Sell More with Return-On-Investment (ROI)

What's the payback? That's the question that a return-on- investment (ROI) sales model seeks to quantify and answer, with compelling, credible figures based on specifics provided by the sales prospect.

We deal with ROI every day as individuals: Buying the larger size detergent, for example, means a slightly higher initial cash outlay, but results in a quantifiable savings when compared over time with buying the smaller size more frequently.

Build An ROI Model And See The Benefits Of ROI Selling

Consider the story of a Fortune 1000 high-tech company that saw a revenue increase from $3 million to an excess of $5 billion over a 12-year period. According to the former VP Sales who ran the sales organization during this phase, the key to his team's phenomenal success was ROI selling.

"The foundation of our entire approach was to use consultative selling techniques and to document the prospect's current cost structure. We could then better define the right configuration and quantify the savings in technology costs, downtime cost avoidance, labor, and other elements of their cost structure. We averaged a 60% higher close ratio and 80% more sales success than our direct competitors. Our culture focused on ROI from day one and that culture has served us extraordinarily well."

The addition of a persuasive ROI model to your sales presentation can greatly reduce the time it takes to finalize a sale. Also, using metrics to understand why your clients need your product or service helps to focus your organization on the areas of your product or service that provide your clients with the highest value. Whether you sell mega-sized soap or multi-million-dollar computer storage systems, the language of ROI can help you sell more by quantifying the value you offer. It makes your client's decision to buy tangible, accessible and compelling. It makes your sales approach easy to justify and defend.

How do you calculate ROI? The formula is simple: What's your product cost? Is it a one-time expense, or is there a monthly carrying cost? How much added revenue can you demonstrate will flow from this investment? What costs will be reduced or eliminated by it? With these numbers, you can quantify payback in either a time frame (it pays for itself in four months) or percentage or absolute terms (you'll save 27% or $1,114 each month).

So how do you build an ROI story? Follow this simple outline to create and communicate your ROI model.

Quantify Your Impact

• Plan to build a model that relies on specifics, not generalizations
• For a high-ticket sale item or a business-to-business sale, create an ROI with customer-specific data.
• Try to identify your areas of impact first; the more specific your request for information, the more likely you will receive data that bolsters your case.
• Make it clear why you want the information by showing them the steps you take to build the ROI. This will build trust and justification for sharing what might be sensitive information.
• Use the collection of that data as an opportunity to build and reinforce a personal relationship between your sales rep and the prospective customer.
• Use ROI as a tool to qualify prospects. If the specifics of an opportunity make your ROI less compelling for a given prospect, are they likely to buy? Perhaps not as likely as those for whom the benefit is crystal clear.

Test Your Assumptions

• Pick one or several representative accounts. Run the numbers by them.
• Do they buy into the model's underlying assumptions?
• Is it too good to be true? (If it's too good to be true, it probably isn't)
• Is the model easy to understand follow?
• Can you demonstrate measurable, credible impact on payback by affecting cost, revenue or both?

Communicate Your ROI

• Build the language of ROI into your lead generation and pre-sales activities, and set the stage for the information request by highlighting the ROI model in your sales collateral materials, cold call scripts, presentations, and on your website.
• Demonstrate compelling ROI examples with case studies, if possible. Try to get permission to use the customer's name.
• If you can't get permission to use the name, be careful to abstract only generalized information to respect the customer's privacy and confidentiality.
• Develop stories around ROI averages (our widget program actually pays for itself in just 3.7 months, on average).
• Post a spreadsheet or ROI software to your website to make it easy for customers to determine for themselves the value you offer.
• Consider the downside of posting your model on-line: Competitor access, and the reduction in your sales rep's ability to facilitate the ROI analysis.
• Make sure your print collateral (leave-behinds), sales presentations, and website all work together to reinforce the qualitative and ROI/quantitative benefits of your product or service.
• Turn ROI success stories into PR opportunities.