Complete Guide to Customer Expansion

Expanding means growing, whether in terms of size, scope or value. And customer growth isn't any the exception. The key is to identify opportunities to help your customers succeed while boosting revenue for your business or team through cross-selling, upselling and complementary offerings.

If you focus on expanding your customer base You and your company will be able to build the foundations to sustain long-term growth, generating regular revenue as well as enhancing the loyalty of your customers.

This article on the blog can provide you with knowledge and tools to create valuable, mutually beneficial connections which will help grow your company and customers alike.

  Skip ahead:  

•         What is customer extension?
•         Three types of expansion for customers
•         What is the difference between expansion of customer accounts and account expansion?
• Why is customer expansion important for increasi n ARR?
• Who is responsible for driving the expansion of customers?
•         How do you determine your base expansion rate
• 8 top customer expansion strategies
•         How can we use the power of education for customers to promote expansion
• Use these top strategies to boost customer expansion in your business

What is the term "customer expansion"?

The process of expanding your customer base is of maximizing value for your customers through encouraging them to make additional purchases that provide greater features and capabilities while driving extra revenue from your existing customers.

Customer expansion has a range of benefits for businesses, which include:

• Generate stable, predictable annual recurring revenue (ARR)
• more cost-effective than customer acquisition
• Helps companies sustain the long-term development of their business.
• Increase the brand's loyalty to customers and increase customer loyalty

3 kinds of customer expansion

There are three major forms of expanding customer base - and each has its distinct advantages for those who are looking to invest in them.

This is a brief overview of each:

Upsells

It's not difficult to imagine the concept of upselling, which is when a business offers a better, more advanced, or more customized model of the product for a higher price.

If the barista at your location will ask you to purchase a premium mix of coffee and you say yes, then that's upselling. When your social media scheduling software has more powerful data and analytics to pay a premium subscription, that's upselling too.

Cross-sells

Companies cross-sell by offering an alternative or a similar item that grants the user access to additional functions and features on top of your existing purchase.

When you're buying family tickets to a museum and they ask you if you are interested in purchasing tickets to the zoo in the city or to the waterpark simultaneously it's one illustration of cross-selling. Or when you're signing for hosting on a website and they give you a business email subscription and they're also cross-selling you a service that you're more likely to purchase.

Add-ons

Add-ons happen where a business offers extra options on top of essential features in order to enhance the service or product that their clients already use.

An example of this can be when you sign up for a gym membership, and the gym asks you if you want to add-on the additional classes you have to take with a charge. Also, when the invoicing program will ask you to integrate an expense tracking option too.

What's the difference between customer expansion and expansion of your account?

Though the terms are often used interchangeably, customer expansion and expansion of your account are two separate procedures. They're very similar but slightly different.

As we've already seen, customer expansion is a process that helps increase the value of your product for existing customers through strategies like add-ons, upselling, and cross-selling.

Account expansion is about expanding the footprint of your product or services within the company's account, such as adding more customers or expanding to other areas, departments or business units within the company that is currently serving customers.

For example, a customer could decide to extend the number of employees they have on their training application by taking the material for training the US teams already use as well as translating it to the international team as well.

In this case, the account would be expanded to accommodate more users across more locations. Additionally, the company could pay for additional admins or for different digital learning areas for all of their regional teams.

As with customer expansion, account expansion is a technique that businesses can employ to build a stronger relationship with current customers and boost revenues from recurring customers, but without the cost of acquiring new customers.

Account expansion can be thought of as a plan in the expansion of customers Account managers may encourage account expansion as part of their upselling and cross-selling procedure.

Why is expansion of the customer base essential for boosting ARR?

for companies that want to grow their annual recurring revenues (ARR) expanding their customer base is an important strategy for development.

It is cheaper to keep the existing customers, and to focus on customer expansion to increase ARR while helping to boost the customer's satisfaction and loyalty while at the same time.

Who's in charge of the expansion of customer base?

When it comes to who's accountable for the expansion of customers within a company The solution is... the answer is a bit complicated.

The reality is, customer expansion is a nuanced process that's the responsibilities of a number of various departments. Each organization to decide who's in charge of customer expansion and who's responsible for executing different strategies to expand customer base.

Many companies use a hybrid model for expanding customer base, with several teams that are responsible for a portion of the expansion of customers.

An 2024-based study that examined who is responsible for the expanding customer base found:

• 41% of those surveyed stated that Customer Success was a top priority.
• 29% of the respondents were in favor of Account Management
• 24percent of respondents reported that they had made sales
• 6% of respondents stated that they were from another department

This is a brief look at 3 of the main departments in charge of customer expansion.

Customer success

Customer success is among the most important players in customer expansion.

In many organizations, departments for customer success take charge of expanding customers and solely accountable for renewals, add-ons cross-selling and upselling. Indeed, one study reported 49.1% of companies claimed that the Customer Success is the one responsible for the entire expansion process.

Because your customer service managers directly interact with your existing customers - and they're responsible for educating clients about the capabilities and functions of your product They're in a good position to help drive growth. Customer success managers can aid customers to understand the options that are available to them.

Experts advise customer success managers taking an approach that is controlled to expanding their customer base by focusing on retention first-and-foremost and providing expansion opportunities to customers which will bring the greatest benefit over the long run.

Management of accounts

Account managers are a key player in driving customer expansion in many organizations. The main goal of account managers is to motivate customers to continue renewing contracts. As a result, they often take charge on expansion too.

Your team of account managers is well-positioned to encourage customer expansion by bridging both customer and sales success. know the additional features and products each customer needs most.

If it's about increasing customer growth Account managers enjoy many advantages including:

• Long-term relationships with clients
• Handling contract renewals
• Expertise in contract negotiations and agreements for closing

Account managers are able to suggest the best avenues for expanding their accounts in light of their current relationship with customers. This is particularly important in organizations with complex product lines that are customizable and typically have customized products for each account.

In order to get the most effective outcomes, the account management teams must be in constant communications with customers' success teams to provide maximum value to customers when they expand.

Sales

Customer expansion is a form of selling, and teams of sales often take on the helm in promoting customer growth.

Actually, 33 percent of businesses said their sales departments led the charge in expanding customer reach in 2021. However, those numbers have decreased from year to year, dropping to 24% by 2024, as more companies shift toward achieving customer satisfaction.

Upselling and cross-selling is where sales teams feel most at ease. Based on research conducted by Hubspot, 91% of salespeople like to sell more, and the tactics used by sales teams to upsell generate the company's revenue by 21% per an average.

While sales can often be the primary driver behind customer expansion - especially for sales-first companies - sales teams are most effective when they work closely with customer success to understand what accounts to prioritize and which customers will be the most benefited by expansion.

How do you determine the base rate of expansion

To get to grips the issue of customer growth in your organization, start with calculating your base rate of expansion to determine the current situation and the impact that your customers' expansion strategies have on your business.

In order to calculate the base rate of expansion for your customers it is necessary to have some data sets available:

• Revenue at start of period: The total revenues from customers who are already in the market at the start of a given period of time such as e.g. one month, a quarter or year.
• Revenue at end of period: The amount of revenue from the same customers at the close of the given period of time, excluding any new customers that were acquired in the time.
• Upsells, Add-ons and cross-sells: Any additional revenue generated during the given period via expansions like additional customers or licensing.

Base rate of expansion can be calculated using this simple formula:

  The Base Rate of Expansion for Customers = (Revenue from Existing Customers at End of Period / Revenue from existing customers at the Beginning of Period) x 100  

For calculating the percentage of your customers expansion rate, multiply the result by 100.

Here's an example of the formula in action:

• Find the income that you earned at the beginning of the period you are calculating (e.g. $100,000). e.g. $100,000
• Find out the income at the close of the month - e.g. $135,000
• Apply the formula to calculate the base rate of expansion, e.g. ($135,000 $ 100,000) 100 x 1.35
• Then multiply the results by 100 for the percentage, e.g. 1.35 x 100 = 135 percent

In this case in this example, the standard rate for expansion for the first quarter is 135 percent. This means that the business increased its revenue by expanding their customer base by 35% through upselling as well as cross-selling with their existing customer base.

How do you use your base expansion rate

After you've calculated your baseline growth rate, you'll be able to use this figure as a reference point for your customer expansion strategies to come.

It is possible to track and assess how effective the strategies you employ to expand your customer base are in driving revenue growth for your organization. Create a plan for frequently reviewing your customer expansion rate for example, each month, every quarter or annually, and then compare the results to your initial benchmark.

8 top customer expansion strategies

How can you increase revenue from customer expansion for your business? Here are eight methods to increase customer growth - plus tips on how you can implement these strategies.

Segment your customers

Through segmenting customers you'll be able to create an even more specific approach to customer expansion that identifies growth opportunities that are based on segments instead of employing a blanket approach that might not be appropriate or relevant to all your customers.

Make a user journey to increase the number of customers

Create milestones to measure success for your customers that create the perfect opportunity for you to increase your sales. Make sure to think of slick, easy ideas instead of drab sales calls. Regularly check in with your customers' success as a chance to uncover customers' needs, goals, and pain points - and, naturally, present expansion opportunities in a planned interaction with customers.

Determine the potential customers to expand

To increase customer expansion for your business, you must determine which customers are most ripe to grow and determine what their needs appear like within your company.

Make use of data to determine those customers who have high utilization who are using your product and would benefit most from extra capabilities or capacity.

Here are some of the questions to ask:

• What features are users already using?
• What should they be using?
• What opportunities exist in other aspects of their business?
• What new problems can we tackle?

Understanding which customers are the most likely to expand will increase the success of your efforts to expand customer relationships and, ultimately, increase the recurring revenues for your company.

The priority for health of customers

Worse still, pushing expansion can actually damage customer trust. If your customer isn't satisfied by your service, you risk them churning if you introduce expansion prematurely.

To drive expansion in your business, use customer health scores to measure and understand the state of health of your customers and how they interact with your business.

Here are some metrics you can use to build your customer health score:

• Product usage
• Customer support cases
• Customer feedback
• Participation of the community
• Marketing engagement

To achieve the most effective results, make sure your clients are able to use the current subscription prior to thinking about introducing an expansion.

Use marketing to help drive expansion

The customer support and account management teams generally assume the responsibility for customer expansion, bringing in the expertise of marketing experts can boost expansions in your organization.

Make use of software for content marketing to simplify communications with customers, and ensure your service remains at the forefront of their minds.

Here are a few advertising tools to boost your expansion

• In-app messaging: Create an automated messaging flow that spotlights your top product features and offers tips to customers to help increase customer growth. Examples include recommending the most expensive feature on the user's usage habits and offering the option of upgrading.
• Campaigns for email: Send automated email messages to your customers to let them know about your products - which includes onboarding tips, highlighting the latest features and offering upgrades or additional options.
• Webinars, online courses and occasions: Hold webinars, host online courses and create online courses that aid your current customers in learning about new features as well as relevant applications that relate to them. The effectiveness of this is enhanced when your content helps customers reach their goals, like getting advice from the most knowledgeable or influential person about how to use the product to improve their businesses.

Marketing strategies are a great way to inform customers on expansion options as well as help them to get the most value from your product.

Train customer success teams

It's not a given that customer success managers will have sales experience. A lot of customer success managers come from technical or support background, and therefore don't have the confidence to discuss expansion opportunities or pricing and promoting new contracts.

If your customer success managers are in charge of promoting customer growth within your business, you should provide them the training they need to succeed.

As an example, it might include modules related to:

• What is the best way to determine which customers most ripe to be expanded
• How to introduce potential expansion options to customers
• Dealing with and negotiating new contracts

Sales training can help customers' success teams have confidence and competence in negotiating expansions with customers as well as improve performance for your company.

Create an arrangement for commissions to CSMs

If you have customer success specialists who have the responsibility of the expansion of your company You could consider securing incentives for their success in securing expansion agreements with an incentive structure based on commissions.

As sales teams do customers success managers may profit from incentives based on commissions in order to motivate them to spend more time and effort in expanding their customer base and to identify the most suitable candidates for upselling, cross-selling as well as additional services.

Make sure you measure the success of your commission plan for manager of customer success in the future. Establish a day for checking-in and evaluating if the plan is effective and aiding in achieving your expansion targets.

Create a community

A community can help to expand customer reach in a number of ways such as:

• Enhancing social learning Help customers achieve their goals faster and more efficiently by building a community where users can get help about challenges, share ideas, and learn how to get the direction they'd like to take from other community members.
• Increasing communication: Community-based communication gives customers weekly, or even everyday - communication with your company through interaction with other members of the community as well as moderators. It helps build loyal customers.
• Opportunities for upselling: In a social space, upselling and cross-selling is natural. You are able to offer suggestions for brand new features, products, or upgrades, without being "salesy" and keep in frequent contact with customers in order to open up new opportunities for expansion in the future.

Through creating a community, you turn your customer base into a community that can help customers build strong relationships with your company.

Make a place for customers to use where they can collaborate and learn with others, congratulate their wins, and find different ways to gain more out of your service.

How can we use educational outreach to increase the number of customers

With a comprehensive educational program for customers offers the opportunity to boost adoption, renewals and growth in your company while increasing the the value of a customer's lifetime and decreasing costs for customer support.

The statistics speak for themselves - companies who introduced a formalized customer education plan reported a variety of benefits including:

• 38.3 percent growth by average in the adoption rate of products targeted by training
• 26.2% improvement in satisfaction with customers
• 35% more the average value of life for each trainee
• 28.9 percentage rise in winning rates for brand new customers
• 15.5 percent reduction in the cost of customer service.

For greater effectiveness of these customer growth strategies make use of customer education strategies in order to assist your customers in getting maximum benefit from your products - - and to open their eyes to the possibilities.

Develop a realistic customer education program

Here are some of the most important areas for prioritizing customer education:

• Onboarding: Help customers get off in the right direction with your product with an extensive onboarding system with the details clients need at the time they require it.
• Absorption: As customers are beginning to use your product and services, a targeted education program can increase adoption and help customers make use of all the options you offer.
• Extension: Educate your customers on the potential of your products, including benefits that expansion could bring like the addition of new capabilities, features, and growth opportunities.

Make customer education the core of your customer's life cycle to please and retain your customers starting from day 1. 100, and even beyond.

1. Deliver quick wins:
     We all feel better when we're able to win. Education that provides rapid wins for customers will improve the satisfaction of customers - as well as boost renewals. Make your customer education programs as educational as you can while also helping your customers reach their goals immediately.
2. Find your customers wherever they are:
     Provide your customers with the educational experiences they want, when they want it with fresh, interesting, and engaging content that brings your products to life. Let your clients have the opportunity to experience the potential of your product, and encourage your customers to achieve success. It's your opportunity to establish the direction for the interactions your customers have with your product.
3. Capitalize on moments that matter:
     The process of education for your customers offers an opportunity to make the most of those moments which matter for your clients - delivering beneficial experiences just at the right moment in their customer journey. Through engaging customer education experiences, you are able to detect and fix any tension before it's trouble by giving the necessary information to your customers.
4. Incorporate them into their lives:
     Utilize customer education as an integral part of your customers' ways of working. For example, customer education can go beyond just understanding how to utilize your product and deep into how you can be successful within an organization, job or even a project.

Use these top methods to increase customer growth within your company

The expansion of your customer base is essential for establishing a successful subscription company. These top strategies are tailored to help drive growth of customers in your organization - including making sure that you educate your customers, forming an online community and making expansion the natural next step for customers.

The most effective tool for helping your customers feel informed, empowered, and able to achieve their goals - leading to more expansion opportunities. The good news is, setting up a training program for customers within your organization is simpler than it has ever been thanks to the platforms such as Plus that are dedicated to making customer education easier to manage, more smooth, and less stressful.

Do you have a team that is looking to increase customer engagement and satisfaction to drive business results?

Get the Customer Education 101: Concepts, Trends & Applications guide for comprehensive insights and practical strategies to help you engage, instruct, and maintain your customer base effectively through education.