November 05, 2008

ROI - Yes, everybody wants it, but nobody believes it!

'Yes, everybody wants it, but nobody believes it!' its not a cryptic clue, we are talking about ROI models. Buyers want to see them (and will be very suspicious if you don't have one), but don't believe them once they are provided.

We have listened to buyers on the subject and here are the reasons why the ROI models provided by sales people are not working:

1. We have our own – 'we prefer to use our own model' – 'salespeople only use a model to give them ammunition to sell' – 'some information we don't want to share'

2. Our business is different – 'that model is more suited to small companies…'

3. It is too complex – 'there are too many sheets, too many calculations, too many assumptions, etc.'

4. It is biased – 'what else would you say (being a salesman)'

5. It doesn't consider the total cost of ownership –'OK, you put the cost at 1.5 million, but that is just your charges, there will be a lot more cost on our side'

6. The assumptions made are not verified – for example 'the efficiency gain you have put at 50%, but what is that based on?' Is that backed up by research, or by your customers?

7. It is presented as a 'fait accompli' – 'if we are not involved in creating the model, then we don't own it'

8. It is confidential – 'we cannot share that information because it is confidential to our business'

Recognizing these obstacles provides clear guidance as to how ROI models can be made more effective. It is not about the perfect model, but an easy to use and credible tool that engages the buyer in exploring the key benefits of your solution to his/her business.

In fact it is probably a series of tools. This is important, as the first introduction to the concept of payback or financial return from your solution is likely to be at a high level, perhaps using standard industry figures, or benchmarks and based on the results typically achieved by other customers.

As the sales cycle progresses the seller will hopefully get a chance to get into more detail and will be involved in building a business case that is tailored to the specifics of the customer's business. However, the business case should always be communicated right from the initial sales meetings and presentations, using examples and averages based on other clients.

If the business case conversation is left till the sales cycle is advanced, then there is the risk that it will take place without the salesperson being involved. When this happens the danger is that the buyer will say we have our own business case, but the information contained therein is confidential. Obviously one concern that the buyer will have is that any costings used will set the expectations of the seller regarding price and therefore prevent a competitive tender.

Having such a model is also vital to quantifying how customers have benefited from your solution - which in itself represents the most powerful marketing information your sales team needs. Indeed, it is the zenith of understanding in terms of the compelling reason to buy your solution.

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