Today, more than ever, buyers demand accountability from technology and solution investments using comprehensive return on investment studies. As budgets come under close scrutiny the demand for clearly articulated cost-savings is rising.
According to Ben Bradley, managing director of Macon Raine – a B2B marketing agency that offers content marketing clients a free marketing automation platform, the buyer’s challenge of demonstrating ROI is difficult because defining value requires a company to agree on three things:
Define the return by sales, profit, conversion, or shareholder value
Account for all soft costs (e.g., operations or efficiency improvements)
Determine the Base Period against which the effort is to prove the ROI
In addition, buyers are also giving more attention to intangible metrics that contribute to the economic potential of an organization. These include brand value, customer satisfaction, business relationships, and efficiency gains. Some intangibles are easier to quantify than others but all contribute in some way to a project’s return on investment.
Demonstrating ROI Difficult for Buyers
Unfortunately, Bradley believes many buyers and advocates rarely have the skills to convert marketing messages to quantitative value propositions they can sell internally. He recommends marketers find ways to translate their messages into quantifiable business cases and streamline information for buyers so they can build a business case that efficiently prioritizes the purchase near the top of the corporate to-do list.
Dave Stein, author of How Winners Sell, believes it is critical to understand where the influence and power lie within your customer’s company. The risk for any sales organization is to not become marginalized. Additional awareness must be developed in order to prevent deals from stalling.
“Being preferred by someone without any influence (no matter what their title) is worth little. Having your competitor preferred by someone with substantial influence is dangerous,” said Stein. “Now, when it comes to selling the value of your offering within your customer’s organization something very important must take place: an influential person must prefer you and they must be able to articulate the value of what you are selling directly against the achievement of his/her department, division, or enterprise business goals and objectives, in clear, concise, and compelling terms. You¹ll need to identify, recruit, and train such an ally to sell on your behalf, especially when you aren’t present. Without them, it often comes down to price. If they aren’t trainable or coachable, you’ll have to find an ally who is, or get someone willing to sponsor you “upstairs” so you can deliver your own value proposition.”
“For marketers, this means we have an obligation to build strong business cases so they can sell for us,” said Bradley. “So how are you helping your buyers make value-based decisions? How are you demonstrating ROI and TCO? How are your value calculations providing credibility – especially when there is an inherent distrust of vendor-supplied ROI models?”
According to Mike Genstil, CEO, and founder of VisualizeROI, the answer to these questions starts by providing a means to collaborate with the buyer around their definition of value – which can be harder than it seems. A sample value calculator is available on the VisualizeROI website. Developing credible, configurable, easy-to-use web-based ROI models are difficult to build and scale for many organizations for the following reasons:
Visually not appealing: Many organizations live in standard spreadsheets. Spreadsheet-based models are often visually unappealing, and the calculations can be hard to decipher. Who wants to debate formulas when you are trying to explore business impact?
Poor integration to other systems: Often the systems that help buyers visualize ROI and value lack any real integration with CRM or marketing automation systems. This then creates yet another data silo that is challenging to integrate with key sales and marketing systems.
Different personas care about different metrics: Showing the right metric to the right buyer at the right time can be hard. For example, a VP of Operations cares more about throughput and quality, while a VP of Sales cares more about increased revenue through shorter sales cycles. Telling the right story can be hard, and requires creativity coupled with solid methodology!
Lack of management buy-in: Getting internal agreement on value calculations is difficult even when getting budget approval requires that the person who writes the check easily understand and quantify the value of the purchase. In addition, in the goal to be comprehensive, overly complex financial qualitative or quantitative models often require too many buyer inputs, or try to account for too many variables – which confuses buyers and influencers.
When done properly, calculating and demonstrating the true value of a project or investment has always been a challenge. Demonstrating ROI with easy to use “value widgets” turn the subjective into the objective and dramatically improve the impact and conversion quality of middle of funnel marketing content.
Equipping the buyer with dollar value tied to a project can fast-track a “go/no-go” decision. Further, visualizing ROI often uncovers additional benefits because buyers are forced to investigate benefits that might not have been apparent when they started evaluating solutions.
Finally, solid ROI calculations can accelerate project prioritization because ROI helps determine a project’s rank among countless other conflicting priorities.
So what are the best practices for demonstrating ROI?
AGREEMENT: It starts by agreeing on established metrics that matter most to your customers. Sales reps, customer support, integration teams – all these front line roles are a wonderful resource for eliciting which metrics are most relevant to different buyer profiles, or personas.
CREDIBILITY: Establishing credibility requires presentation of a range of outcomes. A demonstrating ROI worksheet should help people truly understand their true ROI. A best practice is to use a visual ROI model that makes it very easy technically for buyers customers to compare best-case and worst-case outcomes.
BE CONSERVATIVE: When demonstrating or visualizing ROI, aim for conservative returns that don’t over or under promise results. Allow initial assumptions to be adjusted so that the buyer can become comfortable with the underlying ROI model.
COMPLEXITY: When the value modeling is too complex or requires multiple people to input numbers, your ROI model will have a high abandonment rate. Consider using simple as well as complex versions of the same value models so buyers can test the calculations against a simple model then apply that same input to a complex model.
One of the things we confirmed is that buyers find it especially difficult to verify the business value of proposed solution purchases despite the best efforts of marketers.
When there is ambiguity, or an inability to articulate value to other internal audiences, solution purchases are often rejected for perceptions about lack of synergy or a belief that a project fails to enhance value to customers.
Positioning value across all stakeholders is mandatory into today’s competitive selling environment. When an influencer can properly demonstrate ROI and articulate your value directly against the goals of his or her department or organization, everyone wins.
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