Why Focusing On Cost Of The Problem But Ignoring ROI Can Kill Late-Stage Deals

By Nicole Honey, MD RevenuePartners GlobalSales Strategy Insights

Question: Does your Sales Organisation use formally documented processes to quantify customer ROI (return on investment) for larger deals – and are your sales executives able to consistently quantify customer ROI for larger deals?

Once your sales team has successfully created consensus with the customer that there is a cost of the problem, and more importantly, a cost of inaction, it’s now time to turn to return on investment (ROI).

While decision makers are interested in the cost of the problem, financial directors and finance departments (who are often invisible stakeholders that can nevertheless torpedo a deal) want to see a return on investment.

ROI calculations play an important role with finance by:

  • Overcoming risk aversity
  • Justifying your price to minimise discounting
  • Satisfying the concerns of finance stakeholders.

The Reality 

According to our research at ThinkSales Global, only 26% of Sales Organisations have formally documented a process to quantify customer ROI (return on investment) for larger deals.

In addition, 18.76% of companies rate their confidence as Outstanding that their sales executives are able to consistently quantify customer ROI for larger deals.

The ‘Return On Investment’ Problem

Many organisations don’t trust vendor-supplied ROI projections. Think of it like the ‘sausage rule’ – the more you know about what goes into them, the less you feel like consuming them. This is because ROI calculations tend to either be over-complicated, or indecipherable, with input and output relationships that have no clear connections to each other.

There is also an expectation that vendors will exaggerate the outcome, inflating ROI projections.

Overcome ROI Scepticism

There are 5 key rules to successfully proving ROI:

  1. In order for your customers to find your ROI projections trustworthy and reliable, they must be based on inputs that they have supplied to you.
  2. Any assumptions that you make during your calculations must also be externally validated through customer references and case studies.
  3. The most successful ROI calculations are developed when the customer believes the mechanism used to determine the calculation is their process – particularly if the organisation already has defined internal guidelines that are used to determine ROI.
  4. Make sure you’ve determined whether this is in fact the case, long before you reach the point where ROI needs to be calculated, and most certainly before you submit your proposal.
  5. You need to work with your customer to gather all the numbers you need. What you absolutely do not want to do, is challenge your customer’s investment case evaluation criteria – there is no upside to this.

Do This

Credible ROI projections must be based on inputs that the prospect has supplied and on visible assumptions that can be externally validated through case studies and customer references.

The hallmarks of a credible financial ROI:

  1. Co-created: Inputs made by customers
  2. Created through a transparent framework
  3. Have realistic (believable) outputs
  4. Are backed by proof through a track record (case studies).

Assess The Health Of Your Sales Organisation

A formally documented process to quantify customer ROI (return on investment) for larger deals and sales executives that are able to consistently quantify customer ROI for larger deals are two of 322 measures of a world-class Sales Organisation.

ThinkSales Global is a specialist revenue engineering consultancy.

We assist our clients to deliver market-defying results through strategic and tactical intentions within a Sales Organisation Maturity Model that addresses the five key pillars of high-performing Sales Organsations, namely:

  1. Competitive Strategy
  2. Customer Engagement
  3. Sales Talent
  4. Sales Management
  5. Sales Enablement

How does your Sales Organisation stack up? Find out by taking the ThinkSales 5 Pillar Strategic Sales Assessment™.

This first-of-its-kind 360-degree gap analysis report enables your Sales Leadership team to assess its strengths and detect weaknesses and impediments to revenue growth across the five pillars.

Click here for more information on the ThinkSales 5 Pillar Strategic Sales Assessment™.

Share

About Author

Nicole Honey, MD RevenuePartners Global

Nicole Honey is the Managing Director of RevenuePartners, a specialist Revenue Growth Consultancy. Nicole is a business content strategist and an award-winning publisher and editor. She has worked with a number of South Africa’s leading enterprises, to shape their content strategies and deliver client-centric thought leadership and marketing collateral. Nicole is the architect of five highly-regarded sales education programmes at RevenuePartners, all of which leverage best-practice to accelerate execution and deliver sales results.