Spearheading Expansion Revenue with Personalized PLG Upsell and Cross-sell Campaigns
Growth at all costs? In this economy?!
Economic downturn or not, businesses can’t afford growth at all costs, forever. Sustainable growth beats the “growth at all costs” strategy in the long run. Healthy product-led growth is scalable, profitable, and manageable without bleeding cash.
Measuring Growth
Net Revenue Retention (NRR) is the golden metric to measure sustainable growth for a product-led growth (PLG) business. A SaaS business with healthy growth and profitability shows an NRR of around 90% in SMBs and more than 100% in enterprises. Many PLG companies that went public like Snowflake, Twilio, etc. have an NRR of over 125%.
We are going to talk about why and how to improve expansion revenue in this post.
Why Focus on Expansion Revenue?
According to Patrick Campbell, the founder and CEO of Profitwell, the top performers in growth have doubled the expansion revenue. This significantly impacts the company’s overall performance because upselling to customers costs only $0.27 for every $1 in annual revenue they bring.
The same study also found that high-growth companies get nearly 40% of their total revenue from expansion.
The significantly lower acquisition cost (CAC), profitability, and improved customer life time value (LTV). Saves you time and resources in creating awareness because the customer already knows your product and trusts your brand.
What’s not to love about expansion revenue?
What is expansion revenue anyway?
Expansion revenue is the additional revenue from the existing customers of your PLG business and the sum of upsells (higher priced plan than the one your customer is already using) and cross-sells (additional products and services from your company).
When customers love your product and are willing to spend more because they can experience greater value, you got an excellent NPS score right there. Good expansion revenue is a customer satisfaction metric.
Not as glamorous as acquiring net new revenue, but expansion revenue is more profitable for a PLG company, hands down.
How To Improve Expansion Revenue?
By upselling and/or cross-selling.
In a PLG strategy, you might have already set up pop-up windows, in-product notifications, and alert messages to remind your users when it is time to upgrade. This is a great way to deliver timely reminders and nudges to users. When the decision is obvious, they click on the button, enter payment details, and carry on using the premium version of your product.
This is not the only way to earn expansion revenue though.
When it comes to upgrades, oftentimes your user is not the decision maker or buyer. And, the buyer need not be an active user. So, your PLG go-to-market team needs to employ a communication channel other than the product itself to pitch an upsell to the right audience.
No prizes for guessing but, good old email does the job for you.
Let’s see some examples of how it can be done.
From the Beginning
In a product-led GTM strategy, upselling starts in the free trial period. A message to upgrade can be part of the PLG onboarding campaign and there are multiple routes you can take to successfully convert a free trial user.
- Create urgency with reminders that the trial period is running out and what the users will miss out on. Zapier informs that all the zaps you created using paid features will be paused and suggests upgrading to continue uninterrupted use.
- Suggest upgrading after the trial ended with options to retrieve the outcome of your product’s usage. Maybe subtly remind them how life sucks without your product? Like DocuSign did here.
- Explain why upgrading is a good idea. Basecamp lists out how you can keep everything your team needs in one place.
Land and Expand
This PLG upsell email can be of different types depending on the type of product, your PLG GTM model, and also the customer.
Upgrading for an individual user working on a personal project might be to access premium features or extend the product usage limit. Whereas a team account’s upgrade means additional seats or more user roles, like an additional team manager with unrestricted access.
Take Asana’s example. Their upsell email reminds the customer of the seat limit and suggests upgrading.
Fullstory sends a weekly product usage summary and a warning when the user is near the usage threshold. It’s great that the user is adopting and adoring your product, but send a reminder before you have to hit pause on usage.
You can leverage the opportunity to discuss a better plan to ensure uninterrupted product use and establish customer relationships. An easy upgrade CTA button also works when the customer is about to hit a usage limit or wants to access higher-tier features.
Extra Sweeten the Deal
Discounts are one way to do this. But, in PLG you can also offer extended usage, product credits, limited-time premium feature access, additional seats in the team plan, white-glove onboarding, and so on. An extra slice of monetary as well as product value gives that extra boost to customers on the fence. Setting a time limit on the offer will help faster upgrades too.
You can also use occasions like product anniversaries, feature launches, etc., to offer extra special deals on immediate upgrades.
Show Value, Remind, Repeat
Who doesn’t like getting their money’s worth?
Compare basic and premium versions, show easy ways to reach goal, and highlight the value from upgrading.
Proof of value works in upselling to free users and paid customers as well. The examples above cover highlighting product value to convert free users in the previous section. Let’s see how that works in upselling to paid customers.
They saw value in your product and that’s why they became your customer in the first place. The idea here is to keep reminding the customers of how awesome your product is, especially after they bought a premium version.
Your goal here is to ensure your customers that they are getting their money’s worth while suggesting a higher or additional value. Both upselling and cross-selling can be the theme for this email.
Product-led recap emails and newsletters can be great opportunities to show a summary of the value delivered by your product over time. The recap emails work in converting a free user as well as in persuading a paid customer to upgrade.
You can minimize the risk of downgrades and churn if you follow the value mantra in your auto-renewal emails. It might not be too crazy to pitch an upgrade in the auto-renewal email if a higher-tier plan benefits the customer.
You can also seize the opportunity to rope in sales or customer success to discuss a better and more valuable plan for the customer.
Additional services
It’s like asking if the customer wants fries and soda with their burger.
Think of any add-ons your customer can receive value from. A different product that compliments the one customer already paid for, an added service like a dedicated customer success manager for the account, and so on.
Cross-selling in PLG companies need not start with a hard-sell email. Let the customer get early access or a limited trial to let them understand the value.
Check out Invision’s cross-selling campaign for their new product - ‘Freehand’ and Canva Docs offering users to try out the newly launched products.
Optimize Upselling and Cross-Selling Campaigns
We talked about various opportunities to run email campaigns to drive PLG expansion revenue. But the billion-dollar question is, do they all work?
Yes, if you optimize it for efficiency.
Here are some best practices you can follow to get results from PLG to upsell and cross-sell campaigns.
- Figure out product signals
PLG companies use product qualified leads (PQLs) as a reliable judge of user intent to buy. If you haven’t identified PQLs already, it should be on the top of your list today.
PQLs are the remedy to the ‘spread and pray’ method. Setting up the right product thresholds will help you identify buying readiness better.
Don’t stop with figuring out the PQLS, optimizing them if and when necessary is also important to keep up the efficiency.
- Combine product signals and firmographics
PQLs can be a great indicator of the right time and user to try and upsell. But, if your target customer is not an individual user, but a team or enterprise account then you need a bit more to get the purchase intent right.
Product Qualified Accounts (PQAs) are a combination of product signals and firmographic information such as team and company size, customer’s role in the org, etc. Identifying and optimizing PQAs is key for the expansion campaign to be more effective.
- Personalize PLG at scale
Mining PQAs gives you all the necessary details you need for tailoring expansion campaigns at scale. Tailoring PLG emails that speak 1-1 with the users and buyers in your target accounts at scale becomes easier when you got the purchase readiness right.
Let’s say you want to upsell the annual subscription target account of 50-100 team members on a monthly billing cycle when they are over 80% of the product usage quota with more than 1 week remaining. You can set up the PQA to trigger an internal alert to Sales when all the criteria are met. And, at the same time, automated emails like the one below can be triggered.
And, the email that goes to the buyer’s email can be from the CSM’s email address suggesting an upgrade to an annual plan with details of the benefits for the customer.
Roping in Sales or CS teams can help PLG companies to forge a better buying relationship with the target customer. So, your emails can also encourage scheduling a call. When the team has all the relevant information on the customer’s product and CRM activity, the conversation becomes more authentic and easier.
Get inspired by any (or all) of the examples discussed in this post. Compare features, highlight value metrics, introduce urgency, and sweeten the deal. These campaigns work when you can personalize the PLG upsell and cross-sell emails.
If you made it this far in the post and are wondering about the practicality and dependencies involved in running these automated expansion campaigns, then you should check out Inflection.
Our customers are already running campaigns like the example above and more using Inflection. We unify product, person, and marketing activity data to see a wholesome view of the customer. Inflection is purpose-built to automate growth loops for B2B product-led companies at scale.
In Summary
Expansion revenue seems like a long shot, especially when everyone is cutting back on their expenses.
But businesses have requirements and problems to solve any day. Identifying account expansion opportunities at scale is crucial for product-led growth businesses to achieve sustainable growth.
Powering personalized PLG upsell and cross-sell emails with the right product activity and CRM data boosts campaign efficiency. Your upsell and cross-selling campaigns are automatically effective when they speak directly to the customers’ needs.
