Why ROI Doesn’t Work

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 sevenstep process to make it work in your company.

• 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

1. Assign an owner to the tools and the process
   The tools and processes discussed below are not one-time events. They take on a life of their own and if managed well, will grow and improve with the needs of the organization. The optimal way to approach this is to treat all elements of an economic justification process as a “product”. If the product is owned by a product manager, then it will be managed throughout its lifecycle to ensure the company receives maximum benefit. Without an owner, it will wither and die.
2. Evaluate what’s working now, and conduct an unbiased gap analysis
   Identify which reps are having even moderate success with your current tools. Learn from them, and document why they are successful. The reasons can vary widely – an individual rep’s style or personality, the products or industries on which they focus, or something else entirely. Actual field observations can be invaluable. Go on sales calls with the current experts in economic justification (key sales reps, field specialists, product marketing representatives, and so forth) and examine what is working (and not). Distill the observations into a realistic assessment and gap analysis, and use them to derive a plan for improvement.
3. Build the right model
   Your tool must contain the right business value drivers and metrics. Your model should be comprehensive and accurate. The more thorough the model, the more likely it is that you’ll be able to document an economic justification in your favor. It should be designed to incorporate as many of the prospect’s own numbers and variables as possible. Where that is not possible, it must incorporate credible (and documented) industry averages. The tool should be designed to stand up to the most rigorous evaluation by a prospect. In fact, if designed well, this will create the credibility that is lacking in most tools today.
4. Make it easy to deploy
   The complexity and thoroughness of the model must be presented in an easy-to-understand fashion. The engine (sometimes referred to as the “spreadsheet view”) should have very limited direct accessibility. It contains valuable assumptions, and costing, competitive, and modeling data. More qualified prospects can look “under the hood” with the help of your experts at their side.
5. Build an elegant-looking result
   The end result must be a document over which the prospect feels ownership. While prospects are unlikely to present any document created by you (or any third-party paid by you) to their management, they will use what you have created for them in developing their own economic justifications.
6. Spend time with the prospect
   Your prospects are unlikely to be experts in developing economic justifications. They are under pressure to do so, but typically have not been trained in how to do it well. This is your opportunity to educate them in an approach that shows your product in its best light.
   • Most prospective technology buyers have many, many duties other than technology evaluation and business case construction. The faster they can do this work, the better. Fortified with a credible, useable, ROI model, the sales professional can provide the buyer with much needed assistance, while gaining an opportunity for discovery, discussion, face time, and trust building.
   • Although the best ROI models are fully inclusive, their output is not really intended to stand alone. Sales needs to understand that the buyer will probably select specific line items for use in his own procurement documents. This is expected and appropriate, because the metrics provided by your ROI will still influence the choice of variables to be evaluated in the procurement process. This is an excellent opportunity for drawing focus to your competitive strengths. When offered even earlier in the sales cycle, a credible ROI model can guide the prospect on construction of the RFP. This puts the sales professional in the enviable position of coaching the prospect as they work together on constructing the playing field for the evaluation process.
   • The data requirements of ROI analysis, while high, present continuing opportunities for prospect communication. Most buyers do not have all the necessary operational figures at their ready disposal. Some vendor ROI models provide rich, third-party resources for estimation, and others supply unique calculation methods to extrapolate missing data from an available data set. The ability to re-contact the prospect throughout the relationship, to offer continuing assistance with this work, or to offer newly discovered reference points, enables sales to re-open a dormant dialogue. Sometimes it can even be used to learn specifics of the buyer’s progress with a competing vendor. By providing this pivotal business-case-construction assistance, the sales professional is positioned for greater visibility into the deal, providing him with key information that can move the dialogue forward and accelerate the time to close.
7. Train, test, modify, train ... (this is not just about the tool, it's about the process)
   As stated earlier, this is not about the tool, it’s about a different way of selling. The sales organization needs skills to assist prospects in developing their own approach to whatever economic justification process is best for the prospect and your solution. Developing these skills may not come easily to your sales team. Furthermore, adoption of a new approach is a process, not an event. We have found that a continual program delivers the best results: train the sales team, and/or the specialists who will work with the sales team. Then, test the tool and approach and modify both to make improvements. Finally, circle back and continue training by going back to Step 2 and evaluating what’s working and what’s not working. An ROI program designed to build trust and face-time opportunities will accelerate the sales cycle only if it is enthusiastically adopted, and proper support mechanisms are in place.

In Conclusion

Companies making technology purchases are undergoing steps to ensure that any purchase clears certain economic hurdles. Smart technology vendors are working with decision makers to help step them through the process. These technology vendors have made a commitment to provide their sales organizations with the tools and processes that enable them to succeed with this challenging subject. The technology vendors that adopt the steps we recommend above are much more likely to succeed in winning the economic justification battle for their solutions.

About the Author

Glenn Gow founded Crimson in 1991. He has consulted on strategic marketing issues for some of the most successful companies in the world including Adobe, BEA, Cisco, HP, IBM, Intel, Microsoft, Oracle, Seagate, Sprint, Sun and Symantec, as well as dozens of emerging companies. Under his leadership, Crimson achieved “Inc. 500” status when Crimson became one of the fastest growing companies in the United States.