SaaS (Software as a Service) and other subscription-based businesses rely on monthly recurring revenue (MRR) from existing customers to monetize and enhance their product. Often, “revenue growth” is seen as only achievable through new customer acquisition, but this isn’t the case.
Expansion MRR is new revenue from existing customers when they upgrade their subscription plans. Your business likely puts a lot of effort into new customer acquisition and onboarding; expansion MRR is attractive because it generates revenue from current users who have already been onboarded. It’s essentially a low- or no-expense path to increased MRR.
Customer acquisition is expensive; upgrading existing customers typically is not.
That’s not all: When done right, expansion MRR can lead to “negative churn”—a phenomenon that reverses leaking revenue from customers who downgrade or cancel their subscription.