One of the biggest challenges facing software companies that aren’t in the SaaS space is the fact that customers often don’t or won’t upgrade.
In many cases the old adage of “If it isn’t broken, don’t fix it” applies.
This is true for both B2B and Consumer products (look at how many consumers haven’t historically upgraded to new versions of Windows or Office, for example.) In this article we’ll focus on the B2B non-SaaS space specifically, and provide some strategies for enticing (and in some cases prodding) your customers to upgrade.
If you deliver an incredible new version of software then you get the benefits of lots of upgrades, increasing revenues, sales to new customers and a whole host of other intangible factors. But oftentimes a release like this, when it really hits the mark, does too good of a job of meeting the 90/10 rule. You deliver almost everything a customer could need for almost everything that they do, so in order to get them to upgrade later your next release has to be even more spectacular. As such customers may decide to stick with the old for a decade or more, reducing potential revenues for your company and causing very high support costs.
The strategy for driving upgrades shouldn’t be an afterthought. It shouldn’t be something you determine once the work on the product has already begun or after it has been released. It needs to be created during the early planning phase of the lifecycle. If you don’t address it in your business plan or in the market needs early on then you are highly-likely to end up with a product that gets few customers to upgrade.
Here are five strategies for increasing your upgrade rates:
1. Limit your support policies for older versions to be significantly shorter.
Make this clear when doing business with customers. You as a company can’t afford to be supporting software that is 2 or 3 versions back because it costs you resources and hampers your ability to increase revenue from customers with new versions. Support policies like this should be a core part of your End or Life policies in the Retirement Phase of the Optimal Product Process™. Tell your customers that you only support releases for N years after they are made available to the market. Do this when you sell them the product and also make sure that you communicate this consistently to them during the time period so there are no surprises. This helps them plan and lessens the shock when they are notified that the old version they are still using will be orphaned soon.
2. Charge a very high premium for supporting anything but the latest version.
One thing that you can do is to make the licensing and maintenance fees increase over time so that from a financial perspective it is far better for them to upgrade than to continue using the old version. This allows you to still offer the old version for customers that are insistent, yet increase revenues and margins for doing so.
3. Build “Must-Have” security into the product.
If customers, particularly IT managers, feel that they may be vulnerable with older versions then the incentive to upgrade increases dramatically. It also helps them to justify the budget internally to their executives. No one wants a security disaster ending their career, and they are willing to pay to ensure it doesn’t happen.
4. Offer significant discounts for upgrades if customers act sooner than later.
If a customer knows that waiting for a year will cause the price to go up 50%-100% then they may be incented to move more quickly.
5. Build a product that is so incredible they have no choice but to upgrade.
If you implement great Product Management practices to guide your engineering team as to what the burning additional customer needs are then you’ll have something so good that customers feel they can’t wait. And if your marketing is highly-compelling and hits a real value proposition then they are even more incented to make the move. The key to this is to have something like the 280 Group’s Optimal Product Process in place at the company so that you have the highest chance of delighting customers and maximizing revenues and profitability.
An even more powerful approach is to combine several of these so that the customer has a good combination of both carrots and sticks. But again, it has to be planned out before you start development of the product, or at least well before it is released to the market. And in all cases make sure that you communicate to customers why you are doing this. If you explain that you have a business to run and that supporting older versions is an expensive proposition they will be more likely to understand.