Complete Guide to Customer Expansion

Expansion means growth—whether in size, scope, or importance—and customer expansion is no different. It’s all about identifying opportunities to help your customers succeed while boosting revenue for your business or team through upselling, cross-selling, and complementary offerings.

By focusing on customer expansion, you and your organization can build a foundation for long-term success, driving recurring revenue and strengthening customer loyalty. 

This blog article will equip you with the knowledge and tools to create meaningful, mutually beneficial relationships that fuel growth for your business and your customers alike.

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What is customer expansion?

Customer expansion is the process of maximizing value for your customers by encouraging them to make additional purchases that provide more features and functionality while driving extra revenue from your existing customers. 

A customer expansion strategy allows companies to increase the lifetime value of customers, rather than focusing solely on customer acquisition.

Customer expansion has a range of benefits for organizations, including:

• Generate stable, predictable annual recurring revenue (ARR)
• More cost efficient than customer acquisition
• Helps companies sustain long-term growth
• Increase customer loyalty and brand advocacy

By shifting focus from customer acquisition to customer retention and expansion, businesses can open a relationship with existing customers built on delivering continuous value and exceptional service while fostering closer connections that encourage advocacy and referrals. 

3 types of customer expansion 

There are three main types of customer expansion – and each has its own benefits for companies willing to invest in them. 

Here’s a quick overview of each one: 

Upsells 

You’re no doubt familiar with upselling where a company offers a better, more advanced, or more customized version of a product at a higher price.  

If your local barista asks you if you want to have a premium blend for your coffee, that’s upselling. And when your social media scheduling software offers more advanced analytics and reporting for a higher subscription fee, that’s upselling too.

Cross-sells

Companies cross-sell by offering you a complementary or parallel product that gives you access to more features and functionality on top of your existing purchase.

When you’re buying family tickets to a museum and they ask if you want to buy tickets to the city zoo or the waterpark at the same time, that’s an example of cross-selling. Or when you’re signing up for website hosting and they offer you a business email subscription, they’re cross-selling a product that you’re also likely to want.

Add-ons

Add-ons are when a company offers additional features on top of the core features to improve a product or service their customers are already using.

An example of this is when you sign up for a gym membership and the gym asks you if you want to add-on extra classes to your membership for an additional fee. Or when your invoicing software asks if you want to add-on an expense logging feature too.

What’s the difference between customer expansion and account expansion?

Though the terms are often used interchangeably, customer expansion and account expansion are two separate processes. They’re similar but subtly different.

As we’ve already seen, customer expansion is the process of increasing your product’s value for your existing customers through strategies like add-ons, upselling, and cross-selling.

Account expansion involves increasing the footprint of your product or services within an existing company account – such as adding more users or expanding to new departments, locations, or business units within a current customers’ organization.

For example, a customer might choose to expand their account with an employee training app by taking the training content their US teams are already using and translating it for their international teams too. 

In this case, the account would be expanded to include more users across more locations. The company might also pay for additional admins or for separate digital learning spaces for each of their regional teams.

Like customer expansion, account expansion is a method that companies can use to deepen their relationship with existing customers and increase recurring revenue, without the cost of acquiring new customers. 

Account expansion can be seen as a strategy in the customer expansion process – account managers can encourage account expansion as part of their upselling or cross-selling process.

Why is customer expansion important for increasing ARR?

For companies looking to increase annual recurring revenue (ARR), customer expansion is an essential strategy for growth.

It’s no longer enough to focus on customer acquisition. Why? Customer acquisition costs (CAC) increased by as much as 13% between 2023 to 2024 and they look set to continue rising. What’s more, it costs between 5 to 25 times more to acquire new customers than to retain existing ones.

It’s far more cost efficient to retain your existing customers and focus on customer expansion to increase ARR while helping to boost customer satisfaction and customer loyalty at the same time.

That’s why recurring revenue model businesses are now prioritizing expansion over acquisition – a 2024 survey found 57% of business leaders are looking to increase revenue through upselling and cross-selling compared to 51% planning to increase revenue through new customer acquisition.

Who’s in charge of driving customer expansion? 

When it comes to who’s responsible for customer expansion within a company, the answer is… it’s complicated.

The reality is, customer expansion is a nuanced process that falls under the responsibilities of a range of different departments. And it’s up to each organization to decide who’s in charge of customer expansion and who’s responsible for executing separate customer expansion strategies.

Many companies use a hybrid model for customer expansion with multiple teams taking partial responsibility for customer expansion.

A 2024 study looking at who has responsibility for customer expansion found that:

• 41% of respondents said Customer Success
• 29% of respondents said Account Management
• 24% of respondents said Sales
• 6% of respondents said another department

Here’s a quick look at 3 of the main departments in charge of customer expansion.

Customer success

Customer success is one of the key players in customer expansion.

In many organizations, customer success teams take the lead on customer expansion and they’re solely responsible for renewals, add-ons, upselling, and cross-selling. In fact, one survey reported 49.1% of companies said Customer Success is in charge of driving all expansion.

As your customer success managers are in direct contact with your existing customers – and they’re responsible for educating customers about the features and functionalities of your product – they’re well positioned to drive expansion. Customer success managers can help customers understand the opportunities available to them. 

Experts recommend customer success managers taking a controlled approach to customer expansion, focusing on retention first-and-foremost and providing expansion opportunities to customers that will provide the most value long-term.

Account management

Account managers are a key player in driving customer expansion in many organizations. The primary goal of account managers is to encourage customers to continue renewing their contracts, so they often take charge on expansion too.

Your account management team is ideally placed to boost customer expansion by bridging sales and customer success to get the inside track on what additional products or features each customer needs most.

When it comes to driving customer expansion, account managers have a range of advantages, including:

• Long-term relationships with clients
• Handling contract renewals
• Experience negotiating contracts and closing agreements

Account managers can recommend the best avenues for account expansion based on their existing relationship with customers. This is especially key in organizations with complex, customizable products that tend to have tailored products for each account. 

For best results, account management teams should have close communication with customer success to provide maximum value to customers during expansion.

Sales

Customer expansion is a form of sales, so sales teams often take the lead in driving customer expansion. 

In fact, 33% of companies reported their sales department lead the charge on customer expansion in 2021 – though those numbers have decreased year-on-year down to 24% in 2024 as more businesses pivot to customer success.

Upselling and cross-selling is where sales teams feel most comfortable too. According to research from Hubspot, 91% of sales professionals prefer to upsell, and sales team upselling tactics drive 21% of company revenue on average.

While sales may often be responsible for driving customer expansion – especially in sales-first organizations – sales teams are most effective when they work closely with customer success to understand which accounts to prioritize and which customers will most benefit from expansion.

How to calculate your base expansion rate

To get to grips with customer expansion in your organization, start by calculating your benchmark base expansion rate to understand where you are now – and what impact your customer expansion strategies are having.

To calculate your base customer expansion rate, you need to have a few sets of data on hand:

• Revenue at start of period: The total revenue from existing customers at the start of a given period of time – e.g. one month, quarter, or year.
• Revenue at end of period: The total revenue from the same customers at the end of the given period of time, excluding new customers acquired during that period.
• Add-ons, upsells, and cross-sells: Any additional revenue generated during the given period through expansions such as additional users or licenses.

Base expansion rate is calculated using this simple formula:

Base Customer Expansion Rate = (Revenue from Existing Customers at End of Period / Revenue from Existing Customers at Start of Period) x 100

To calculate a percentage for your customer expansion rate, multiply the result by 100.

Here is an example of the formula in action:

• Identify the revenue at the start of the period you want to calculate – e.g. $100,000 
• Identify the revenue at the end of the period – e.g. $135,000
• Apply the formula to calculate the base expansion rate – e.g. ($135,000 / $100,000) x 100 = 1.35
• Multiply the result by 100 to get a percentage – e.g. 1.35 x 100 = 135%

In this example, the base expansion rate for Q1 is 135%. That means the company increased their revenue through customer expansion by 35% by upselling and cross-selling to their existing customer rate.

How to use your base expansion rate

When you’ve calculated your base expansion rate, you can use this figure as a benchmark for your customer expansion strategies going forward. 

This means you can track and measure how successful your customer expansion strategies are in driving revenue growth for your organization. Set a schedule for regularly reviewing your customer expansion rate, such as monthly, quarterly, or yearly and compare the results to your initial benchmark.

8 top customer expansion strategies 

What’s the best way to increase revenue from customer expansion in your organization? Here are 8 top strategies to drive customer expansion – plus tips on how to implement them. 

Segment your customers

The best content feels like it’s talking directly to you. To drive expansion in your organization, use segmentation to separate your customers into groups based on their goals, behaviors, and needs. Segmentation will help you personalize your messaging for different customer groups.

By segmenting customers, you can create a more targeted approach to customer expansion that identifies expansion opportunities based on segments, rather than using blanket messaging that might not be appropriate or relevant to many of your customers.

Create a customer journey for expansion

While many companies have a clear onboarding plan, your customers’ experience with your company doesn’t end there. To boost expansion and increase customer lifetime value in your organization, create a post-onboarding customer journey that sets a clear path for expansion for your customer success teams to follow.

Set success milestones for your customers that create a natural opportunity for upselling. Think smooth, slick suggestions rather than clunky sales calls. Use regular customer success check-ins as a chance to uncover customers’ needs, goals, and pain points – and naturally introduce expansion opportunities as part of an orchestrated conversation with your customers.

Identify the customers ready for expansion

To increase customer expansion in your company, identify which customers are most ripe for expansion and what they look like in your business.

Use data to analyze the customers with high product usage who are overutilizing your product – and who would benefit most from extra functionality and capacity.

Here are some questions to ask:

• What features are customers already using?
• What should they be using?
• What opportunities exist in other parts of their business? 
• What new problems can we solve?

Understanding which customers are most ready for expansion will increase the success of your customer expansion efforts – and ultimately increase recurring revenue for your business.

Prioritize customer health

One of the biggest barriers to customer expansion is poor customer health. If your existing customers aren’t getting value from the product they’ve already got, they’re unlikely to be open to expansion. No matter how good your add-ons and upsells are. 

Worse still, pushing expansion can actually damage customer trust. If your customer isn’t satisfied with your product, you risk them churning if you introduce expansion prematurely.

To drive expansion in your business, use customer health scores to help you measure and understand the health of your customers and their relationship with your business. 

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

• Product usage
• Customer support cases
• Customer feedback
• Community participation
• Marketing engagement

For best results, make sure your customers are succeeding with their existing product subscription before trying to introduce expansion.

Use marketing to help drive expansion

While customer success and account management teams usually take the lead on customer expansion, bringing in marketing expertise can help boost expansions in your organization. 

Use content marketing tools to automate communication with your customers and make sure your product is always top of mind.

Here are a few marketing tools you can use to increase expansion:

• In-app messaging: Set up an automated messaging flow that spotlights your top product features and offers tips to customers to help drive customer expansion. For example, recommending a premium feature based on their usage patterns and offering an upgrade.
• Email campaigns: Send automated emails to customers to keep them informed about your product – including onboarding tips, highlighting new features, and introducing upgrade or add-on opportunities.
• Webinars, online courses and events: Host webinars and build online courses to help your existing customers learn about new features and relevant use cases that are relevant to them. This is extra effective if your content also help your customers achieve their goals – like learning from an expert or thought leader on how they use your product in their business.

Marketing strategies can educate your customers about expansion opportunities while helping them get maximum value from your product.

Looking for step-by-step guidance? You’re in luck.  Join the challenge and create your first online course in just 5 days.  “The Customer Education Blueprint”, our mini-course led by customer education expert Simon Dunant, is carefully crafted with short and engaging 7-minute video lessons, practical examples, and hands-on assignments to help you start making an immediate impact on your customer experience and success. Enroll now.

Train customer success teams

It’s not a given that customer success managers will have sales experience. Many customer success managers come from technical or support backgrounds so they won’t necessarily feel comfortable discussing expansion opportunities, pricing, and pushing new contracts. 

If your customer success managers are responsible for customer expansion in your organization, give them the training they need to succeed. 

For example, this could include modules on: 

• How to identify the customers most ripe for expansion
• How to introduce expansion opportunities to customers
• Negotiating and handling new contracts

Sales training can help customer success teams feel more confident and capable when approaching expansion with customers – and can boost results for your organization.

Create a commission structure for CSMs

If your customer success managers are in charge of driving expansion in your organization, consider incentivizing them to win expansion deals by switching to a commission structure. 

Like sales teams, customer success managers can benefit from commission-based incentives to encourage them to invest more time in customer expansion and carefully identify the best candidates for upselling, cross-selling, and add-ons.

Remember to measure the effectiveness of your commission plan for customer success managers down the line. Set a date for checking-in and evaluating if the plan is working and if it’s helping achieve your customer expansion goals.

Build a community

To increase customer expansion, focus on building long-lasting relationships with customers based on human connection. Create a community around your brand to help increase the sense of connectedness and collaboration – and transform casual customers into super fans.

A community can help drive customer expansion in a number of ways, including:

• • Boosting social learning: Help customers achieve their goals easier and faster by building a community where they can ask questions, discuss challenges, and learn how to get where they want to go from other community members.
  • Increasing communication: A community gives your customers weekly – even daily – contact with your brand through communication with your other community members and moderators, helping to build loyalty.
  • Generating upselling opportunities: In a community space, upselling and cross-selling feels natural – you can surface recommendations for new products, features, and upgrades without it feeling ‘salesy’ and maintain regular contact with customers to open up new opportunities for expansion in the future.

By creating a community, you turn your customer base into a supportive network that can help customers build stronger relationships with your brand. 

Create a space for your customers where they can learn and collaborate with other members, celebrate their wins, and find new ways to get more from your product.

How to use customer education to drive expansion  

Customer education is at the heart of customer success. To have success with your product, your customers need to know how to use it to achieve their goals and objectives. 

With a comprehensive customer education program, you have the chance to increase adoption, renewals, and expansion in your business while increasing customer lifetime value and reducing customer support costs.

The stats speak for themselves – companies who introduced a formalized customer education program reported a range of benefits including:

• 38.3% increase on average in adoption of products targeted by training
• 26.2% improvement in customer satisfaction
• 35% increase in average lifetime value per trainee
• 28.9% increase in win rates for new customers
• 15.5% decrease in customer support costs.

To boost the effectiveness of these customer expansion strategies, use customer education to help your customers get maximum value from your product – and open their eyes to what’s possible.

Develop a realistic customer education plan

Every business is different. That means there’s no one-size-fits-all approach to customer education. Develop a realistic customer education plan for your organization that’s feasible, affordable, and most effective for your customers and your products.

Here are some key areas for prioritizing customer education:

• Onboarding:  Help customers get off on the right foot with your product with a comprehensive onboarding program that delivers the information customers need to know – when they need it.
• Adoption: As customers start using your products, targeted customer education can increase adoption and help customers utilize the full range of features you have on offer.
• Expansion: Educate your customers about what’s possible with your products – including the benefits that expansion could bring, such as new features, capabilities, and opportunities for growth.

Make customer education a part of your entire customer lifecycle to delight and engage your customers from day one to day 100 and beyond.

1. Deliver quick wins:
   We all feel better when we’re winning. Customer education that delivers quick wins to customers can help to boost customer satisfaction – and increase renewals. Aim to make your customer education program as informative as possible while helping your customers achieve their goals from the get-go. 
2. Meet your customers where they are:
   Give your customers the learning experiences they want, when they want it with fresh, interesting, and engaging content that brings your products alive. Give your customers the chance to see what’s possible with your product and inspire them to find success. This is your chance to set the tone for all your customers’ engagements with your product. 
3. Capitalize on moments that matter:
   Customer education gives you the chance to capitalize on the moments that matter most to your customers – dropping valuable experiences at precisely the right moment in their customer journey. With impactful customer learning experiences, you can also spot and stop friction before it becomes a problem by delivering the information your customers need. 
4. Embed into their world:
   Use customer education to become a core part of your customers’ ways of working. For example, customer education can go beyond just how to use your product and deep into how to succeed in an industry, task, or project.

By giving your users strategic advice about how to improve, you become a natural part of their daily success and routine. That’s how Hootsuite built a thriving community of 500,000+ learners using Thinkific Plus to deliver over 1 million courses to their customers as part of the Hootsuite Academy – educating customers on social media management and how to have success with Hootsuite’s products.

Use these top strategies to boost customer expansion in your organization

Customer expansion is key to building a thriving subscription-based business. These top strategies are tailored to drive customer expansion in your organization – including prioritizing customer education, building a community, and making expansion the natural next step for your customers.

Customer education is the number one tool to help your customers feel informed, empowered, and able to achieve their goals – leading to more expansion opportunities. The good news is, implementing a customer education program in your business is easier than ever thanks to platforms like Thinkific Plus that are dedicated to making customer education easier, smoother, and stress-free. 

Is your team looking to improve customer satisfaction and engagement to drive business results?

Download the Customer Education 101: Concepts, Trends & Applications guide for comprehensive insights and practical strategies to help you engage, train, and retain your customers effectively through education.