(425 words – 4 min)
Last week, we discussed the two ways you can grow revenue: win new customers, or grow your existing customers. All businesses focus on winning new customers, at least they did when they started. Let’s talk about growing customers.
There are only four ways you can grow a customer: raise prices, upsell, cross-sell, and usage.
Raise prices: You can raise prices on subscribers. This is a no-brainer, but so many companies are afraid to do this. Your current customers already know the value of your product, which we assume is huge. They probably have high switching costs to jump to a competitor. You can and probably should be raising prices. You may not want to do it across the board, but you have many customers who will tolerate a price increase. As a famous shoe company says, just do it!
Upsell: We often initially win new customers by getting them into one of our lower priced packages. Then, over time, they learn how valuable additional features could be. They learn how valuable your product is. They want to buy a bigger, more powerful package. Think of this as going from good to better or better to best. Of course, this implies you have a packaging strategy to enable these companies upgrade.
Cross-sell: There is a blurry line between cross-sell and upsell. Think of cross-sell as something that is not an extension of your current product, but is related. For example, imagine a company that sells CRM and Marketing Automation modules. You could easily picture some companies using CRM without Marketing Automation and others using Marketing Automation without CRM. When you have great relationships with your customers for one product, they are much more likely to trust you and be willing to buy other products from you.
Usage: The more someone uses your product, the more value they likely receive. This means they are probably willing to pay more. To take advantage of usage, though, you need to have the right pricing metric. A pricing metric is what you charge for. Google charges for ad clicks. Dropbox charges for storage. The more customers use, the more they pay.
Yes, you should focus more on growing customers. It doesn’t happen by accident. My advice:
- Create an annual price increase program.
- Package your products to make upsell easier (Good, Better, Best).
- Create new products tangential to your existing products.
- Carefully choose the right pricing metric for your market.
What is your best technique to grow your customers?