Building the Customer's Confidence in the ROI of the Solution
During the initial panic of the pandemic, businesses made quick and aggressive moves to cut costs. Data from PwC reflects just how pervasive this early response was. In a survey of 871 CFOs, the research shows that 81% planned cost-containment measures as a reaction to COVID-19. In recent months, however, something started to change; businesses began to soften the intensity of their cuts. Follow-up research from PwC found that a significant proportion of businesses decided to lessen their intention to cut or cancel planned investments. This trend indicates that businesses have not abandoned the time-tested notion that an investment today will yield results tomorrow.
Despite this return to a long-term perspective, businesses have in fact changed in other ways. Though willing to spend, they are now exercising more scrutiny over investments than ever before. CEOs and CFOs need a level of ROI assurance that surpasses the countless competing priorities in need of funding. Therefore, sales professionals face considerable challenges in positioning a solution that now must clear a much higher bar. Stakeholders need to see the measurable, financial benefits of the product or service. They need to become confident in the solution’s ability to deliver benefits within a reasonable period of time. Without this assurance, the buyer’s anxiety and sense of uncertainty will command a greater influence over the purchasing decision. Consider recent research from J.P. Morgan, showing that 70% of 520 surveyed business leaders cite “uncertain economic conditions” as their biggest challenge today.
Here, we examine three ways in which sales professionals can build the stakeholders’ confidence in the ROI of the solution. While the soft benefits of a solution still hold value, nearly all business leaders have shifted their focus to outcomes visible on the income statement. Effective sales professionals are preparing to speak to this need.
Articulate the Value of Incremental Gains
As business conditions worsen, sales professionals feel the pressure to deliver a solution with an ROI that can be realised in the short term. For most solutions, this timeline is not realistic. Moreover, such a timeline is not ideal because it suggests that the value of the solution is immediate but short-lived. The strongest ROI is one that can be realised over the long term because it compounds. The promise of a fast return is indicative of a strategy that prioritises the present at the expense of the future. This idea is supported by research published in the Journal of Finance, which showed that businesses that cut R&D spending “underperform at a longer horizon relative to the set of firms that increased discretionary expenditures and missed forecasts.” Put simply, the businesses in the study that favoured instant benefits, in this case earned through cost cutting, suffered in comparison to those that accepted the fact that meaningful rewards take time. This outcome is echoed by other research from Harvard and Northwest, which concluded that “firms that cut costs faster and deeper than rivals don’t necessarily flourish. They have the lowest probability — 21% — of pulling ahead of the competition when times get better.”
These findings have never been more relevant because the current climate has instilled a pervasive and prolonged sense of uncertainty. Consider the conclusions of a working paper from the Becker Friedman Institute for Economics at the University of Chicago, which learnt that all eight of the uncertainty measurements analysed have increased since the start of the pandemic, and the majority of those measurement have reached an all-time peak. With so much confidence eroding, it is easy to see why so many are prone to seeking immediate relief.
Effective sales professionals enter the ROI conversation with an awareness that many stakeholders are under pressure to deliver benefits sooner rather than later. Therefore, the challenge is to help widen the decision maker’s perspective. Doing so acclimates the buyer to the idea that incremental, compounding gains offer the best possibility for success. Sales professionals can illustrate this concept by discussing the ROI of a solution as a phenomenon that happens in stages. This kind of open, forthright dialogue fosters confidence in not only the solution but the sales professional as well.
Understand the ROI Factors that Resonate with the Customer
Customers will respond to ROI factors differently. Therefore, sales professionals must first understand what the customer values before positioning the ROI. Doing so means taking the time to ask the right questions. This process is often intensive because the group of stakeholders will consist of decision makers who each have a unique opinion about what constitutes value in the ROI. Stakeholders like the CFO and those in procurement roles are likely to be attuned to the financial benefits of a solution. In most cases, they will seek to define the value of the product or service through a quantitative approach that assigns a dollar figure to the savings or revenue increase associated with the decision to buy.
In contrast, the stakeholders that are responsible for implementation might choose to focus less on the hard factors underpinning the ROI and instead examine the ease with which the solution can be integrated into business operations. The most forward-thinking stakeholders might consider the ROI in the context of the competitive landscaping, choosing to gauge the value of the solution against the perceived strength of competitors.
The key is to remember that there are as many different conceptions of value as there are stakeholders. This characteristic of selling has become even more prominent amid the pandemic. Notions of value are changing every month. The ideal ROI profile of a solution has changed as businesses pivot or even redesign their model. This characteristic of today’s business setting is evident in research from MIT Technology Review Insights, which discovered that almost two-thirds of the 372 senior business leaders surveyed believe that the pandemic will disrupt the way their companies innovate. The good news: the same data shows that “seeking new partnerships” represents the most common top-ranked initiative as businesses dramatically shuffle their priorities.
This research illustrates the risk sales professionals face when they choose to articulate ROI factors that have historically resonated with buyers. Pre-pandemic ROI conversations have little relevance in today’s world.
Contextualise the ROI to the Industry
Broadly, investments can be segmented into one of three categories: structures, equipment, and intellectual property. Each of these categories will recover across different timelines. Historical data illustrates this point. For example, “IP investment has been less affected by previous recessions and has recovered faster than equipment and structures in the past 10 business cycles,” according to data from Deloitte. In contrast, commercial and manufacturing structures saw downturns that were more prolonged than that of the total economy. Further, equipment investments show more varied recovery times dependant on the kind of equipment in question. That is, transportation and industrial equipment investments tend to experience sharper downturns than information processing equipment.
These findings underscore the fact that the expected ROI of a solution is dependant on the category to which it belongs. Sales professionals should keep these findings in mind when building confidence in the ROI conversation. If a buyer is going to develop genuine confidence in the anticipated ROI of a solution, they must first be assured that the sales professional has demonstrated an understanding of how previous economic downturns have impacted investment outcomes based on the kind of solution in consideration.
The key is to help the customer recognise that the intended outcome of the purchase is dependant on other factors. This is where a higher-performing sales professional distinguishes themselves from the rest. They fold implementation into the conversation. They link the ROI of the solution to their ability to integrate the solution into the business. This approach helps the buyer develop confidence in the financial aspects of the purchase because they know that the sales professional’s success is not based only on completing the sale — it is based on ensuring results.
Though the initial and intensive cost-cutting response to the pandemic has slowed somewhat, leaders are extremely sensitive to the ROI profile of every purchase, big and small. This heightened scrutiny is driven by both quantitative and qualitative factors. That is, businesses need to see the quantifiable and therefore financial benefits of a solution. They also need to see qualified benefits, which ensure that the decision to move forward with a purchase will not tarnish their reputation.
Overcoming this escalating challenge means that sales professionals must discuss the ROI of the solution with a consideration of the other factors influencing success. Often these factors are unique to the industry in which the solution is being applied. Sales professionals must also recognise that the definition of a meaningful ROI will not always be shared among all stakeholders. Therefore, it is critical to understand each decision maker’s perspective while also accounting for each buyer’s evolving definition of success. Finally, sales professionals must remember that in today’s setting of fear and uncertainty, many buyers will seek immediate results. Addressing this challenge means having an awareness of its presence and encouraging the customer to think of success as a long-term endeavour.
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