The Art of Upselling: How Retention Can Drive More Growth Than Acquisition
Did you know that 62% of clients not upsold in their first three months churn within two years?
What’s in this article:
- A look at the art of upselling and how your brand can benefit from it
- The acquisition and onboarding of new customers requires a great deal of resources, whereas converting an existing customer to a higher tier of service is almost pure profit
- When your upsell approach matches the growing needs or pain points of your clients, it improves your ongoing relationship
A recent Brightback report claims that retention — not acquisition — will drive business growth in 2020. Achieving this expansion, however, requires brands to master upselling techniques that maximize customer engagement. This article will explore the crucial guidelines for getting started.
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What is upselling?
Upselling is when an existing client chooses to buy a more expensive version of your product. In SaaS companies, this typically involves a more feature-rich or customized experience of the service. Don’t confuse it with the similarly named cross-selling, which instead involves an existing customer purchasing a different product offered by your company. Leveraged properly, upselling can increase customer retention. One study suggests that as much as 62 percent of clients not upsold in their first three months churn within two years.
The case for retention versus attraction
Every SaaS business will experience a certain amount of churn, so when it comes to growth, there are two options: attract new customers or retain existing ones. The case for putting your efforts behind retention-based growth is strong. The acquisition and onboarding of new customers requires a great deal of resources, whereas converting an existing customer to a higher tier of service is almost pure profit. According to one survey of SaaS companies, it cost $1.18 to earn $1 in profit from a new client, versus $.28 to get that same dollar from an existing customer.
Upselling is tied to retention because the happier your customers are, the more likely they are to remain your loyal customers. When your upsell approach matches the growing needs or pain points of your clients, it improves your ongoing relationship. Of course, the vital companion to upselling is strong customer support; you can’t get a bigger buy from an unhappy customer. Do an audit of your customer support channels before launching any campaigns designed at increasing client buy.
Upsell in the first three months
It may seem pushy to try to upsell a client during their first 90 days with your service, but a strong onboarding process can go a long way towards establishing trust. Touching base early in your client’s journey provides the opportunity to evaluate their experience to date and make adjustments as necessary to best suit their individual needs. That adjustment may mean a higher payment tier, but be prepared to downgrade as well, if that’s what makes the most sense. Taking the financial hit in the short term will pay dividends in the long run as you indicate your clear dedication to providing the right service for your customer.
Understand your customer’s needs
It’s important to understand that your customer thinks about your service in terms of the value it provides, rather than how much it costs. So long as your service consistently delivers high value, the price tag is almost incidental. When it comes to upselling, it’s vital to explain it in terms of personal benefit. It doesn’t matter what you believe the best features of your next service tier to be, it matters how those features will make life better for your customer.
What will they be able to do if they commit that they couldn’t do before? What will the new package you’re selling allow them to do faster or better? How does the higher-priced version of your service improve their life today? Answer that question clearly and effectively, and you should have little trouble boosting your customers’ financial pledge to your company.
Be clear about what you’re offering
Unless your customer wildly underestimated how many of your features they’d need when they signed up for your service, an upsell should be a helpful nudge, not a dramatic leap. While appropriate tier levels will vary depending on industry, as a general guide, keep upsell proposals within 25% of the current commitment.
An upsell proposal has to be fully transparent about what the customer will be receiving as a result of purchase. Your site ideally provides a thorough explanation of each tier of service, and the overall pricing structure that accompanies them. Elements like subscription duration, additional features, and pricing difference based on company size should all be easily understood at a glance. Make sure your customer support team is well-versed in the particulars of your service options so they can respond to questions quickly and clearly.
Time your proposal to coincide with milestones
The best time to approach an existing client about expanding their commitment is when they’re feeling positive about their relationship with your company. Recognizing a milestone such as the number of leads generated, or hours clocked creates an opportunity to celebrate your combined success.
Your customer may not even be aware they’ve hit a new milestone. Capture as much data about their journey with your company as you can and be ready to provide it to them as evidence of your successful partnership.
Remember: make sure you have a clear picture of what your client values. Proposing an upsell because they’ve clocked a certain number of hours on your service when what they really care about is the number of tasks completed sets you up for failure.