Total Cost of Ownership (TCO) and Return On Investment (ROI) seem to be similar methods of proving cost effectiveness, but they perform best in totally different situations.
In fact, if you use a TCO tool at the wrong time in the sales process, you are taking a couple of big risks. Let's take a closer look at ROI vs. TCO and which tool is better for your business.
Value and total cost of ownership comparisons are important to any B2B sales process. Between them, they attract and justify the selection of your product while building a business case for prospective customers to use when presenting your offering to buying committees and financial approvers.
However, they operate in different ways and at different points in the sales cycle. Each tool has a different goal and addresses different pain points, and each is used by a different primary user to different benefit.
Has your sales cycle grown longer and more complex? Are you challenged by new buying behaviors that exclude you in the early stages of discovery? Chances are you’re also faced with more restrictive corporate and financial oversight, which shifts purchasing authority to CFOs and inter-departmental committees.
How can you get the attention of buyers and decision makers in such a dynamic sales environment? A proven approach is value selling, a strategy that develops distinct sales messages focused on the bottom line. When all is said and done, prospects want to know how investing in your solution helps save money, increase sales and revenue, and achieve pertinent business goals.
Quite often sales and marketing professionals seek a TCO analysis to help grow sales when an ROI calculation would actually be a better choice. Many people assume they need a TCO analysis to close deals, when an ROI analysis would actually be far more beneficial. I know this because I get frequent requests to create TCO tools, and my first question is “What problem are you trying to solve?”
