Let’s face it: The modern world doesn’t operate the way it used to.
Snagging one-time customers and walking away won’t cut it if you want your Product team to grow. To thrive, you need to generate expansion revenue and keep that income pouring in.
Fortunately, product-led growth is designed to carve out and deepen your expansion revenue streams. Wondering how? Read on for the five ways product-led growth lands your company more expansion revenue and helps your team grow.
What is expansion revenue?
Expansion revenue is money that your company generates from your current customer base. Some common examples include any revenue you earn from upselling, cross-selling, and securing upgrades from existing customers.
Expansion revenue is especially important for product teams because it ultimately creates more value for your business and product. It also positions your product firmly at the core of your company’s growth strategy. To secure more expansion revenue, product managers need to put the product at the center of the customer experience at every stage of the business–from acquisition all the way to expansion.
In order to increase expansion revenue, you need to consistently improve your product by enhancing your users’ experiences. By doing so, you reveal more product value and inspire your customer base to invest more money in your product.
Why is expansion revenue important for growth?
Expansion revenue isn’t important in every business model. However it is essential for some, especially in SaaS industries. That’s because most SaaS companies have adopted recurring revenue models in order to meet customer needs. And recurring revenue models require a steady flow of income from your current customers to keep running.
In turn, the more money you can generate from within your existing customer base and retain through higher net dollar retention, the faster your company will grow. That’s why it’s critical to build an internal machine where you’re digging into user needs, improving user experience, and squeezing as much revenue as possible out of your current customer base.
How does product-led growth increase expansion revenue?
Wondering how product-led growth fits into the puzzle? Here’s how product-led growth lifts expansion revenue:
1. It leverages metrics.
One of the most direct ways product-led growth boosts expansion revenue is through in-product metrics. Within an effective product-led growth strategy, you tap into metrics and use them to measure, back, and inform decisions. And these insights reveal the best ways to lift expansion revenue.
For instance, maybe you dig into the data and see new users are taking way longer to make an upgrade than advanced users. From there, you could use path analysis to see what steps your advanced users are taking and compare that information to the path of new users. This comparison could show you what friction points are holding back new users. With that info, you could add engagements or adjust your product roadmap, building a bridge to more frequent upgrades.
2. It lifts retention.
Retention is critical—especially if you’re using a recurring revenue model. It’s one reason nearly 60% of SaaS leaders mark customer renewals as a high priority. Product-led growth draws more expansion revenue out of your retention efforts in a couple of key ways:
- Product-led growth reduces churn. It uses in-product analytics to help you spot potential churn risks, step in, and steer risky users toward better experiences. Ultimately, this data-driven approach can drive retention higher.
- It increases expansion revenue opportunities. Product-led growth helps you pull more expansion revenue out of those customers you retain. Because you can dive into each user’s experience, the longer your users stay on board, the more you learn about their behaviors. And that insight reveals what moves are most likely to deliver value to—and glean more revenue from—each user.
3. It increases adoption.
The faster your users adopt your product, the sooner you’ll start seeing expansion revenue. And product-led growth hands you the keys to unlock faster time to value. That’s because it lays out adoption metrics that you can use to identify where to focus your efforts.
For instance, if you just launched a new feature, you can use in-product analytics to see whether or not users are engaging with your new launch. And you can see what’s stopping them from embracing it altogether. From there, you’ll have a clear map showing you what action you need to take to speed up adoption and start moving users on to expansion revenue opportunities.
4. It improves user experience.
User experience is the beating heart of product-led growth strategies. And product-led growth is designed to motivate your team across departments to improve the user’s experience. That approach doesn’t just improve customer satisfaction. As you improve experiences at every stage of the user’s journey, you’ll be opening up opportunities for upsells, cross-selling, and upgrades—and a higher rate of expansion revenue.
5. It sparks proactive customer success.
Far too many companies take a reactive approach when it comes to customer success. That means Customer Success teams are left putting out fires and handling complaints. But product-led growth opens the door to a more proactive customer success plan.
As the whole team works to improve user experience, it’s easier to identify customer friction points before they turn into problems. That lifts pressure off of your Customer Success team, and it frees them up to focus more on delighting the customer. The more your customers feel delighted, the more eager they’ll be to sign up for upgrades or new products.
Take control of your team’s product-led success efforts.
Product-led growth is built to help companies drive expansion revenue higher and grow rapidly. And you can help lead your company on a product-led success journey that hoists it to a new level. Ready to get started? Download our ebook, “Product-Led Success: The Professional’s Handbook,” now to learn how to become a product-led growth master.