Friday, May 21, 2010
Calculate the cost of the problem, not just the ROI
Return on investment is a great tool to use in the sales process. It demonstrates clearly that a company can make more (or save more) by using your product or service.
The major problem with ROI on its own, however, is that it doesn’t necessarily create urgency. There’s a positive return on the investment, fine, but I could do that for dozens, even hundreds of things. How do I determine if the work & cost up front is still worth my time? How do I, the buyer, prioritize this? How do you, the seller, create urgency with your prospects to want, to need, that ROI?
The answer often can be found in calculating the cost of the problem. Understanding there is a problem is just the first step. If you can quantify the problem, then calculate the cost of the problem over a period of time, you may just create urgency to change now. The risk of staying the same needs to outweigh the risk and time/cost of making a change. That comes from understanding the true cost of the current problem.
You also need to make sure you’re speaking to someone who understands and directly feels the pain and cost of the current problem. Let’s say you’re working with a company and want to help them reduce the margin of error on a current process. You make a case that by eliminating 50% of the current errors, you can save the company significant money.
But if you’re speaking to someone who has already built a profitable model with the margin of error baked in, and who is motivated to spend as little extra budget as possible this fiscal year, good luck getting the deal done.
But take that same business case and cost of problem calculation to the sales department (who may have more inventory to sell if you fix the margin of error) or perhaps the CFO (who would enjoy the sales lift while also understanding that the cost of fixing the problem would be a fraction of the incremental sales, therefore also improving margins), now you’re getting somewhere.
Calculate the cost of the problem to drive urgency. Ensure you’re selling to someone who’s direct objectives & desired outcomes are impacted by that problem. Then deliver the ROI on solving the problem. It’ll be difficult for prospects to argue with that.
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