November 17, 2016

The Hardest Part of Your ROI

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When launching a new ROI engagement on behalf our clients, we’re often asked: what part of the process will be the most challenging?

We at TFP have played the ROI rodeo plenty of times; well north of 600 opportunity-specific ROI analyses over the last five years, if you want to know.  And we know where the obstacles are.

Who am I?
The journey of self-discovery begins

Is it figuring out how much the customer can improve?

Is it gaining consensus about the purchase decision?

Heck no.  Most often the hardest part of the ROI process is figuring out not where the customer can be tomorrow, but where they are today.  As Arnold Schwarzenegger so eloquently expressed in Total Recall: “If I am not me, then who the hell am I?”

It sometimes take just days to figure out “who the hell” the customer is.  Sometimes it’s weeks, putting the ROI engagement (and the sale) at risk.  Why does this happen, and what you can do about it?

There are several reasons why prospects have a hard time knowing, or at least admitting, where they are today:

The Causes

Companies don’t know.  Many companies don’t measure as much as they might.  To some extent, this is reasonable: grabbing a stopwatch and conducting an enterprise-wide time and motion study to figure out how much time is wasted on a particular task is probably not a great idea.  But anything that’s transactional—sales, spend, customer interactions, customer records, etc.—that’s all stuff that should be tracked.

They’re not comfortable with guesses. When precise current state data isn’t readily available, we usually try to use an educated guess—but those guesses make some people nervous.

They are worried about negotiating leverage.  Buyers may be concerned about losing bargaining position if they give away too much information.  They may figure that the more the seller knows about the pain a prospect is experiencing, the more likely they may be to charge a price premium.  To defend against this, prospects may withhold key data.

The Solutions

For the seller or ROI specialist, here are some recommendations to address these issues:

Hoard benchmarks to use when opportunity-specific data isn’t available. Real customer data is always best. Failing that—use a sourced and documented third-party survey to which the prospect organization can relate:

Effective use of a benchmark in place of customer data
Effective use of a benchmark in place of customer data

At TFP, we have done so many opportunity-specific ROI analyses over the years we have a lot of our own benchmarks that we can present if the customer lacks data.

Remind prospects that ROIs are never totally precise. They are designed to be at least directionally correct to help guide informed decision-making.  So reasonable, conservative guesses are OK so long as all parties agree.

Scenarios (low, medium and high) views can also alleviate anxiety about using a specific, exact number.

At every opportunity, present the ROI as a neutral deliverable that’s separate from sales material.  Use non-commissioned (or, even better, third-party) staff to build the ROI and manage the value process. Emphasize that the prospect gets to agree and control every number in the analysis.  Offer to give the ROI model to the customer if they want to control the drivers themselves (another reason why Excel is the superior ROI tool to online models).  And be honest throughout—no imaginary benchmarks or intentionally uneven numbers to imply fake precision.  Beyond the moral component there’s this: the moment you lose the prospect’s trust the ROI engagement is dead.

Know Thyself
It looks cooler in the original Greek

Arnold’s question goes way back, before Total Recall.  Even before Pumping Iron.  The ancient Greeks coined the aphorism “Know Thyself”, and it appears frequently in their printed word dating back to Plato.  Knowing themselves remains a considerable challenge for many companies and for sales professionals hoping to make the case for change.   The tactics described above can help a trusted vendor guide the prospect through their experience of self-discovery, culminating in a profitable outcome for both vendor and buyer.

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