Upselling vs Cross-Selling: Boost SaaS & Game Revenue

Maximizing client lifetime value is critical for long-term growth in the highly competitive digital product market. Upselling and cross-selling are two effective revenue-boosting techniques that are particularly important for software, video game, and SaaS companies seeking to increase average order value while enhancing customer satisfaction. 

Despite the frequent confusion, these techniques have different implementation strategies and are most effective in particular situations. Global companies must carefully consider global payments, eCommerce compliance, and payment localization when implementing these strategies. A Merchant of Record (MoR) can assist in navigating these obstacles. 

This article explains when, why, and how to utilize upselling and cross-selling strategies to optimize your conversion funnel and increase cross-border sales.

Understanding Upselling

What is Upselling?

Upselling is the process of encouraging clients to purchase a more expensive product, upgrade to a premium model, or buy product versions with additional features for digital enterprises.

Key Features of Upselling:

The Pros of Upselling

• Increased average order value (AOV) with minimal additional marketing resources
• A higher CLV (client lifetime value)
• Improved client satisfaction when high-end features satisfy actual demands
• Reduced fulfillment costs compared to cross-selling (delivering a single type of product)
• Compared to cross-selling, reported conversion rates were 30% higher, per recent industry data.

The Cons of Upselling

• The possibility of creating purchase friction if viewed as overbearing
• Risk of cart abandonment if there is a significant pricing difference
• Need a strong case for the increased value.
• It may be limited by the client's financial constraints.
  
  

  Ideal Use Cases:

  SaaS upselling entails offering basic, professional, and enterprise subscription tiers

  Standard and premium editions of video games, as well as season passes

  Software that comes in premium, paid editions and feature-limited free versions

  Products with characteristics that are easily divided into categories based on user complexity and needs

Examples:

• Adobe encourages users of Creative Cloud to switch from a single-app to an all-apps subscription.
• Shopify encourages merchants who outgrow their basic plan to upgrade to the advanced plan.
• Users of Microsoft 365 Personal can now access Microsoft 365 Family.

Understanding Cross-selling

What is Cross-selling?

Recommending related or complementary products to customers based on their past or present purchase intent is known as cross-selling. Cross-selling involves introducing new products, rather than modifying or enhancing the existing selection, in contrast to upselling.

Key Features of Cross-selling:

The Pros of Cross-selling

• Increases consumer knowledge of your product ecosystem
• Using complementary products raises the value of the entire cart.
• Improves user experience by offering relevant updates.
• Establishes several points of contact with the client
• Exposes customers to goods that they might not have otherwise found

The Cons of Upselling

• Can make the purchasing decision more difficult.
• Danger of losing emphasis on the main purchase.
• It could be necessary to integrate several services or products.
• Possibly increased acquisition costs for different products.

Ideal Use Cases:

Examples:

• Electronic Arts offering in-game currency packages when purchasing a new game
• Atlassian recommending Confluence to customers purchasing Jira
• Salesforce suggesting additional modules like Marketing Cloud to CRM customers

Up-selling Vs. Cross-selling: 3 Differences

• Implementation Effort: Upselling typically focuses on pricing strategy and clear value communication, requiring less technical integration. More advanced recommendation systems, product connection mapping, and even complex bundling criteria are necessary for cross-selling, particularly in foreign countries where product availability and laws may differ.
• Global Considerations: Both techniques encounter particular difficulties while conducting business abroad. Localized price points that preserve suitable value steps between levels across various economies are necessary for upselling. When selling multiple product categories together, cross-selling must consider regional product availability, bundling laws, and potentially complex tax implications.
• Mobile Optimization: Upselling must succinctly convey value differences in constrained screen real estate, and cross-selling must strike a balance between visibility of recommendations and the purchase flow. 

Which One is Right for You? Choosing the Best Strategy

Your customer journey, product portfolio, and business model determine the right strategy. Think about these factors:

• Product Portfolio: Businesses with tiered offers may find upselling simpler, whereas those with a variety of complementary products usually gain more from cross-selling.
• Customer Acquisition Costs: Trying to cross-sell more products is rarely as effective as upselling current clients if your CAC is high.
• Development Resources: While upselling necessitates spending money on premium features, cross-selling calls for a number of products that are ready for the market.
• Global Market Presence: Managing several areas adds complexity that influences both methods in different ways. For example, upselling could necessitate tier structures tailored to a particular market, while cross-selling contends with varying product availability and regulatory issues.
• Business Model: Cross-selling at the point of sale often yields greater benefits for one-time purchase models, whereas upselling typically yields better outcomes for recurring billing businesses.
  
  

  Ideal Use Cases:

  For SaaS Companies: Your main tactic should be to upsell to higher subscription levels, with enterprise clients receiving focused cross-selling of complementary modules. As customers approach feature limits, analyze usage statistics to identify potential upgrade prospects and offer them timely upgrades.

  For Video Game Creators: Use a hybrid strategy, upselling to premium editions for upcoming releases after first securing the first game purchase, and then cross-selling DLCs. Make season passes that upsell to a premium bundle of cross-sold content, combining the two tactics.

  For Software Vendors: Prioritize upselling to professional or enterprise editions throughout the first purchase process. Once consumers have seen the value of the product, they should strategically cross-sell related technologies. Instead of trying to upsell every feature in a single premium package, cross-selling specialist add-ons for creative or productivity software frequently results in higher adoption rates.

  For Freemium Models: Begin by offering targeted cross-selling of specific premium features to free customers based on their usage habits. After they have seen the benefits of using individual premium components, upsell to complete premium plans.

How a Merchant of Record Enhances Upselling and Cross-selling Globally

When conducting business in foreign countries, it becomes more difficult to use successful upselling and cross-selling tactics.

These revenue optimization strategies are supported by specialist infrastructure from a Merchant of Record (MoR) model such as PayPro Global, which offers:

• Localized Pricing and Payment Methods: By enabling advanced pricing localization for cross-sold items and upselling tiers, a MoR guarantees the best possible prices in every market and accommodates local payment preferences.
• Subscription Management: To determine the best upsell timing across various markets and client segments, a MoR offers payment data, prorated billing, and smooth upgrade routes for upselling within recurring billing models.
• Global Tax and eCommerce Compliance: An MoR automatically manages the complex tax ramifications of digital sales, such as VAT, GST, and sales tax across jurisdictions, when putting either strategy into practice abroad. This is especially crucial when cross-selling goods that might fall under different tax categories.
• A/B Testing Infrastructure: Top MoR providers have integrated testing tools to evaluate the effectiveness of various cross-selling and upselling tactics across geographies, aiding in the optimization of strategies for particular markets.
• Fraud Prevention: To safeguard revenue while preserving a flawless customer experience, sophisticated fraud screening is crucial when introducing more expensive upsells or intricate cross-sell bundles.

Conclusion