“Rather than lead with ROI, consider starting the discussion with payback, then turn to ROI.” – Ian Campbell in today’s Tip 1630
What’s your thought about this?
Join the conversation below and check out the links!
Have feedback? Want to share a sales tip? Call or text the Sales Success Hotline: 512-777-1442 or Email: [email protected]
Scott Ingram: You’re listening to the Daily Sales Tips podcast and I’m your host, Scott Ingram. Today Ian Campbell is back. Ian is the CEO of Nucleus Research and author of the Wall Street Journal bestselling book “The Value Sale.” He’s trained 1000’s of sales professionals on ROI analysis and teaches at Babson College and Florida International University. In his spare time races Ferrari’s in the Ferrari Challenge series. Here he is:
Ian Campbell: Hi, everyone. I’m Ian Campbell. When the topic of value comes up during a sale, the discussion usually turns to return on investment, show a positive ROI, and the deal becomes a lot easier to move forward. You may even have your own value engineering team that can jump in to generate an ROI business case for you.
But pause a second. Presenting an ROI number may not be your best strategy if you want to close the deal. Payback period or time to value can be a far more effective way to begin a discussion. Payback period is simply the time when the benefits from your solution cover the cost.
For example, if your solution costs $100 and generates a $200 benefit to your prospect in the first year, your prospect will cover their costs in the first six months. Simple.
Here’s the advantage to payback period. Your prospect may intellectually understand that the $100 project returning $200 has a 200% ROI, and that’s good. But they’re more likely to feel a six-month payback.
With payback period, you address the question of risk. Knowing they’ll cover their cost in the first six months feels great. Even better, that’s probably the first thing they’ll say when challenged on the decision.
Think of a CFO. They understand ROI, but they’ll respond to knowing the project covers its cost quickly. Financial decision-makers are not risk takers, they’re risk avoiders. Payback period addresses that concern.
Another strength of payback is accelerating time to close. The quicker your prospect moves forward with the decision, the quicker they’ll reach the point where their costs are covered. It’s foolish, for example, to spend six months deciding to move forward on a project that has a four-month payback. Although ROI is very important to the business case, it doesn’t generate that same desire to move forward.
So payback is a number easily felt by the prospect and can be used to both reduce risk and accelerate a deal. Rather than lead with ROI, consider starting the discussion with payback, then turn to ROI. That little change in presenting the business case might make closing the deal a lot easier for you and a lot easier to justify for your prospect. Thanks for listening.
Scott Ingram: For links to connect with Ian and to check out his book “The Value Sale”, just click over to DailySales.Tips/1630. Once you’ve been over there, be sure to come right back here for another great sales tip. Thanks for listening!