SaaS companies face unique challenges on the road to profitability. In the rush to generate revenues and build a customer base, high churn rates and an inability to scale can quickly derail even the best-laid profitability plan. What typically separates the companies that reach profitability from those that don’t is the ability to leverage existing customers. As many SaaS businesses quickly discover, existing customers, not acquisitions, are often the best and most cost-effective sources of new revenue.
How SaaS companies typically generate new revenue from existing customers is through up- and cross-selling. Research shows that cross-selling through product recommendations can increase revenue by 300%, conversions by 150%, and order value by up to 50%. Tweet While up- and cross-sells are an incredibly effective way to increase revenue and reach and sustain profitability, the strategy is not without its pitfalls. If you’re not careful, it can go sideways quickly and you can end up alienating customers and losing more revenue than you stood to gain.
Like with most everything else to do with your SaaS business, cross- and up-selling must be approached strategically with a clear plan in mind. The following tips are designed to help you get started.
We listed this first because cross-selling in the shopping cart can easily get out-of-hand and become a nuisance for the customer. First, be sure the product you are cross-selling complements the main product and costs less. Secondly, don’t offer more than three products and place the product you hope to sell the most in the middle. Don’t confuse the customer by throwing a pile of products and solutions at them. Third, show them what others like them are purchasing. Put it in terms of something like, “Ten other software companies added the x module to their purchase,” or “Customers like you rated the x module with five stars.”
Your best data comes from existing customers. Mine data based on what certain categories of customers purchased together. Then, come up with a strategy that creates the most efficient cross-selling recommendations for each category. You are basically predicting future behaviors based on past behaviors. Keep in mind that behaviors change, though. Part of your strategy must also include monitoring and updating buying habits.
All of us love a good opportunity. We hate to feel like we are missing out on something great. When cross-selling in the shopping cart, you have the advantage of a customer who has already told you what they want to buy and how much they are willing to spend. Use that data to provide an incentive. For example, you might say, “Your current purchase totals $89. Purchases over $100 qualify for this special discount.” The incentive could be a variety of appropriate hooks, including a free gift, a free trial of another add-on, or an additional month free. However, the customer should still feel like the additional product is something of value, not just something to increase their total to qualify for the incentive. Follow-up the incentive message with customized product recommendations. Tweet
Customers in any industry start the purchase process by looking for a solution to a need or problem. Cross-sell by promoting solutions, instead of additional products. Your solution should be a “no-brainer.” With data you have gathered throughout the sales funnel, customize products you know will solve the customer’s needs. For example, instead of promoting product x as an engagement module, simply say, “Let customers see your human side with effective engagement.” Have a simple icon that represents this module for customers to click on and learn more.
A poor cross-selling strategy can lead to “shopping cart abandonment.” Overwhelming customers, not clearly stating what is being offered, and simply bombarding them with an aggressive sales pitch can irritate the client you worked so hard to get down the sales funnel. Avoid that situation by showing that you understand the customer’s needs, even during the shopping cart process. While cross-selling may be an automated process, effective data mining will help you provide customized recommendations that clients perceive as just what they need.
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