A Better Way to Calculate Return on Investment (ROI)
Estimating return on investment (ROI) can be a very effective sales tool, however it is difficult to calculate and if a prospect perceives it as a guarantee it can hurt your brand. The problems with ROI stem from trying to reduce, without much investment in time or money, the impact of a product on a business, a complex human organization in constant flux, to a dollar amount that is unique to each prospective client.
The solution is to expand people’s thinking of ROI beyond money to include stress, customer service, employee engagement, communication, quality and happiness in your definition. To make a purchase decision using ROI, you do not need to estimate the exact profit that it will generate, but instead determine if it will improve your business more than other available investments.
One of the best ways that I have discovered to expand people’s thinking about ROI is to use a mental case study where you ask your prospective client to image that they have two identical clones of their business, and one of the clones uses my product and the other does not. I then ask them what differences their are between the two clones as the develop over time. As I guide them through the simulation most of my prospects start to visualize how my products help impact their companies, sales cycle, marketing, customer service, management and strategic planning. If a client is not able to visualize themselves having significant benefits from my product I know not to sell my product to them because either they don’t have a need or they are not willing to invest the time to generate a significant return on their investment.