It is much more expensive to win new customers than to keep existing ones, and many Startups fail because of a lack of retaining their customers and not necessarily as a lack of acquiring them. Therefore, it makes sense to focus on retention. Expansion revenue is done through cross-sells, up-sells, or add-ons. This can be by upgrading them to a higher payment plan or by cross-sells, where they get add-ons that further help them succeed. A healthy SaaS business has at least a customer acquisition cost to customer lifetime value of 1:3. This means that customers bring three times the value they initially cost to acquire. Since customers don’t stay with you forever and eventually churn, expansion revenue is a great way to recover your initial investment faster and keeping your customers longer engaged as they receive more value from you.
How to calculate expansion revenue
How to increase expansion revenue
• Reward people to upgrade
• Find out what your customers value most and provide cross-selling to increase the value of your service further
• Think about how your customers evolve and where you can provide additional value
• Offer related products
• Develop additional features based on your customer’s needs