The majority of businesses believe that one of the methods to generate revenue is to close agreements and bring in new sales. That is not the case, however.
When it comes to bringing in new sales, you need to understand the significance of marketing and the definition of a sales lead. Your revenue grows due to approaching new leads, obtaining a contract, and closing the deal.
While sales play an important role in revenue generation. There is another type that is rarely discussed in this case: expansion revenue.
Expansion Revenue: Overview
While fresh leads convert to sales, increasing the company’s revenue, existing customers also generate profit. Expansion revenue is the term for this type of revenue.
Upsells and cross-sells generate revenue from the beginning to the end of the sales cycle, referred to as expansion revenue.
Upsells occur when a consumer credentials request a similar product version with extra features due to a growth in work or demand for specific features. Cross-sells occur when a customer expands their use of your product or service by trying something different than what they were previously using.
Let’s use a basic example to try to grasp the concept.
Assume a current customer requests a simple employment background check, including basic address, email, and phone number. On the other hand, the customer upgrades the checking procedure and opts for the pro version, which includes information on the employee’s criminal past, educational background, and employment experience. The process of upgrading to a higher level of service while still using the same product is known as upselling.
Whereas, when a consumer requests an individual background check instead of a employment verification background check, this is referred to as cross-selling because the existing customer opts to check out a whole different service this time.
On the other hand, regular renewals are not counted toward expansion revenue. This is because you can account for the money you’ll get from them based on their contract unless they leave.
Importance of Expansion Revenue
Businesses increasingly emphasize revenue growth, even though expansion revenue is also an important driver in corporate growth. Getting a new customer is more expensive than keeping an old one.
The resources required to attract new clients are greater, which necessitates higher costs. Your marketing team will spend more money bringing in new leads by implementing numerous techniques. The team will close the deal once the strategy is in place.
Keeping existing consumers, on the other hand, is simple and inexpensive. Information on new products or services might be sent via email or phone.
Businesses should concentrate on establishing consumer trust through high-quality products and services. As this will increase upsell and cross-sell opportunities, hence increasing your expansion revenue.
How To Generate Expansion Revenue
As per consumer credentials, businesses can use a variety of tactics to increase their expansion revenue. Customers can be educated about the product or service, which is one of the most basic measures they can take.
Companies can also utilize surveys and ticketing systems to obtain customer feedback on a specific or several items. Then use that information to ensure that customers receive an enhanced product or service in the future.
Customers that buy from the same company receive a small discount or free packaging as a thank you for being a loyal customer. Businesses could introduce sales and discount deals with pricing that encourages customers to dig in and purchase.
Increase upsell and cross-sell to generate expansion income. You won’t be able to persuade a consumer to follow up unless you deliver a high-quality product or service. That is why it is important to offer products or services that make a difference.