Mastering the Upsell in As-a-Service Business Maturity
Unlocking revenue growth and customer value at every stage of your service model journey
By Tamarah Usher and Charles Schreiner
How to think about as-a-service business maturity
In our first blog post, we showed a Business Model Transformation Roadmap that highlighted, among other things, the ever-changing customer value proposition that accompanies maturing as-a-service (AaS) models. As the AaS business model and supporting products mature, the methods of generating revenue and supporting the model change. To ensure this maturity transition is smooth and you are getting the most from scale, it is crucial for you to:
- Understand the change in value proposition to the customer and how it generates revenue
- Know how to identify and seize upsell opportunities
In today’s blog post, we’ll discuss upselling opportunities at each maturity stage and how those shift as the model changes.
The digital product upselling journey
Companies at the “Digital Product” stage typically have made the jump and have an app addressing specific use cases and functionality. The business may have matured from legacy products or be a pilot stage of a larger product roadmap.
Upselling opportunities at this stage come naturally, as they’re typically extensions and improvements of product features. For instance, can you provide a white-labeled version of a lending application so that more businesses can use it as a customer-facing product? Are there additional functions that your customers are asking for that you could enable as in-app purchases? Or is there more visibility that you can offer management about the real-time activity?
Transitioning customers to SaaS models from stand-alone products can take several different paths. First, there can often be a convincing pricing conversation if you show how much their users use the products and demonstrate a lower but recurring pricing model. Second, you can show that a freemium model (with lower functionality) is a best-fit model for specific customers. Third, a tiered per-user license model may offer the best feature and user flexibility if your customers have highly variable staffing models in seasonal or hyper-growth mode.
Selling in and beyond with SaaS
A few standouts can make a difference when it comes to upselling strategies for software-as-a-service (SaaS) businesses. The first consideration may be tiered pricing. This is where you offer different service levels or features at different price points. It’s a great way to encourage customers to upgrade as their needs grow. Then there’s bundling, which involves packaging multiple features or services at a discounted rate. It’s a win-win because customers feel like they’re getting a deal, and businesses increase their revenue. And let’s not forget about cross-selling, where you promote related or complementary products to customers. It’s a brilliant way to increase your revenue per user while adding more value to your customer experience.
Now, let’s talk about the importance of customer onboarding and education in encouraging upselling. A well-executed onboarding process doesn’t just help customers get started with your product — it’s also the perfect time to showcase the value of higher-tier plans or additional features. By educating customers about how these offerings can solve their problems or enhance their experience, you’re planting the seeds for future upselling opportunities. Remember, a customer who fully understands and appreciates the value of your product is much more likely to consider an upgrade. So invest in a solid onboarding process and continuous education — it’s an upselling strategy in its own right.
Sales-focused retention and engagement
As SaaS companies grow, they start to pull out all the stops to keep customers happy while building stronger relationships and finding new ways to make money. Big players in SaaS are nailing customer retention and upselling, starting with making things personal — going above and beyond to customize user experiences based on individual wants, needs, and goals. They’re building stronger ties with their customers and ensuring new users hit the ground running with helpful tutorials and resources while watching for potential hiccups.
They’re also keeping tabs on how customers use their services, gathering valuable nuggets about customer behavior. Their intelligent systems spot upsell opportunities that mesh with the customer’s interest. They’re also not afraid to mix things up and experiment with product features and messaging through A/B testing while ensuring their platform stays fresh and flexible with ongoing updates.
These seasoned SaaS players are also playing a careful game with significant financial numbers like customer acquisition cost (CAC), annual contract value (ACV), and customer lifetime value (CLTV). They’re finding the sweet spot between growing and making a profit. They’re also tracking where their revenue is coming from, which helps them make smarter decisions.
All these efforts are built on a solid foundation of good data management practices that ensure their data is clean and aboveboard. They’re using advanced data engineering and business intelligence (BI) to make decisions based on hard data while leveraging the cost benefits of the cloud for scalability. Being a pro at SaaS retention involves a mix of tech, data analysis, and a focus on the customer. This mix works to improve customer engagement, retention, and upselling.
Services made possible with AaS features
As the SaaS world moves fast, leaders always look for fresh and exciting ways to boost what they offer and keep their customers returning for more. When SaaS companies hit their stride, they open up a new universe of possibilities with value-added services. These extra goodies make their SaaS offering even better and open up innovative new ways to make money.
These value-added services often appear as handy insights, tips, and suggestions that help customers get the most out of the platform and reach their goals. Businesses can deliver tailor-made services by tapping into the power of data and machine learning. These could be insights about features on the platform that customers aren’t using enough or comparisons showing how they’re doing against their industry competitors. Some companies cleverly market these services with a tiered model, saving the best value-added services for customers who level up to higher subscription tiers.
But there’s more to it than just data-driven insights. SaaS providers are also finding new ways to make money by teaming up with third-party providers and creating a network of related services. This all-in approach creates a smooth and enhanced customer experience. They’re also cashing in on data by creating data products, turning data into something useful that adds value while sticking to the rules for using data properly.
The path to expanding value in SaaS is a strategic focus on boosting customer value with extra services. By embracing innovation driven by data, keeping the customer at the heart of everything, and forging strategic partnerships, mature SaaS businesses take the customer experience to new heights, find new ways to make money, grow value-added services, and solidify their place as industry pioneers.
Where do we go from here?
It’s essential to remember that as your customers grow and progress through the maturity model, their needs will evolve too. This means your upselling strategies should continuously innovate and align with your business growth. Successful upselling can significantly impact CLTV and your overall business profitability. It’s not just about selling more — it’s about creating a win-win situation where your customers get more value and your business grows.
So, whether you’re just starting out or already making strides in the industry, take a moment to assess and enhance your upselling strategies. You might be pleasantly surprised by the opportunities you discover. Keep advancing, and remember that there is always potential for expansion and refinement in the realm of SaaS!
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