity marketing is by offering a discount for a limited number of users.
For example, you can offer 30% off on your Pro plan for the first 500 customers to upgrade.
This gives people a sense of urgency and encourages them to upgrade before it’s too late.
Another great way to use scarcity marketing is by offering discounts or deals for a limited period of time. This is actually more commonly used in utilizing scarcity marketing for SaaS products.
For instance, let’s say you’re running a promotion that gives 10% off all upgrades. But the promo would only last for a week or a month.
Scarcity marketing can be very effective in SaaS upsell strategies because it appeals directly to our fear of missing out (FOMO) on something great.
By creating a sense of urgency, you can help persuade more people to upgrade their plans and get the most out of your product.
Hype Up Your Upsell With New Features
If you want people to upgrade their plans, you need to give them a good reason to do so.
One of the best ways to do this is by regularly releasing new features or updates for your higher-tier plans.
For example, if you recently released a new feature for your Pro plan, make sure to let your customers know about it.
You can do this by sending out an email blast, posting about it on social media, or even adding a banner on your website.
By constantly adding new features and improvements to your higher-tier plans, you can show your customers that they’re always getting more value by upgrading.
This is a great way to encourage more people to sign up for your paid plans and help improve your SaaS upsell strategy.
Final Thoughts About Building A SaaS Upsell Strategy
Upselling is an important part of any SaaS business. It can help you drive more revenue and strengthens your relationship with your customers.
In this article, we’ve talked about a lot of ways you can do to build a successful SaaS upsell strategy.
But at the end of the day, upselling is all about value and trust.
For your customer to even consider upgrading to a more advanced and expensive plan, they first have to see the value in it. They need to have a picture of what it’s like to use your product at its greater potential.
You also need to build trust with your customers. They need to feel like they can rely on you and be confident that you’re always looking out for their best interests.
The best way to do this is by being transparent, honest, and helpful. Build a strong relationship with your customers and they’ll be more likely to upgrade their plans when the time comes.
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