Many technology companies--especially those that offer complex or expensive solutions--have developed Return on Investment (ROI) tools for their sales organizations. The goal is to provide a way to offer prospects a factual, economic basis for making a purchase decision.
Unfortunately, very few companies are making a real impact with this important approach to selling. Virtually all of our clients have developed some type of economic justification tool, but very few would claim that they are winning significant business as a result.
This article talks about why most approaches to ROI-based selling don't work, and provides a seven-step process to make it work in your company.
First, though, a bit of definition. Everything this article says about ROI also applies to other methods of selling using economic justification--namely, Total Cost of Ownership (TCO) and Return on Assets (ROA). Crimson has worked with clients to develop ROI, TCO, and ROA approaches to selling; each approach has its proper role depending on a variety of circumstances.
ROI, TCO, and ROA: Which One, When
ROI is typically used earlier in a product's lifecycle, when the prospect is trying to justify spending any money on a product of this type. The question prospects are attempting to answer is “what return will I get for an investment of this type?”
TCO is generally used at a more mature point in a product's lifecycle, when the prospect is trying to justify investing in one vendor's solution over another. The question in this case is “what will it really cost us to use product X vs. product Y?”
ROA is often used when the solution offered by the vendor enhances the value of technologies currently in place. Both the return and the assets being measured are a combination of the additional investment and the investment already in place. The question here is “How will this additional investment increase the return on the assets I have in place?”
Why Don't They Work?
Given how much effort and cost is expended in these tools' development, and how much technology companies are driving to increase revenue, why have these efforts failed? There are several reasons:
- The companies have a “develop and ignore” philosophy with respect to sales tools. The tools are not developed, tested, and modified to ensure successful use by the sales force. Most companies will state “we have tools, or approaches, or models for economic justification.” Rarely, however, will you find an internal owner of these tools who treats them like a product. If the tool is not treated like a product, then there is rarely an ongoing analysis of users' (the sales force's) needs. The tools either get a poor reputation, or they atrophy from lack of visibility and support.
- The tools are too difficult to use by, and explain to, sales reps and prospects. The concept of economic justification can be challenging to begin with. The vast majority of existing tools are burdened with a user interface that only adds to the perception of complexity.
- The tools (and/or their output) have no credibility with prospects. It's difficult enough to overcome the suspicion of a tool presented by a vendor (whether developed by a third party or not); if the presentation of the tool isn't made with a high level of confidence and with believable data, it loses even more credibility. A high level of confidence comes when the sales rep has a clear understanding of the tool itself. The “believability” factor comes from helping the prospect understand the value of the approach, and through the application of their data to the tool.
- The tools are treated as just another piece of sales collateral (like yet another data sheet), and not as a completely different approach to selling. Not only are salespeople not trained in using the tools, they are not trained in how to sell based on economic justification. Addressing the requirement of technology buyers to make their own economic justification requires a serious investment in a new sales approach.
Making ROI Work For You
A truly useful ROI tool/sales approach will be flexible enough to guide the buyer and sales rep to constructing a customized business case, and in the process will help to define the playing field for the evaluation itself. The right tool, presented in the right way, gives the sales rep the power to help the prospect make his or her own economic justification as to the value of the solution.
Prospective buyers need help in articulating their own ROI, and in constructing a business case. Many come from functional and technical areas, rather than finance, and are not familiar with business case preparation. Although prospective buyers from finance possess this expertise, they lack the technical depth to connect product specifications to the operational paybacks that fuel a thorough and valid ROI analysis.
The Seven Steps to ROI Success
Assign an owner to the tools and the process
- Evaluate what's working now, and conduct an unbiased gap analysis
- Build the right model
- Make it easy to deploy
- Build an elegant-looking result
- Spend time with the prospect
- Train, test, modify, train...
The prospect needs help from the vendor to make a decision and justify a purchase. In the next article, we'll discuss the steps we recommend to ensure you have the tools and processes that will help the prospect buy from you.