Upselling isn't easy

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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.)

upsells and expansions.

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.

Taglines are more than a few clever words

There are lots of memorable taglines for consumer products: 

• Just do it. (Nike)
• Got milk. (California Milk Producers)
• Betcha can’t eat just one. (Lays)

But business and technology products have had a fair share of effective taglines as well: 

• Imagination at work (GE)
• THINK (IBM)
• Think different (Apple)
• The early salesforce tagline wasn’t even words; just a logo saying “software” with a slash through it.

Each of those short phrases does a lot of work.  They convey something vital about the product or the company.  They come out of a deep understanding of the product or the company and the benefits it delivers.

And the tagline isn’t just something that’s used on a billboard or in a TV ad.  It’s actually reflected in the way products are built, service is delivered, how the company hires, and everything else about the way they do business.

Authentic taglines require deep thinking

I worked with Lotus when they developed a tagline, “Work the web.”  It was featured prominently in a series of ads featuring Dennis Leary.  It made the point that the web was useful for lots more than creating chat rooms, virtual pets, and cat videos. 

The tagline was a clear expression that the web, which was still in its early days, can be a powerful business tool.  It came out of deep thinking and many meetings in which people thought hard about how to carve out a compelling role for Lotus – specifically Notes and Domino - in a rapidly changing market.

The most effective taglines aren’t just dreamed up by a clever marketing team.  Yes, a few creative folks sitting in a room could come up with something cute or catchy, but it’s unlikely to have much meaning to people hearing it or convey anything fundamental about the product or the company.  It will be just a few empty words.

Nor can effective taglines be “borrowed” or adapted from another company.  Grafting on a phrase that isn’t a genuine reflection of a company’s true value proposition or culture is inauthentic and meaningless. 

Taglines aren’t required

Companies can effectively market their solutions without a tagline.  They definitely need a concise and compelling value proposition – a few sentences that clearly explain who should buy their product, what problems they solve, and why someone should pay them money for it.  (See “Two Essentials for SaaS Marketing.”)

But they don’t necessarily need to distill this into a short tagline, a few words that captures the essence of the value proposition.  It can be helpful in ad campaigns or other promotional efforts, but not essential.

Companies and marketing teams that do opt to develop and use a tagline though, should recognize that it’s not an easy task to do it well.  There’s lots of work squeezed into a very few words.

Do you know why your customers buy?

If they’re doing their job, SaaS marketers can tell you how many leads they’re attracting, how many convert into paying customers, where the leads are coming from, and even how much they’re paying for them.

That’s all useful information that should be collected in your CRM system.  You can’t run an effective SaaS marketing program without it. 

But all that data doesn’t really answer an important fundamental question underneath the numbers:  Why do your customers buy your solution?

To break that question down into smaller bits:

•  What problem are your customers trying to solve?
• What’s wrong with the solution they had in place before yours?
• How costly or urgent is the problem?
• Why did the solution from you and not some other vendor?

Answers to these questions won’t be found in your CRM or marketing automation solution.

You might make some educated guesses based on particular keyword searches or paper downloads.  But that’s exactly what they are:  guesses.  What someone clicked on doesn’t really reveal why they were looking in the first place.

Ask your customers

I’ll suggest a better approach:  talk with your customers.

In particular, talk with customers that have bought recently.  They can still remember what motivated them to evaluate alternatives to their old solution.  They can give you some useful insights into what problem they were trying to solve.

Who shouldn’t ask?

From what I’ve seen, there are a couple of good options when you think about who should be asking new customers about why they bought.

But first let me point out some bad options:

Customer satisfaction surveys:  These surveys can be measure existing customers’ satisfaction with your solution, but they don’t reveal why they bought the solution to begin with.  I also find that the survey approach can be confining, with little opportunity for customers to raise new issues or elaborate.

Customer support:  When a customer is talking with a support agent, they usually trying to get a problem resolved.  They’re really not inclined to chat about why they bought the solution in the first place.

Sales:  Nearly every time I’ve asked a salesperson why the customer bought, I hear some version of this: “Great relationship with the salesperson!”  That may be true, but not really helpful.  It could explain why the deal was closed, but not why the opportunity opened.

Who should ask?

Having worked with lots of companies that interview new customers, I’ve found that the most useful insights come when either of two people ask the questions.

The marketing team:  Someone from marketing can gather useful insights from customers if they ask as a market researcher.  In other words, they should explain to the customer that they’re gathering feedback to help improve the product and the marketing programs. 

They should explain to the customer that they’re not trying to sell the customer anything.  Instead, it should be clear that they are genuinely interested in better understanding the customer’s evaluation and purchase process. 

Outside marketing analyst:  A second option is to bring in an outsider to conduct the customer interviews and prepare the analysis.  This outside expert has no direct interest is selling the customer anything, and sometimes customers are more forthcoming in speaking to a third party about their experience.  (Shameless plug:  Contact me if you need help.)

It’s not a one-time effort

One more bit of advice:  Talking with new customers shouldn’t be a one & done activity.  Collecting input monthly or at least quarterly can help confirm or refine your insights, or it might reveal a shift in the way customers buy.