Growth October 13, 2020

Tip: Grow with your customers by baking customer expansion into your pricing model

Growth Bites @growthbites

With the right kind of pricing, you can grow your company without even onboarding a single new customer. Leverage customer expansion by charging based on value or usage.

EmailOctopus recently stated that customer expansion made up 47% of their new revenue and 9.5% of their MRR. That's because they charge according to each customer's subscribers — the more subscribers a customer gets, the better EmailOctopus does. When customer expansion is baked into your pricing like this, your incentives become even more closely aligned with theirs, which is good for everyone. It also lowers the barrier for early-stage customers and ensures that they're only charged for the value they receive. Of course, you should always let customers know when they're approaching a new price tier. A company called Custify does this by sending an email congratulating customers on their success, and upselling them to the new tier. The email converts at 70%.

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  1. 3

    This is a brilliant idea.

    Also, as a variation of this, I suggest, for startups whose customers make transactions on the platform, whether sending or receiving money, the startup should take a % of transactions in addition to the base monthly fee, and watch MRR soar.

  2. 3

    What ways of expansion revenue have you seen that were more than just "number of user based"?

    1. 2

      Stripe charges a percentage of payments. Baremetrics charges according to a customer's MRR. There are lots of ways — just gotta get creative! 🤓

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