“That ROI is way too high. It can’t possibly be right.”
Have you heard this from a customer?
At this point, do you:
- Reduce your value estimates to lower the ROI, or
- Go through the calculations with the customer to prove the business case?
The correct answer, of course, is number two.
If you're a value-seller using the right tools and processes, the value estimate that you made with your client may not be the issue, so don’t be too quick to discount it.
Why Does ROI Appear High?
A low price paired with a high value assumption will result in a high ROI estimate. That doesn’t make the ROI incorrect, however you need to look at a few things to make sure you’re not undermining yourself.
Is it possible your offering is underpriced? Go back and do your homework to make sure the price you’re asking is based upon the value your offering delivers relative to your buyer’s other alternatives. If you’re discounting your price as a way to get your foot in the door, you may be underpricing, which in turn will reduce the revenue and profit available to you to build your business.
You may not be able to raise your price for this sale but you can use the information you gained in determining a better price point for future sales.
Is the market too competitive? A competitive market or competing alternatives may be limiting your ability to increase your price without hurting your lead generation and selling efforts. You can’t charge more than the value that you deliver relative to other alternatives, and if your competitors are underpricing, that can limit your price.
Did you overestimate the value your solution brings? If you’re calculating the ROI using generic numbers, you may be using a value estimate that isn’t realistic for your particular customer.
Convincing Your Buyer
Your first job is to get your customer to “own” the numbers. You own the process, but the customer owns the numbers. Work with the customer to assess his or her situation. Ask how much can be saved in your customer’s case.
The Value Calculator
Using an ROI selling tool such as a value calculator will go a long way towards getting the customer to believe the numbers, because the customer will be the one to enter the numbers.
A value calculator lives on your website or another venue. Customers input their own numbers to see the benefit and can manipulate benefit dimensions any way they like. Once your sales team engages, the customers already know the numbers are theirs.
Leave some flexibility in the tool so customers can clearly see how the calculations were made and can adjust their own input as necessary.
The ROI Tool
Using an ROI tool can help you have a dialogue with the customer about the total value that could be achieved with your offering. It allows you to “negotiate” the estimated value with your customer and get to the point where they buy in and are ready to defend the value estimates.
A high ROI is not necessarily an unrealistic ROI. Collaborate with your buyer to ensure the expected benefits are based upon the buyer’s unique environment. Remember, no two buyers are going to receive the exact same financial return from your solution.
Remember also that your customers may be coming to your product because they’ve stretched their old solution too far or haven’t realized until recently that their processes or technology need updating. If the customer runs your assessment tool and sees a poor comparison to benchmarks, the next step will be running your value calculator to see what the solution to their problem can do for them.
In any case, remain realistic on your solution’s value and your price—don’t automatically pull back on any of your numbers until you’ve worked through them with the customer’s numbers in front of the customer. Make the calculations transparent and show the results every step of the way.
Using the customer’s own data is the best way to build confidence in any ROI number.