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I’m probably reading the same research
you are about upselling. The clear
conclusion is that selling more stuff to existing customers is important for
software-as-a-service (SaaS) companies.
The most successful SaaS companies are generating more than
half of their new bookings from Plus, they’re achieving “net negative churn,”
meaning the loss of customers is more than offset by selling more to existing
customers. (See KBCM
2019 survey of SaaS companies.)
And this “land & expand” strategy can be a lot less
expensive than selling to new customers.
The cost of selling to an existing customer is about half the cost of acquiring
a new customer.
Where upselling can go wrong
But just because the strategy makes sense doesn’t
mean it’s easy to execute. In
fact, there are lots of ways it could go wrong.
Poor experience with the initial product: It may seem obvious, but upselling new
products requires that the customer have a good experience with the first
product. Companies need effective
onboarding, training and support in place to ensure customers are
satisfied. Without that, customers won’t
even consider purchasing more. (See “How
to lose a customer in the first 90 days.”)
Poor product integration:
The follow-on products need to work well with the customer’s existing
product. If customers struggle to use
the two products together, they simply won’t.
Things like a similar user interface, single sign-on, easy transfer of
data from one product to the other are essential.
Difficult to understand the value: It should be easy for the customer to see how
they’ll derive significantly more value by adding another product. For example, adding a tenant screening
service to a residential property management solution makes sense. Unrelated products and services don’t. Don’t make your customer work too hard to
understand the value. (See “Your
prospect has a day job.”)
Require new decision makers:
If the add-on product requires an OK from a new person within the
customer’s company, a “simple” upsell can get complicated. This is true even when one product is closely
related to another. For example, there may
be an advantage to connect an HR administration solution directly to a payroll
product. But that means the purchase
decision for the new solution now involves the Finance executive, not just the
HR administrator. That doesn’t mean it’s
impossible to sell the add-on payroll product, but it does present another
obstacle.
Poor timing: Be
careful not to jump into upselling too soon.
The customer needs to see value from the first product they’ve purchased,
and they need to trust you. That may
take time.
Speaking of poor timing, don’t try to upsell a customer
while they’re trying to resolve a support issue. When they contact the support desk, they’re
focused on getting the existing product to work properly, and probably
not in the mood to think about purchasing additional products.
Lack the support of end-users: If they’re happy, end-users can be a huge
supporter and make it easier to sell add-on products and services. If they’re unhappy, not so much. If an HR manager is getting lots of pushback
from employees about their experience with an HR solution, they’re unlikely to
buy additional products. Same for a
Sales manager getting complaints about the CRM system, a Finance manager
getting grief about an expense reporting system, etc.
Difficult to purchase:
Customers buying a related product from the same vendor expect a simple
buying process. A complicated multi-step
process and pricing that’s hard to figure out will be confusing, slow
everything down, and make the buyer wonder whether these two solutions really
are from the same vendor.
Selling without understanding: The people doing the upselling need to know
what the customer really needs.
Mindlessly pitching one thing after another, just because it’s in the
salesperson’s bag, isn’t very effective.
Because the customer is using a SaaS product, it should be possible to
know precisely what additional products or services might make sense for
them. No need to spam them.
I don’t mean to scuttle anyone’s plans to grow their SaaS
business by selling more to existing customers.
Done well, it can work. And lots
of SaaS companies have made it work. But
be aware of the obstacles. Even though
products carry the same logo and come from the same vendor, upselling isn’t as
easy as it seems.
