The Gantry Group

Confidence to make Critical Business Decisions

Gantry Group Newsletter Issue No. 17, December 2002

This email is never sent unsolicited. You are receiving this email because you have subscribed to receive news and updates from us or one of our affiliates. If you don't remember opting in, or you think someone else has opted you in against your wishes, please follow "Unsubscribe" instructions at the end of this newsletter. PLEASE NOTE: A source reference to Kotler Marketing Group was inadvertently missing in the last issue of the newsletter. The following is a link to the corrected and updated Issue 16, Tangible Marketing Messages, with the reference included.    Issue Insights: Your successful ROI sales campaign begins with marketing; make sure your marketing materials support and align with the economic case for your offering. A well stocked ROI toolbox will combine a robust, credible calculator, with seamlessly aligned marketing materials. ROI training for your sales force is a must; just as important as the calculator itself. ROI modeling is an effective sales tool at almost any stage of the sales process. One of the best CRM practices  is post-implementation ROI modeling. Your customers will thank you! Be vigilant about the quality of the data that is used to run your ROI models. If ROI scores are not what you expected, check the data accuracy or change your offering - don't play with the model to force attractive numbers that cannot be achieved. Wrestling with a technology purchase decision for your company? Watch for our NEW  ROI for the Enterprise series to start in January 2003. Sound quantitative strategies for making the right purchase that is sure to bring your company expected value. Happy Holidays! And wishing our readers a winning 2003!   Now Available!   ROI Best Practices Briefs Gantry Group has just published a set of best practices briefs, describing the components of an ROI sales toolbox, how they are used and why they are important. CLICK HERE to download the briefs.

ROI Series Snapshot Getting the Dogs Back on the Chow Leading With ROI: Fact Not Fairytale Homing in on Your Market's Business Metrics Quantifying Your Value Proposition Tangible Marketing Messages Selling with ROI   Selling with ROI Okay - so you've hired an objective third party to develop a customized ROI calculator to be used by your sales force. And better yet, the ROI numbers produced by the calculator demonstrate significant value -- without the use of fudge factors that artificially "fix" the ROI numbers to look good. But now what? How do you integrate the ROI calculation tool into your overall selling strategy? How do you weave the quantitative benefits, likely to be experienced through use of your offering, into the value proposition? Welcome to the world of ROI-centric selling -- the art of selling based on the cold hard facts that present the economic case for your offering. There are some things you need to think about when putting together an effective ROI-based sales and marketing campaign: 1) How comfortable is your sales force with using a financial model as a component of the sales pitch? 2) Will this be a "back-office" sales tool or will your staff use it on-the-fly in real-time while calling on a prospective customer? 3) Do you want this ROI tool available on your website to be used unsupervised by a potential or existing customer? 4) Does your marketing collateral and qualitative value proposition align seamlessly with the quantitative benefits of your offering? 5) When during the sales cycle should you apply the ROI calculator? Is it ever too early or too late in the sales process to bring in your ROI tool? 6) How do your prospects best appreciate your offering's value proposition? Through a custom ROI profile? White papers that expose value drivers? Case studies of companies with similar business challenges? ROI comparisons with competing offerings? The bottomline question then, is what should be in this ROI-centric selling "tool box", to best assist your sales force to sell and your prospects to buy -- based on the ROI value proposition of your offering. This is the final newsletter issue of our Technology Vendor ROI Series (which began with Newsletter Issue 12). Our past six issues of this series has discussed at great length, the merits and importance, techniques and pitfalls of measuring the ROI of your offering from a customer's perspective. Now, in the final series issue, we're going to talk about the "well-stocked" ROI tool box and implementing an ROI-centric selling campaign. Editor's Note: For those of you who are alarmed that this particular newsletter series is at an end, we are happy to inform you that a new ROI series will be starting up in January 2003! The new series will approach ROI from a different perspective -- the enterprise. In a series of 10 newsletters, we will take on the challenges and best practices for enterprises looking to use ROI as a tool to make purchase decisions.

Before you send your sales force off with their brand new ROI calculator, the entire marketing communications package must be revamped to speak quantitatively as well as qualitatively. To enjoy the total benefit of ROI selling, marketing must endorse and support the ROI sales case. For starters, your marketing messages, product positioning and value proposition statements should all consistently highlight the economic business case for purchasing your offering. 

Please note that ROI-centric does not mean ROI only. Your messaging should be inclusive of other factors, in addition to ROI, that your research has shown to be important. As we have mentioned in previous newsletters, conducting primary research with your target market to identify the critical value points and pain points (i.e. unmet needs) is vitally important to getting your message "right". Once you have completed your primary research and developed the ROI calculator, you will have the essential underlying data to create marketing materials that expound upon selected tangible and intangible value drivers that snatch prospects' attention.

As an example, your primary market research may have indicated that increases in "productivity" are of top importance. In addition, you may also have discovered that shortened sales cycles and greater repeat business, are two of the most crucial factors in making a "go" sales decision for your offering. Imagine that your ROI calculator demonstrates, on average for your deployed customers, that your offering results in a 300% return in a 1.5 year period. The drivers for the ROI are shorten sales cycle and increased repeat business, along with cost savings in some of the business processes. Your marketing messaging is now practically written for you. The marketing messaging can now speak to your market's needs qualitatively to address "softer" value claims, substantiated by solid ROI calculations.

However, this is based on a very important assumption:  You have actually applied your ROI calculator with customers who have deployed and experienced value through your offering. And the more customers in your ROI profile, the stronger and more statistically valid the ROI data set. When aggregated, this ROI data set of benefits and costs become the default values that can be used to drive the calculator when used in a predictive situation for a prospect. Prospects can make a buy decision more quickly if you provide them with answers to the following straightforward three questions:

• How will the product bring value to my company?
• How much value will the product bring to my company?
• How soon will will I recover my investment in the product?

If you have not yet deployed your product or have accumulated only a small set of referencable customers, you can still begin to develop "industry standard" inputs that attribute your application and your market. These data represent a benchmark or range of values that typify a company's experience with implementation of your offering. This is key to your marketing and positioning because it enables you to substantiate claims in your marketing materials. Thus, you can overcome your prospects' greetings of skepticism that may challenge your claims as merely "intangible" benefits.

Few sales executives would disagree that they need to be armed with more than an ROI calculator to convert a prospect to a customer. The well-stocked ROI toolbox should contain a variety of individual items -- all consistent with respect to brand and market positioning, and strategic messaging. We have listed the essential ingredients in an effective ROI toolbox in previous newsletter issues, but they are so important we feel compelled to list them again:

ROI Calculator - ROI calculators have proven to be excellent frameworks for advancing the sales process. An ROI calculator steps the customer or prospect through the value drivers of the product. While the end goal of the ROI calculator is to reveal a bottom line number, the real value of the calculator is establishing a thought process in the prospect's mind about the discrete areas that your product delivers tangible value. In addition, the ROI Calculator communicates to the customer that you have "done your homework" and you understand their business.

Your sales force can use ROI Calculators to direct highly consultative sessions with prospects. Leading with ROI exudes confidence in your offering to the prospect... a vendor that is ready to practically discuss how the product will affect the prospect's business.

ROI Calculators should bring enough detail to accommodate a high degree of customization for the prospect, while being simple enough for your entire sales force to easily use. Credibility and ease of use are successfully balanced.

ROI White paper - The ROI Value Driver White Paper memorializes the pain points and challenges of your target customers, documenting how the ROI value drivers of your offering positively impact their business. Such a white paper reinforces that you have taken careful consideration to build value into your product with a deep understanding of the prospect’s business. It is your opportunity to convey that “ROI” is not simply reserved for marketing collateral; it is built into the very design and architecture of the offering.

The content of the white paper relies upon essential primary research derived from a representative set of 5 to 15 customers or prospects and closed/lost sales analysis with your sales force. These research interviews delve into the ROI experience with your deployed offering and the criteria for evaluating your offering. They document the business metrics and cost drivers that primary market research has revealed to make the tool meaningful to your customer base. During this phase you also learn about specific quirks in metric measurement and behavior, as well as which metrics are viewed by customers as the most critical. The Profile Report memorializes the findings from this research phase, and can be used to help you develop strategic messaging around the ROI/TCO value proposition that enables your sales force to crisply speak to the tangible economic benefits of your offering.

Critical questions include:

• What are the market sector's challenges that your offering can impact?

• What the value and cost drivers for the target market?

• How does your offering address their pain points and challenges?

• What are the mechanisms and timeframes for payback?

An ROI white paper is a good first step since it enforces the discipline of getting a solid foundation of your tangible ROI message first, prior to calculating it. The ROI Value Driver White Paper is particularly useful for companies who do not have an established customer base or whose customer base does not have a long enough deployment track record with the offering being modeled for ROI.

ROI Case Studies - ROI Case Studies help your prospects learn and vicariously experience value delivery through your customers. The participating customers must be carefully selected to provide a business situation with which each of your prospects can identify. The resulting ROI case study profiles:

• The precise business situation and challenges.
• Motivations and the decision process that led to purchasing your product.
• How your offering helped the customer overcome these challenges.
• The customer’s ROI Scorecard (e.g. the results of applying the ROI calculator)

Competitive ROI Bake-offs  - Sometimes you will have customers who are already aware of the kind of ROI they can expect from an offering such as yours. In these cases, it is more compelling to compare the delivered ROI value of your top competitors with your own ROI.  An effective competitive ROI study rigorously applies a consistent ROI model both to your customers and your top competitor's customers. A sample of 10 to 50 customers per product is recommended; the more ROI data points, the more statistically valid your results will be. A scaled down version can simply compare to ROI case studies: one from your customer base and one from a competitors'.

ROI Benchmark Reports - ROI Calculators are great for profiling the customer's experience with your deployed product. They are even more powerful if they can be used to project a prospect's expected ROI with your offering prior to purchasing and deploying your product. By applying the ROI Calculator, a statistically representative set of ROI profiles can be developed for your customers who have sufficient experience with your deployed offering. Aggregated, averaged data for each value driver can then be used as default benchmark values within the ROI Calculator. This transforms the ROI Calculator into a credible forecasting tool.

Such ROI studies are typically conducted with at least ten to twenty customers to achieve confidence in the data.  The additional bonus is that the aggregated customer ROI data can be used as defendable statistics for strategic marketing messages. 

Your sales team will need to cross train for new ROI selling skills. Selling with ROI dictates quite a different mathematics-based sales approach. Your sales team must become a financial business advisor to gain sign-off from your prospect's C-Suite -- and in particular, the CFO. Therefore, sales training is as important as all the other facets of the ROI toolbox suite because, without knowledge about the use of an ROI/TCO tool, your sales force simply won’t feel comfortable using it. The bottom line is that your sales force will bring no distinct advantage if they are not confident about using the tools.

Because the notion of formal "ROI-centric" selling is relatively new, even seasoned sales executives can benefit from a training session about optimal use of  the ROI Toolbox. Whether your training is in-house or outsourced, online or in-classroom sessions, there are several topics to cover to maximize the effectiveness of the training.

Any onsite or web-based training session should -- at a minimum -- enable your sales force to leave with knowledge about the following: 

•  Usage of each tool;

• When to use each tool;

• When to question when a customer’s data looks too high or too low;

• Explaining the underlying assumptions that the tool is based upon;

• Collecting optimal data from a prospect’s team; and,

• Developing ROI profiles that are both reasonable and credible to prospects.

Knowing when to use an ROI calculator is paramount. But just as important is getting your sales force to understand using the concept of ROI as a type of selling (e.g. just like "solution selling" was a type of selling in the mid-late '90's).  Many vendors of third party ROI models will offer training as one of their ancillary services to development of the ROI calculator. However, it is vitally important that this training be augmented (again either by you or an outside party), with a presentation about making the economic business case one of the central themes in competitive advantages of your offering.

Developing an ROI selling program is recognized to be a highly strategic and detailed effort. What is often overlooked and under-planned is the deployment of the ROI program -- which is absolutely critical to the ROI program success. ROI calculators, and ROI toolboxes overall, can be delivered in multiple media formats, to optimize use. In order to determine what format to use to make your ROI toolbox available,  here are some things to consider:

• Who do you expect will be using your ROI Calculator? 

• Will this be something only your prospects will only access in person or on the phone with your sales force? 

• Do you anticipate making the calculator available on your website for prospects to use on their own? 

• Do you plan to give customers their "own" ROI calculator to use after implementation to track success?

• The format and delivery method you select should be driven by your needs for security, maximized usability for your sales force, and the preferences of customers and prospects in your market place.

Many companies have aggregated and organized their ROI tools and data into a centralized repository. These ROI repositories can be be made available to either your sales team or customers.

Sales Force ROI Toolbox CD - An effective way to immediately arm your sales force with handy ROI knowledge is by aggregating ROI white papers, ROI benchmark studies, customer case studies and ROI calculators onto a CD.  Many companies want their ROI Toolbox on a CD ROM rather than on the web. Typically, a CD-ROM based ROI calculator will be written in MS Excel, MS Excel/VBA, or MS Visual Basic. The CD is on hand, ready to transform your sales person’s laptop into an ROI selling machine! And, because it resides on the laptops of your sales force, it is secure from online hackers or unethical competitors who may want to steal sensitive materials.

Sales Force ROI Toolbox Website - An ROI Sales Toolbox should never be regarded as completed. A good defensible posture is to be relentlessly building your ROI case, with ever increasing data, facts and testimonials to reinforce your value claims. Because of the evolutionary nature of the ROI toolbox, creating a restricted area on your website, for sales force access only, is a great way to bring to-the-minute ROI materials to your sales force. A complete ROI Toolkit for your website, should include

• Usage instructions for the sales force

• Print-ready collateral for prospects

• Online ROI calculator, optionally designed to archive, aggregate and analyze all profiles completed

To ensure security, you can make the website area password protected and we recommend using an HTML/JavaScript tool rather than Visual Basic to guard against unwanted and unsavory visitors to your website.

Customer/Prospect ROI Payback CD - ROI Toolboxes are not necessarily just for your sales force. Your customers who have already deployed your offering may be interested in quantifying their investment’s performance. And your prospects may wish to compute their own ROI profile. An ROI Toolbox CD is an effective collateral piece, proclaiming you have your total ROI act together.

Customer Payback Website - An alternative distribution vehicle for your Customer/Prospect ROI Payback CD is to create a restricted access, Customers-only, area off of your website. Here, your customers and prospects can safely and securely make inputs into the ROI calculator, access white papers and case studies and examine competitive ROI.

ROI modeling can be effectively performed at various stages of a customer life-cycle: in pre-sales, during the selling process, and post sales - after implementation.

Pre-sales Situation

In a "pre-sales" situation, data populated ROI models can be used with your prospect as a high-level example of what is possible, using anonymous input data from existing customers. Model scorecards can be shown in a PowerPoint slide set, various articles and white papers. In this scenario you are in the very beginning stages of whetting the appetite of your prospect and may not have even had the first in-person meeting. They are not yet engaged to the point where they will begin providing input data from their own company, but they are very interested in learning about the value and cost (TCO) factors that drive your ROI calculator. Hopefully you will have intrigued them to the point where they will now want to sit down with you and work through the model with their own numbers. Now you have truly engaged the prospect into the sales process (as opposed to pre-sales).

During the Sales Process

During the selling process, your prospects are generally in one of two states: 1) they desire a convincing demonstration of your offering's ROI for their particular company or organization; or, 2) they are already convinced of the potential ROI of your general product category and have moved on to shopping vendors for the best ROI.

In the first instance, they are ready to engage with a sales representative and to spend time gathering input data for the ROI model. They may even want print-outs of some of the input forms to fill in manually. During this process you may discover that some prospects have access to more quantitative data than others. If your prospects are comfortable enough, you may decided to use the default values aggregated from past customers in sections where they do not have their own numbers. Still other companies will not much care about getting the exact data inputs as long as they know the general ball-park of the figures. It is your job to remind them of this as they look at the final ROI scorecard, which could be much higher than you know is realistically possible, or lower than they require. This is a critical juncture when the sales person must know about helping them refine data inputs that were wild assumptions with no basis in reality.

In the latter case, the prospect is comparing the benefits and investment required from deployment of your product, as well as your competitors'. It is critical that you know how your offering stacks up in ROI against your competitors. ROI is the final frontier of competitive differentiation.

Prospective customers already convinced of the ROI inherent in a particular investment they are considering, are often excluded from the ROI profiling exercise. Sales executives are typically concerned that ROI profiling might open a whole other can of worms if the ROI calculation does not match or exceed the prospects expectations. It is not unusual for a sales executive to claim that ABC company is "too far along" in the sales process to warrant an ROI consultation since they have already reached a comfort zone that they will achieve acceptable ROI. We are of the mind that unless the sales contract is about to be penned, it is not too late for ROI modeling. In fact, as long as your prospect is still deliberating, ROI is generally a sales process accelerator -- not an inhibitor.

This is, of course, your call. But if you are worried that your ROI won't be high enough, isn't it preferable for the customer to realize that your anticipated ROI is lower than their expectations before they actually implement it and find out later? If you work with them from the beginning to model their ROI, they may discover that their previous views were based on faulty assumptions about their own costs and expected benefits. Our recommendation is that you get in early with ROI modeling -- even if the customer already believes it. In the long run, you will be adjusting their expectations to be aligned with reality as they move into the implementation stage. By doing this sales "best practice", you will be avoiding the honeymoon period that typically ends when customers discover that implementation timeframes and costs are quite different from what they erroneously assumed.

Another way that ROI can be enormously useful with potential customers already "ROI aware", is in the context of competitive ROI "bake-offs". If your prospect is debating between you and one or two other vendors, you are armed with the tools to do a comparative analysis. If you had the ROI calculator developed by an outside party, you will probably want to engage them to conduct the bake-off, just to prove objectivity. They will contact customers from your competitors and apply the ROI calculator with their data inputs. Hopefully, your product will come out superior. 

IF IT DOES NOT, DO NOT ATTEMPT TO INTRODUCE FUDGE FACTORS!!! We know some ROI calculator vendors advocate this, but you will jeopardize your credibility if you resort to these tactics. Our recommendation is to examine your pricing and requirements for implementation and the economic benefits of your own offering to try to enhance your competitiveness. If your offering doesn't compare well to a competitors', you should apply efforts to try modify your offering, not "fix" the numbers.

Post-Sales Situation

Finally -- you've made the sale and implementation has just been completed. The customer is well along the the initial learning curve.  Now is a great time to run the ROI model again.

Why?

Assuming that your customers are not "one-offs" and you want a long-term, profitable relationship with them, working with them to apply the ROI calculator under real implementation conditions is one of the best CRM tools we know. Even if you should find areas where costs were higher or benefits are lower than foreseen in the pre-sales situation, you may be able to address these deficiencies (if they are not issues beyond your control). Better for you to discover and address these issues than having your customer bring ROI performance to your attention. Take the offensive - not the defensive. Your customers will appreciate that your follow-through in bringing promised value to their organization. The point we want to make here is that by applying continuous post-sales ROI modeling with your customers, your company will maintain regular quality contact with them. This provides you with opportunities to develop further sales or remedy festering issues. In this way, you can keep your customers "referenceable" at all times, as they will appreciate the openness of your interactions with them.

While styles of selling come and go in popularity, it is unlikely that ROI-centric selling will fade away any time soon. We are, in fact, confident that it will continue to be the primary method for successful selling for all of 2003 and well into 2004. 

Return on investment is not a new concept as everyone has widely noticed. What IS new, is the concept of making it central to the value proposition and central to the sales strategy. What is even more novel is the application of ROI modeling as a driver to product capability scope and  implementation priorities. This type of thinking is not yet widely practice.  But why companies would not want to develop with the advance knowledge of their customers' expectations seems an unnecessary question; we expect to see this become a product development "best practice" in the next 12 months or so, certainly for technology vendors.

This brings to a close, our series of six ROI for Technology Vendors newsletters. Our objective was to provide detail on the best and worst practices around ROI calculation, and to advise our subscribers about things to consider as they make decisions around ROI marketing and selling. We hope we have accomplished our educational objectives, and that the subtleties and pitfalls will save you time and money. As noted at the beginning of this newsletter, we will be starting a new series of ROI newsletters in January 2003. Unlike this past series which focused on ROI for Technology Vendors challenged to sell in poor economic times, the new series will be targeted to Enterprises who are considering Technology Investments.

From all of us at The Gantry Group, we wish you a joyful holiday season, and a safe, healthy and prosperous New Year!!

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