Let’s talk about upgrades.
One of the best ways to increase your customer’s lifetime value is by getting them to upgrade their purchase. But how do you convince your new customers to pay more when it already took blood, sweat, and tears to get them to this point?
Here’s the thing: You have a 5% to 20% chance of converting a lead into a customer. That’s one in five if you’re lucky. But you have a 60% to 70% chance of selling more to a current customer. I like those odds.
Not only that, the majority of your revenue (80%) will come from a select group of your existing customers (20%). If you want to secure the future of your business, focus on retaining customers by pairing them with the right products and services. This is why upgrades must be part of your customer loyalty strategy.
Let’s discuss how to encourage your customers to make additional purchases.
Understand the Goals of Your Customers
The first step is to truly understand the goals of your customers. Sure, you know what your product/service does, but do you know what the customer actually needs? What problem is your customer attempting to solve with your product or service?
For example, let’s say your SaaS is an instant messaging service that allows your customers to collaborate with small teams. That’s what you do in a nutshell. But some of your customers need to send files over a secure channel. Because you’ve taken the time to understand your customers and their needs, you can offer this feature to some of your customers as an upgrade.
Use surveys to help you learn more about your customers, including what they need and are hoping to accomplish from your product.
Sell the Good Night’s Sleep, Not the Mattress
When it’s time to market your upgrade, don’t rattle off a list of features. Instead, you must paint a picture to convince your customer to buy the upgraded version of your product.
In other words, don’t focus on the coil count of a mattress. Describe how well the customer will sleep at night. Think benefits not features. Customers want to buy the end result, so be sure that your upgrade is marketed to emphasize the happily ever after.
Offer More Than Once
A lot of businesses make the mistake of treating the upgrade offer as a special unicorn that customers can only see once. Don’t do that. There’s no reason why an upgrade should be a one-time offer. Instead, upgrades should be offered multiple times. For example, you can offer an upgrade at the following milestones:
- Immediately after the customer adds to cart
- In an email sent 24 to 48 hours after they’ve purchased
- Within 14 to 30 days after purchase
- After being a customer for 1 year
- After logging a specific number of hours in your app
To be successful, don’t offer the upgrade in the same way each time. Instead, highlight a different benefit that aligns with the customer’s goals.
Don’t Offer at the Wrong Times
Timing is everything, especially when offering an upgrade. It’s easy to overwhelm your new customer by offering an upgrade too many times. This tactic can backfire and cause them to lose confidence in their original purchase with your SaaS. They may worry that this product won’t do what you promised and they’ll feel scammed. Those are troubles that you don’t want.
Instead, space out your upgrade offers so that your customers aren’t bombarded.
Highlight the Right Benefits to the Right Customers
To echo what we mentioned above, tailor your upgrade offers to meet specific customer goals. The best way to do this is by first grouping your customers based on a certain set of characteristics. Then, after segmenting, you create an attractive list of reasons to upgrade.
There are multiple ways to segment your new customers. For example, you can segment based on:
- Their intended goal – What does your customer wish to accomplish with your product?
- Their purchase history – What items have they purchased from you?
- Their wishlist – What items have they added to their wishlist?
- Their page history – Paying special attention to product pages, what pages have they visited on your website?
Don’t be afraid to be selective with your upgrade offers. Not every customer wants or even needs to upgrade. This is why you must be selective with your upgrade offers.
Make Sure the Price is Right
Even if your upgrade offer perfectly matches up to what your customer wants, that’s not the only hurdle you’ll need to jump. Pricing is also critical. If they can’t afford it, they’re not going to buy it.
The good news is that most customers can afford to upgrade if you price it right. There’s no set rule for how to price an upgrade, but many studies suggest that you price the upgrade at 25% above the original amount paid.
For example, if their initial purchase is $100, you can offer them an enhanced version for $25 more. Even though that’s more than they initially wanted to spend, it’s still within reason. If you sell it right (focusing on the benefits and not just features), your customer will see the wisdom of paying more. The less you ask, the less friction you’ll encounter from your customer.
Use Persuasive Words
To make your upgrade more attractive, use enticing language. This taps into the buyer’s mind and urges them to act immediately without delay.
Use words that convey urgency, such as “now” or “today.” You can also implement a countdown clock or show the offer’s expiration date to encourage action.
Another tactic is to amplify the customer’s FOMO (fear of missing out). Use phrases like “hurry, don’t miss out” or “54% of buyers purchased this upgrade” can be highly motivational.
Make Them Trust You
Your customers will only buy more if they trust you more. So, if you want them to upgrade, you’ve got to gain a little more of their trust.
You can do this in several ways:
- Offer a money-back guarantee – Reassure your customers that there’s no risk in upgrading. Stand behind your product and you’ll win over more upgrades.
- Include social media counters – Encourage people to like your upgrade package and then show the number of likes when offering the upgrade.
- Show what percentage of customers upgrade – Use social proof data to encourage the upgrade.
- Include testimonials – Show your new customers the benefits of upgrading by using actual testimonials.
- Offer a trial – Allow your customers to try before they buy.
Because you have a greater chance of selling to an existing customer, there’s no reason not to start right away. Use the above tips to improve your upgrade game and get more revenue from your new customers.
Before you go, check out these related posts:
- 8 Mistakes to Avoid When Closing a Sale
- How to Inspire Customer Loyalty in Your SaaS
- Re-Engage Your SaaS Customers With This Email Strategy
- How to Find Out Even More About Your SaaS Customers
- Use These Email Marketing Tips to Convert Trial Users to Customers