Growing Successful Customers: The Ins & Outs of Upselling

Growing Successful Customers: The Ins & Outs of Upselling

CustomerSuccessChat Recap

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Knowing how, when and where to upsell is crucial for customer growth in a SaaS business. But what role should Customer Success teams play in an upsell? Can an upsell ever actually increase the risk of churn? What do you do when customers actively try to avoid bumping up to the next pricing tier?

Our January #CustomerSuccessChat, the fourth in the series, explored these topics and more as we discussed Growing Successful Customers: The Ins & Outs of Upselling. Our experts — David Mitzenmacher, Allison Metcalfe, and Tom Krackeler — joined fellow Customer Success practitioners and enthusiasts from the field to discuss challenges and best practices in upselling and cross-selling. Here are the highlights.

Our first question addressed a fundamental concern: should Customer Success be responsible for upsells and cross-sells at all, and if so, to what extent? Experts and chat participants debated whether CSMs should actually do the selling, or if they should pass along the opportunity to the sales team.

David, Tom and other experts advocated for several variations of a hybrid approach, including:

  1. having CSMs identifying upsell/cross-sell opportunities and teeing up to sales to close
  2. having CSMs owning the upsell, and sales owning the cross-sell, and
  3. having CSMs cross-selling/upselling existing relationships within the department,while sales goes after new departments.
Trust and the relationship between CSM and customer emerged as hot topics within this question. Chat participant Julie Martin pointed out that she didn't think Customer Success should be involved in sales for reasons of trust, while Lincoln Murphy pointed out that because of trust built between CSMs and customers, it's fine and even good for them to do simple upsells and then hand over more complex deals to sales.

Tom advocated that the Customer Success team should preside over user and tier growth, and then identify opportunities for Sales to sell new modules/products to different departments. The experts agreed that the complexity of the sale should drive whether CSMs handle upsells, not so-called "trust" issues.

A few of the themes that arose here included:

  • It's crucial to align back-to-base sales with Customer Success team efforts.
  • CSMs can handle simple deals; Sales teams are needed for more complex and/or high-volume deals.
  • It can harm a relationship if the CSM expects an upsell before the customer is ready or without providing a clear ROI.

Does upsell/cross-sell increase or decrease churn risk? Both Tom and David asserted that done wrong, upselling/cross-selling can increase churn risk if there's a bad product fit or if the interaction damages the customer relationship. If you sell your customer something they don't need, that could entail a churn threat. But the mere act of upselling isn't a churn issue in and of itself. Experts said it's important to tie the upsell to customer milestones, and, perhaps most importantly, to clearly communicate the value to customers that can be gained by increasing in tier or adding products.

The next question centered on what to do when you notice oddities in your customer metrics that drive your pricing. Of course, this first requires that you notice that your customer is taking "unnatural steps". But once you do, what does it mean, and what can and should you do about it?

Lincoln Murphy suggested re-evaluating pricing in this case, because if it's happening a lot, that says something about the value of your offering held up against pricing. If you aren't differentiating your pricing tiers based on value, customers won't want to pay for more. Tom pointed out how important it is to ensure tiers step up in value beyond just "more of same" — ex. additional features, premier support, etc. Shannon Kluczny pointed out that a few customers statistically won't follow the "natural process", and that's not something to worry about unless it's more than 20% of cases.

Tom suggested providing a "clear line of sight to ROI", in order to showcase the value of the upsell/expanding app capabilities. Lincoln Murphy pointed out that not wanting to move up, gaming the system, sharing logins, deleting objects, etc. can be pricing issues and churn threats. The biggest problem with pricing that's incongruent with customer needs/wants is that it shows you don't understand your customers.

Here, the experts hit on three themes:

  • Retention is important and positive, but you need to build an expansion path for a healthy SaaS business model.
  • You may be missing an opportunity for expansion and it's important to dig into why your customer hasn't grown.
  • Assuming you've added more value to your app over time, it's likely your customers are (or should be) getting more and more out of your product, and it's important to price accordingly.

What are the most egregious SaaS upsell/cross-sell snafus? We received a great list of "#FAILs" from our experts and participants. Take care none of these happen to you!

What data matter most for setting the stage for a successful upsell? Our experts weighed in and said that data can be extremely helpful for framing upsell conversations. This included understanding trends, mapping them to milestones and outcomes, and filling in the gaps with upselling/cross-selling. Data can also identify when there are triggering events for decision-making, such as a change in primary user, or if customers are achieving multiples of the value they are paying. It's also smart to track trajectory of key metrics (ex. percent of licensed seats used) and step in well before hitting the limit. For the cross-sell, Tom suggested putting intro functionality or "learn more" teasers in the app, tracking who checks them out, and then engaging fast.

In case you missed our last #CustomerSuccessChat on nailing and scaling onboarding, we highly recommend reading the recap! This question delved into how to set the stage for upsells during the onboarding process. Experts suggested capturing the customer's success goals during onboarding and then planning to deliver future value in their terms. Participant Shannon Kluczny recommended taking time during onboarding to see why they didn't buy other product offerings to see if you can fill in concerns down the line.

As a side note, chat participant Matt Hogan asked if anyone knew of a term for when a customer nearly cancels and you flip into an up-sell. David called it an "Upsave" and Tom called it "Churnaround". Feel free to co-opt these terms in your Customer Success department, or let us know if you've got another favorite!

Join us for the next #CustomerSuccessChat on Tuesday, 2/17/2015 at 9a PT / 12p ET. The topic will be: #SuccessHacking: #CustomerSuccess as #GrowthHacking.

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