The character Concorde (played by Eric Idle), trusted assistant to Lancelot (played by John Cleese), has just been shot in the chest with an arrow bearing a message that seems to have been written by a damsel in need of rescue. Vowing to respond to this cry of distress, Lancelot declares, “Brave, brave Concorde! You shall not have died in vain!” To which Concorde raises his head and replies, “Uh, I’m-I’m not quite dead, sir.”
I’m in the ROI calculator business, so I obviously disagree with the premise that the ROI calculator is dead as a sales tool. On the other hand, Zarges makes some valid and valuable points. Most ROI tools suffer from a few fundamental flaws and therefore undermine the credibility of the tool (and the provider company), as well as any sales rep that uses it.
I do believe, however, that a properly built and deployed ROI tool can increase not only the sales rep’s credibility, but also improve close ratios and result in bigger deals. Here are my responses to three of Zarges’ observations about ROI tools.
Point 1: “Your reps never learn how to calculate the value themselves.”
First, sales reps need many skills, but I’m not convinced that strong financial-analysis skill is paramount to sales success. The sales process is complicated enough understanding all of the roles and influencers and managing the relationships, without also needing to be a financial expert as well. Second, when properly built, an ROI tool shows the underlying calculations for each business value benefit articulated in the business case. This allows both the sales rep and the prospect to understand how the value is calculated without necessarily being able to build the calculations on their own.
I wrote a blog post about why spreadsheets fall short as selling tools, and I believe Zarges is referring to those kinds of homegrown spreadsheets. Black-box tools where reps or prospects enter a few numbers and a financial justification magically appears damage the credibility of the tool as well as the providing company.
Point 2: “The calculator only solves for the ideal problem.”
Again, this may be true of many calculators and most homegrown calculators, but a properly developed calculator uses a set of default assumptions only as a starting point. The tool should then allow the rep and/or the customer to modify all of the numbers. Any hidden calculations or hidden assumptions undermine the credibility of the analysis. Ultimately, you want the customer not just to buy into the numbers -- you want the customer to own the numbers. They must believe the full results of the analysis and all of the underlying inputs and assumptions, and they must be ready to defend the results if challenged by anyone internally. Any hidden or fixed number undermines their ability to defend the analysis results. Most tools today are filled with hidden and fixed assumptions and don’t allow for modifications based on unique user situations.
Point 3: “The calculator is solution agnostic.”
This can sometimes be true of an ROI tool, but not of a Total Cost of Ownership (TCO) tool. And this is true of an ROI tool only if your offering has no differentiated value for your customer. If your offering has no differentiated value, then you have a bigger set of issues to deal with than the sales tool you’re using. In a competitive situation when trying to show why your offering delivers more value over the competitor’s offering, a TCO tool is sometimes a better choice.
In the end, however, the customer will likely have to build an ROI-based business case to get the funding approval for the project. The funding-approval business case (sometimes called capital authorization or project authorization) is never based on a comparison against a competitive offering -- it is always based on how the project will impact the financials currently projected. Thus, even if you need a TCO tool during the sales process to show more value than a competitor, you’ll probably also need an ROI tool to show the customer how deploying your solution will have a beneficial impact for them financially.
Credibility in sales is everything. Customers want to purchase from people they trust and who can deliver solutions to unique problems. If the sales tools you provide your sales reps undermine their credibility, then you’re better off not using the tools. But I’ve seen many cases where a well-designed ROI calculator absolutely helped sales reps move the deal forward and win the sale.
Back to The Holy Grail, in the end, Concorde, who is “just fine,” is being left behind by Lancelot as he goes off to save the supposed damsel in distress, and replies as Lancelot ‘rides’ off, “I’ll-um, I’ll just stay here, shall I, sir?” In the end, value calculators and ROI tools will still be here to back up the sales team when they need them.