So this is a seemingly simple post, but it’s a point I find many founders, CROs, CMOs and more get wrong. I got it wrong for a while too, until I started invest in and working with more vertical SaaS companies. And that is something somewhat counterintuitive:
It may be easier to sell your second product to new customers than your existing ones.
We’ve all learned we need to generally bring second products to market earlier than before, often as early as $10m ARR, to keep the engine going. And what we think we’re often doing is building another product to sell to our existing customers. Which nine times out of 10, you should. It’s easier to sell an existing product to the same buyer than find a brand new buyer (although even that has nuanced, as you max exhaust the budget your existing buyer has).
But what many of us miss is the attach rate for second products is often higher on new prospects. And it’s for one simple reason: you often aren’t asking them to switch.
Let me give you an example from MangoMint, where I’m an investor there. They are SaaS for spas and salons. They were the first in their category to add payroll, and it’s gone well. But the attach rate for new customers is 50% higher than existing ones. Why? New SMB customers often don’t already have a next-gen payroll platform in place. But the ones that have already been a customer for a year or two or more already found a payroll vendor.
I’ve now seen this to be the case many times: the attach rate for a second product is higher from new customers than existing ones.
Just be aware of it. Most SaaS companies do a big push to cross-sell a new product into the base. But maybe save 20%-30% of that energy for marketing the combined product to new customers. That may be an easier sell. Somewhat counterintuitively.
