4. Account expansion
In a downturn, all the talk is about ‘survive’, but what about ‘thrive’? Happy customers buy more in a recession and the SaaS model enables companies to expand their revenue by focusing on existing customers.
From using in-app analytics to determine customer preferences to monitoring app usage for account expansion opportunities, SaaS companies can use their existing data tools to target specific customers with extras, add-ons, and upsells. What’s more, expansion revenue (increasing customer spend after the initial sign-up) is ready-made for a recession as it enables SaaS companies to increase revenue without needing to acquire new customers.
How are SaaS companies expanding revenue from existing customers?
For SaaS businesses, upselling is selling a higher subscription plan for the same product, such as moving from ‘free’ to ‘paid’ or ‘standard’ to ‘premium’. Whether it’s multiple email accounts (i.e. Calendly) or more messages (i.e. Slack), SaaS businesses are setting limits to encourage existing customers to upgrade to more feature-rich subscriptions.
This includes determining your value metrics, analyzing product usage among various customer segments, optimizing where these limits are set, and using time-limited discounts (i.e. half price for the first three months) to those upgrading.
Cross-selling and add-ons
Cross-sells and add-ons are increasingly used by SaaS businesses looking to expand account revenue. Cross-sells are entirely different products that are suitable to the same user-type, such as Atlassian offering Trello to Jira customers. Add-ons are additional extras that work with the base product, such as Freshdesk offering additional bot sessions to its customer service software (when the customer is at checkout).
In the current climate, some SaaS companies are offering new packages to customers, including additional cloud storage or priority support, while others are even building purposeful add-ons for popular products.
Adjusting your pricing in a downturn might seem risky, but that risk is minimized by data and outweighed by the returns.
For instance, SaaS companies are raising prices based on value metrics: if a product has a NPS over 20 then customers will likely pay more for it. Meanwhile, SaaS companies have added specificity to their pricing.
For some, that’s adding new pricing layers beyond the traditional ‘free, standard, premium’ options, which better capture customer segments. For others, that’s offering localized pricing (country-specific) or creating specific pricing structures per client (client-specific).
Read more of Survive or thrive: How operational efficiency can strengthen SaaS in a downturn.