TL;DR
- You can maximize your SaaS business's potential by mastering upsell vs cross-sell SaaS techniques.
- Upselling is about selling a better version of what customers already have, while cross-selling involves offering related products.
- These methods are not just interchangeable terms; they're strategic approaches to increasing your SaaS business's AOV and revenue.
- Upselling and cross-selling not only increase revenue but also improve customer lifetime value (CLV) and reduce customer churn by enhancing the service value.
- Statistics show that upselling and cross-selling can contribute to a 10% revenue boost by enhancing customer loyalty and MRR.
- Key upsell and cross-sell strategies for SaaS include knowing your customers, segmenting them, offering compelling products, encouraging upgrades, and listening to feedback.
- SaaS businesses can leverage existing customer relationships to demonstrate the value of upselling or cross-selling, making it a cost-effective strategy compared to acquiring new customers.
- Ultimately, upsell and cross-sell practices foster long-term customer relationships and revenue growth for SaaS companies.
There are two ways to bring in revenue for your business:
Sell your products to more customers.
OR
Sell more products to the same customer.
The prime objective, however, is to sell.
In business, the terms “upselling” and “cross-selling” are often used interchangeably, mainly because both methods are critical in selling the products to customers.
For those in the SaaS business, knowing how to upsell and cross-sell is critical in maintaining a steady revenue stream while simultaneously keeping your customers engaged with exciting offers. It is a mutually beneficial deal that works to everyone’s advantage.
Our blog takes you through the intricacies of upsell vs. cross-sell for SaaS products and business. Let’s explore.
Upsell Vs. Cross Sell SaaS Products: What is it All About?
Before venturing into the details, let’s clear the air about upselling and cross-selling.
What does upselling mean?
Upselling is when a seller encourages buyers to purchase additional items to improve their original purchase, thereby making the transaction more expensive. To do this, sellers may offer premium options, upgrades, or enhancements.
Essentially, upselling is all about maximizing the value of the customer’s original purchase, or in other words, saying, “Your original choice is a good one. But this one is much better, and here’s why.”
A good example of this is Togai's Enterprise Plan. It has no caps on events or invoice amounts, making it ideal for growing businesses.
What does cross-selling mean?
Cross-selling is when you offer complementary products to expand the initial purchase. The additional item is a complementary item tested for innovative features and functionalities to tempt your customers and complement their initial purchase rather than serve just as an add-on.
Take, for instance, Togai’s Startup Plan. It maximizes the value of a customer’s purchase and enhances their experience.
Upselling and cross-selling increase your AOV or Average Order Value to boost your revenue. These two practices are critical for every SaaS company, regardless of your niche, industry, or market.
Let’s boil it down to simple terms before moving on to the next section of our blog:
Upselling refers to the practice of selling a larger package. On the other hand, cross-selling is the practice of selling customers additional related products.
There are no hard and fast rules for upselling or cross-selling your products. You can implement them at any point in time, whether initially, mid-way, or towards the end of the sales.
How do upselling and cross-selling help SaaS businesses in particular?
Reports say that 44% of SaaS businesses gain 10% additional revenue from upselling and cross-selling. These two practices are all about clubbing your growth and that of your customers to foster loyalty and boost your MRR (Monthly Revenue Rate).
Let’s explore the benefits of upselling and cross-selling SaaS and what drives the same.
Also Read: SaaS Billing: Understanding its Role and Software Necessity
Cross-sell Vs. Upsell SaaS: Profitable Metrics & Benefits
Many SaaS businesses aim to increase revenue through upselling and cross-selling, with higher targets to fuel growth. These strategies suggest relevant products to the right people at the right time with key differences.
There are three major metrics all SaaS companies rely on for profitability:
- CAC or Customer Acquisition Costs is the sum of the money required to acquire a new customer. CAC combines the expenses for marketing campaigns, sales events, etc, and divides this value by the number of customers acquired over a period of time.
- CLV or Customer Lifetime Value is the amount of money a customer generates while they are loyal to your brand or product.
- Customer Churn is the rate at which customers cancel their subscription with your product. Customer churn is tied to customer retention.
In this scenario, upselling and cross-selling increase the Life Time Value or LTV since every customer who upgrades the existing product or adds another one is paying more.
Upgrades and add-ons improve the service value for the customer, eventually making them happy and thereby increasing retention. In short, customers who are happy with the service or product are likelier to remain loyal to your business.
The sensible thing for any SaaS business to do is upsell or cross-sell to existing customers rather than exhaust its resources in acquiring new ones. The trick is to leverage your established relationship, trust, and credibility with your customers to demonstrate the true value of upselling or cross-selling.
Asking customers if they want an add-on or an additional service is not sufficient to maximize the value of their shopping cart. SaaS businesses should implement effective upselling and cross-selling techniques to leverage the customer's shopping behavior and preferences to achieve this.
Read on for these details in the upcoming section of our blog.
5 Brilliant Upselling & Cross-selling Strategies for SaaS Businesses
Understand your customer.
Analyze customer behavior to identify opportunities and gaps to leverage your additional products or upgraded plans. Gather the vital customer insights from:
- Initial sales conversations
- Customer requirements
- Customer surveys
- Customer feedback
Togai is a great example of a platform catering to customers’ needs. It offers everything a new customer can expect. Its free starter plan is packed with functionalities like:
- Discounts
- Flat fees
- Credits
- Multi-currency
As your business scales, you can choose Togai’s Enterprise pack, which has more functional features, custom integrations, and dedicated support.
Segregate your customers.
Know your customers well? It’s time to segregate them according to demographics, preferences, and buying behaviors. Segmentation allows you to customize your upselling and cross-selling strategies to suit each group. You will also be able to evaluate the following:
- If your customers are gaining the complete value of the product.
- How to enhance customer experience with other products.
- How to address customer challenges before promoting products.
3. Introduce eye-catching products.
One of the best upselling or cross-selling strategies is to surprise customers with a brilliantly designed product. Once they are hooked, it is easy to cross low entry barriers during the trial period. Uniquely designed products bring in interested customers who are willing to spend time knowing the benefits of the upgrades and complementary products.
4. Be generous with upgrades.
Promote self-upgrades with clear instructions to encourage clients to upgrade themselves anytime. Also ensure your customers never have to worry about running out of product or being unable to contact your company. Educating your customers about how the shift from basic to professional tier benefits them is also important.
5. Remain open to customer feedback.
Listen to your customers. It is the best way to reduce customer churn and grab upselling opportunities. Customer interaction is a great way to highlight the value of the upgrade rather than its cost.
Even if your upgrades are at a lower price point, listening to customer feedback makes customers happy and increases the customer's lifetime value. Implementing their feedback further fortifies customer loyalty for a long time to come.
Wrapping Up
In SaaS businesses, upselling and cross-selling can lead to sustained revenue growth. By utilizing these tactics correctly, companies can encourage their customers to make larger purchases and add extra products to their orders. Showcasing the business's tangible benefits and added value, ultimately leading to increased revenue and long-term customer loyalty.
To understand upselling and cross-selling, schedule a Togai demo with our team. Togai is the best Usage-based billing software that facilitates your upselling and cross-selling initiatives.
Upsell and cross-sell Seamlessly With Togai!
