Although the terms upsell and upgrade are often used interchangeable, I personally use them to distinguish between two very specific SaaS product marketing scenarios. For the purposes of this discussion, I will use the following definitions:

• Upgrade : Higher revenue from increased usage of current SaaS product capabilities.
• Upsell : Higher revenue from new SaaS product capabilities.

The reason for my distinction is that the buying dynamic is very different for the two scenarios. Upgrade potential of a SaaS product depends on the customer’s need to increase consumption of a known solution to a known problem, and deepens commitment to a particular capability. Whereas upsell potential of a SaaS product depends on the customer’s need to find new solutions to new problems, and widens your SaaS product footprint. This is not to say that upgrades and upsells are completely independent, because the need for increased usage can be highly correlated to the need for new capabilities as a growing customer’s business often entails greater volume as well as greater complexity.

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