Updated in September 2021.
Acquiring new customers is always going to be one of your top priorities, but just as (or more) important are your existing customers. It is easier and more cost-effective to increase the amount of money generated from current customers by renewing and upgrading their service, than it is to market to and acquire new customers.
Upgrading your users can be hard work, but it is also one of the most effective ways to deepen the customer relationship, keep them coming back, and ultimately increase their customer lifetime value.
A Look at Client Upgrades in Subscriptions
Ultimately, your pricing model will guide your strategy to upgrade your SaaS users to the next product tier, so it is important you make a clear differentiation between the main transition types out there.
- Freemium to Paid. Freemium models give users access to a limited version of the product in terms of features, and while they can be useful in gaining a large customer base they are not desirable in the long run. The freemium offering is meant to get users to experience your product first-hand and motivate them to organically upgrade to the premium version.
- Free Trial to Paid. Free trials provide users with access to the full product, within a certain time limit, usually, 7, 14, or 30 days. This model can be used to accelerate growth through new acquisitions, although converting free trial users to paying customers usually takes more sales and marketing resources. To drive the users down the funnel, more nurturing campaigns and sales enablement are involved within the time-limited trial period.
- Maximizing Paid Subscriber’s CLV. Once you have secured a paying user, your goal will be to have them renew their package, but also convert them to a higher paid tier at some point in their customer journey. This will most likely amount to upselling a more advanced product plan.
Increasing Revenue from Existing Customers
To develop a pricing structure that encourages upgrades, SaaS companies must understand where their users perceive value. Customer surveys of SaaS users have revealed that value is placed on additional sales they received, contacts made, reporting functions, productivity improved, and other indicators of their ROI.
As you structure your plans around perceived value, be sure to evaluate your North Star Metric and how different groups of users achieve success according to this indicator. Map out the desired experience at each tier, and know what users successfully achieve at every step, so you can better fine tune the brand promise for higher tiers.
It’s also important to remember that constructing and communicating each tier is of the utmost importance in tiered pricing, so users of the same use case/buyer persona don’t end up choosing different plans. Use data analytics and feedback of past trial users to fine-tune your plans around whatever value is perceived by potential customers.
Use free trials to build your initial pool of users and upgrade freemium users to paid plans by communicating the higher potential value of superior plans. Brands achieve success in this area by clearly emphasizing what extra benefits the next level plan brings to the table.
Upgrading paying customers to higher-priced tiers is generally done through grouping the features by use cases and/or by customer profiles you are targeting for each tier. Effective targeting is bound to increase users’ perceived value because they feel the chosen plan is tailored for them. Upselling also becomes easier to pursue.
As users scale and their needs grow, they should eventually upgrade, but if this doesn’t happen organically, you can take proactive steps to upsell them the higher tiers in a more personalized manner.
Make Sure Your Onboarding Experience is Stellar
During the onboarding period, your goal is to nurture and lead users to that “aha moment” when they can see how your solution really solves their problem, and how the premium/paid version of the solution will be even more effective in addressing their needs.
Ensure your onboarding emails are optimized to the behavior of the users — a good strategy is to share information in stages, before introducing the upgrade option. Consider using automation for your onboarding strategy, especially for freemium users. Free trial and paying users will require a mix of automation and interaction with sales and customer success.
Nurture Your Customers as They Grow
After your free trial and freemium users have subscribed, it’s critical that you learn about how their growth plans and progress could align with your higher-level product offerings. When this alignment is done correctly, the upgrade process becomes more organic and your clients will seek out upgrades of their own accord.
Of course, as most free trial periods are limited to 30 days or less, there’s a low probability for those users to grow significantly during such a short timeframe, but it’s relatively simple to implement this strategy for freemium users. As their needs grow (which is very common especially in B2B), they will naturally seek more functionalities beyond the basic ones that the freemium plan is providing.
Nurturing customers to grow them to a higher paying tier is achievable if you’ve set your product tiers according to the different stages of growth a potential user goes through. However, having plans that are well-aligned with the growth stages of your buyer persona(s) is not enough. The key to effectively upgrade paying users resides in identifying when they have grown sufficiently to need such an upgrade.
Personalize the Product Experience
Once you know who among your paid, free trial, and freemium users is using particular features, you can target those customers for upgrades to the next level of service. Use analytics tools to understand behavior and make upgrading to the next level simple and seamless, something users can do immediately as they keep working.
Personalizing your marketing efforts is a better option than using a scattergun approach that covers your entire client base. You might consider personalizing your email campaigns based on your customers’ activities or using email and in-app notifications based on actions they do or do not perform. In these ways you will approach your customers in a way that make them feel their situation is unique and that you are responsive to that situation.
Use Self-Service and Assisted Service in Concert
Make it easy for your users to purchase your product upgrades by offering clear upgrade paths, and have self-service enabled for all your users (especially if you are a long-tail SaaS player).
A well-crafted self-service option makes it faster and easier for users to upgrade, by shortening the sales cycle. It allows your clients to see their current subscription status and usage, a simple cost breakdown of purchasing new capabilities, feedback from other clients who are already using the upgrade successfully, and a way to try out the upgrades before purchase.
It’s not feasible to dedicate sales teams, customer success teams, and other such type of resources to users who are at lower level of commitment, like free trial or freemium. That’s why self-service is an optimal solution for this type of user.
In addition to self-service, providing assisted service for paying customers so they can zero in on value gaps that can be closed by an upgrade product makes sense. Provide self-service options to enable these users to gain swift access to all the resources and information they need to use your product at its full potential.
Don’t Forget Promotions
While we warn against devaluing your product with over-the-top promotions, customers do love a good bargain. Segment your users based on their activity, demographics, or industry sector , and customize promotions just for them. A timely discount can also work well after a free trial period.
To entice your freemium users to upgrade, think about offering a free upgrade trial, perhaps with an add-on. Gaining temporary access to the premium product version enables users to get a taste of it and understand what they are missing out on.
Keep Your Customers Engaged
There are multiple strategies to keep your customers on board and happy with your products or services, including the following:
- Provide them with insights about how the product has helped them.
- Identify features that users have access to but are underutilizing and show them how to leverage those and what results they will bring (a video tutorial could do this job very well).
- Enhance the onboarding efforts with educational content, anything that can help them better understand how the solution works and how it can work to solve THEIR problem — whether it’s blogposts, eBooks, videos and webinars, infographics, a knowledge center, etc.
- Create content based on the stages of the buyer’s journey. For freemium and free trials, we recommend introducing a survey and asking users what they want to achieve with your product so you can trigger specific campaigns with useful resources for achieving their goals.
- Leverage milestone notifications and customer success stories when upgrading lower tiered subscribers to higher plans, to remind paying users what they have achieved with you so far.
- Continue to educate freemium/free trial users who convert to become a paying customer on how to use your solution to its full potential.
Getting your existing users to upgrade to a higher tier is a matter of careful planning, continuous process fine-tuning, and nurturing. Ultimately, users should feel they need that transition to a higher tier to be able to maximize the outcome of the product. In addition, making the transition should be as seamless and easy as possible will increase the likelihood of them converting to a higher tier. Read our eBook to discover the full picture and start better monetizing your existing users.