How to Create and Effectively Use a ROI Calculator
Following on my previous post on ROI, I wanted to continue the discussion on how to create and effectively use a ROI calculator in the sales process. The key elements are creating the template, leading the discussion, and applying the learnings.
Creating the Template
Now that you have defined where the Hard, Soft, and Other value elements come from, you need to create a simple set of assumptions that will calculate the value. As an example, imagine your Product X helps salespeople increase close rates by 20%. A few assumptions to calculate the value of that increase for your prospect would be: # of salespeople, # leads/deals per month, current close rate, close rate improvement, and Annual Contract Value. From those assumptions, you can then translate how much dollar-lift comes from a 20% close rate improvement.
In your ROI calculator template, you’ll have sections for:
- The key areas of value (hard/soft/other) in your product (try and keep it to 2-3 max)
- A few assumptions for each
- A calculation of the value (for prospects to see the dollar amount associated)
I love building this with your early development/beta customers, as they can help you quantify and tune the assumptions with real data/value, as well as help you order the sources of value based on importance and reality.
Leading the Discussion
Now that you have prepared the ROI calculator, it is time to put it into practice. I like to use these templates in the sales process to engage the prospects, to help frame the conversation around value, as well as quickly sniff out how they think about our product’s value. For each of those assumptions described above, I like to have industry benchmarks as comments, but have discussion with prospects that allows them to tweak those assumptions based on their specific organization and experiences. It gets them talking about value, as well as applying how their own world is unique (and trust me, everyone feels they are unique). Now that you have entered their assumptions, the math calculates and shows the potential value from the product, let’s say $1 million annually. You can now ask the prospect questions around does that feel right, what are they currently achieving, etc. It is a great way to realize early on in the sales process if they feel there is any value, as people usually react more to a specific number. Conversely, if you see lots of nodding heads and little pushback on potential value, maybe you have more pricing power than you realize. In the corresponding templates, I also have some more specific instructions on how to use in the sales process.
Applying the Learnings
Now to the “So What?” Going through this process gives the benefits of prospect engagement and a reality check early. It also allows you to build a better foundation of which parts of the value equation most resonate, how concrete and believable they are, and how to tweak the pitch on value. You can experiment more with pricing based on perceived value than pure cost or industry standard and adjust your pricing model. Even more important than the specific numbers, using a ROI calculator in the sales process really enables discussion and learning about their business as well as positioning you as an expert in the space. People like to buy from experts who are teaching them something new about their industry/business!
Now that we have talked about how to use a ROI calculator, check out a few templates that can more practically show what one could look like and some more specific instructions on how to use it.