Many Australian SMEs get ‘upselling’ and ‘expansion revenue’ mixed up, and that’s understandable. Both aim to increase revenue from existing customers, but they’re fundamentally different growth strategies. Understanding this distinction is crucial for building a robust revenue model, especially as competition heats up.

Simply put, upselling focuses on getting customers to purchase *more* of what they already buy. Think of it as moving someone from a small coffee to a large, or suggesting premium features on a software package. It’s about increasing the value of the current transaction. Expansion revenue, however, is about selling customers *new* products or services they haven’t purchased from you before. It’s about broadening your relationship with them.

Here’s a breakdown of the key differences:

• Scope: Upselling is contained within an existing product or service line. Expansion revenue introduces something new.
• Customer Effort: Upselling generally requires minimal extra effort from the customer – it’s a quick ‘yes’ or ‘no’. Expansion revenue often involves a more considered purchase decision.
• Marketing Approach: Upselling relies heavily on point-of-sale suggestions and targeted offers within the customer journey. Expansion revenue needs broader marketing campaigns showcasing the value of the new offering.
• Revenue Impact: While upselling provides incremental gains, expansion revenue has the potential for significantly larger revenue increases.

We often see businesses successfully using both strategies in tandem. For example, a plumbing business might upsell a higher-grade tap fitting during a repair (upselling), and then offer a whole-home water filtration system (expansion revenue). The key is to recognise which strategy you’re employing and tailor your marketing accordingly.

Don’t fall into the trap of solely focusing on upselling. While it’s easier to implement, expansion revenue builds stronger customer relationships and unlocks greater long-term growth. To maximise your revenue potential, analyse your customer data to identify opportunities for both. Start by mapping out potential expansion revenue streams – what complementary products or services could you offer your existing customer base? This is a powerful step towards a more resilient and profitable business.