5 Ways to Expand Revenue
Dear Readers,
Let’s assume you've acquired and activated a user. They’re regularly engaging with your product. Congratulations, that’s no small feat. Job done? Hardly! It’s now time to practice expansion, the growth motion of deriving additional value from core users.
In B2B, customer acquisition costs are high, so retention and revenue expansion of existing users is by far the most efficient way to grow versus popping more people into the top of the funnel. This newsletter covers 5 ways to expand revenue.
See you on the Internet,
Community Leader, Venture Builder
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To best illustrate revenue expansion motions, let's take note out of the Dropbox playbook. Dropbox’s growth maturity means they have all these expansion motions in play and can be used as a widely understood example of each.
1. Usage Expansion - Increase the amount of product the user is consuming
Getting users to consume more of your product is easy to explain with Dropbox which charges for different tiers of access to cloud storage. Dropbox gives you 2GB of storage for free and then requires you to pay more to get more storage. To increase storage, building features that automatically backup and sync means they are increasing the amount of storage without a user having to upload individual files. Investing in ways to automate usage expansion like sync and backup is a clever way to do that and applies to many businesses.
2. Tier - Upgrade to a higher, more expensive tier
In addition to storage per megabyte in tranches, Dropbox has many plans: plus, professional, standard, advanced, and enterprise, and they even offer family plans in some markets. Dangling premium features that nudge you from one tier to the other is a classic way for them to derive more revenue from your account.
3. Add-Ons - Pay more for additional features or product units
Add-ons allow you to pay more for additional features or product units usually with a la carte pricing. In Dropbox's case, they have special features that you can add on that allow you to do more like offline folder or advanced sharing permissions.
4. Cross-sell - Buy another product from the company
Cross-selling is when a company convinces you to buy another product that they offer. So this is a way you might start with one product and build or acquire additional ones to sell them to the same user base.
So with Dropbox, the example is the premium document-sharing product Docsend, which costs $15-300 per month. Docsend provides analytics about who is accessing your files and what they’re looking at. They’re packaging DocSend with their Dropbox for Business plans, cross-selling a more premium product to a B2B audience.
5. Geography - Expansion to new markets
Geographic expansion includes regions, countries, cities, or even languages. Geographic expansion teams are how many growth designers get their start. At this point, Dropbox is in a dozen languages and virtually every region in the world.
Once you know the five motions of revenue expansion—usage, tier, add-ons, cross-sell, and geo—you’ll see them everywhere. How many are you using in your current role? Tell us in the GrowthDesigners.co community Slack (or apply to join.)
About the Author
Molly Norris Walker is leader of the GrowthDesigners.co community, a serial of head design at high-growth startups and author of Design-Driven Growth. Currently, she’s building new ventures in Seattle.
