If you are selling software to clients and businesses then you have to get your head around the fact that upselling is where the money is to be made. This, along with the pricing structure of the software, is what too many companies are getting wrong in recent years.
In fact the brilliant Josh Melick has just uploaded a brilliant breakdown about this on his website, which we are going to touch on today. According to Melick there is a great deal which those selling SaaS products are missing out on, and he has offered some fascinating insight as to how that can be fixed, and how these companies can start to improve their income and unlock potential for upselling.
Three Dimension Approach
The crux of Josh’s piece centers around the fact that too many businesses have their pricing structures laid out wrong. We know that most software providers will offer three pricing levels for their products, depending on the needs of the customer. The point which Josh is trying to make here is that differentiating those prices based on users and usage alone is not the way to go forward, and actually cripples the business in terms of future plans. Josh talks about a third dimension to this which is that a time limit is tagged onto each pricing structure.
Upselling With Time
Now most people could look at simply tagging 12 months onto each pricing level, and keeping it the same across the board. What you could look at doing here however is to add additional time on if you upgrade the package. And so instead of selling the silver package at 12 months to the client, you could offer them the gold package for 14 months, offering them two months for free. This is a great way to get more people to upgrade.
Lower Price Hike
The main reason why Josh is focused on that third dimension is that it gives companies the ability to raise prices at the end of the year, and do so with the full knowledge of the customer. What you can also use this process for is to upsell. And so let’s assume that you follow Josh’s advice and increase prices by 7% across the board, at the point of renewal you can offer a promotion. You could offer a silver package member that if they move up to gold, you will only increase the price from last year by 5%. If this works and they do upgrade, you will be able to count on a new gold member who is paying more, and in essence you are saving that person money for their upgrade.
The key to upselling to your customer is to follow Josh’s plan first, which is to get your pricing structure right first time. Once you have created these levels and then added a time frame to it, you will find that you are in a much better position to upsell to your clients.