Economic Impact Analysis


Sales tools are becoming “must-have” components in the selling equation. More than 80 percent of IT buyers now rely on vendors to help them quantify the value proposition of solutions.” In fact, many CIO’s now elevate the ability of a vendor to proactively justify their solutions to one of the top five most important selection criteria. There are several key concepts to using sales tools in the new selling equation.

Preemptive strike –

A preemptive strike is where you (the sales professional) first do your homework. You need to gain an understanding of the prospect before ever making the first call. Many think a cursory look at the website is enough… IT ISN’T. Do a quick Google search for news articles or management changes. If they are a public company, look at their Annual Report. The more you know the better off you are when dealing with a new prospect. Use tools like, Jigsaw, Inside View, Google Alerts, or Hoovers.

Value hypothesis –

This exercise is one where you are able to anticipate a prospects issues, pains or goals by looking at your current customer base. Select customer’s that are close in size to the prospect and complete a value hypothesis before your first call. Use this document to discuss potential value and impact you will have on your prospects financial statements. A value hypothesis is simply a Business Case before you do your discovery. You are hypothesizing your value based on your history of success with similar customers.

The right questions for the right decision maker –

Too often when a salesperson gets an opportunity to meet with a decision-maker he or she doesn’t have a logical, relevant, and consistent set of questions to discuss. Therefore the salesperson ends up gathering data that is inconsistent, irrelevant or not pertinent. Come prepared with questions and data that will enhance the conversation, not delay the opportunity. You should be able to use your current customers to better understand the questions you need to ask. Create a Value Inventory like the (SALES WON ANALYSIS I asked a client to get a partner to do but he would not do it for excuse it was not in WORD- Gimme a break please- and create the appropriate questions before you walk in the door. How else can you resell something if you don’t know why customers of the partner bought in the first place. Talk about time wasters. Bottom line: You must respect the decision-makers time!

The longer a sale takes the less chance you have of winning the opportunity –

Sales process research consistently shows the longer a sale takes to close, the greater the risk of losing the sale to a competitor, or worse to “no decision.” Utilizing economic impact analysis tools you can capture cost and calculate decision delay or cost of no decision. These calculations are very effective in the sales process.

Quality of ROI model separates winners from losers –

An objective and credible economic impact model separates lightweight ROI marketing ploys from substantive sales tools. By utilizing a value justification tool during the sale and an economic impact assessment program after the sale, you are setting the tone for a paradigm shift from vendor to partner. Brian Sommer, former VP at Aberdeen told us once, “everyone will figure out the spreadsheet ROI, but no one will put a post contract program in place and measure the milestones.” It is critical to a successful sales team to follow-up and measure the value delivered.

Documented decision making –

Some products, especially intangibles like software, are subject to scope-creep after the sale. As one vendor put it, “The customer buys based on an 80% fit to their needs, and then quickly focuses on the 20% that they knew wasn’t there when they bought.” The point is, a consistent selling method, a well-documented proposal, an economic impact study going into the sale, and a value assessment measurement program after the sale, can keep the implementation project focused on the key requirements. It ensures the benefits that originally drove the purchase decision are met. It also results in happier customers and more quality case studies for use on the next opportunity.

Change the paradigm –

Ted Matwijec of Rockwell Automation said it best, “Using sales tools in the sales process has changed the paradigm between salesperson and vendor. We are now subject matter experts and can clearly articulate to our customers that we have their best interests at heart. Economic impact sales tools have turned the vendor / customer relationship into a partnership relationship.”

ROI does not eliminate risk –

ROI models, custom training programs and expert proposals do not eliminate risk. With low-risk projects there is less need for an economic impact study. However, when risk becomes real and important, economic impact is used to mitigate the risk by offering several metrics for financial comparison. These metrics must be credible, believable and objective. We believe there are over a dozen C-Suite metrics that assist an economic buyer in making an informed decision. It is crucial you understand your value (economic impact) as it relates to these metrics: Net and Gross profit, Earnings, Operating costs, ROA, ROE, DSO’s, Payroll as a percent of revenue, Cash flow and Debt to Equity.

Educate the buyer –

A credible economic impact analysis will help educate your buyer. Through a detailed questioning process you are telling a story that explains outcomes customers can expect as a result of using your products features. The best salespeople in the world learn early in their careers… the art of the question. The ability to ask a question that elicits the information you need and educates the buyer at the same time is the difference between the best and mediocrity.

Value justification vs. Cost justification –

These two concepts, value and cost justification, although they may seem like the same thing, are very different. Separating value justification from cost justification is a question of attitude and timing. When you are selling value you take a positive and proactive approach to selling by presenting value early in the sales process. When you are cost justifying, you are taking a reactive approach of “defending” your price and may have already lost the opportunity. It is philosophical, you must position your product for value and take a proactive approach. It is a mindset you need to have when selling value. If you don’t know the value your products and services are bringing to the prospect, then you are incapable of value justifying the sale.

There is a difference between knowing your product and knowing the value you are capable of delivering. You must understand the difference between product features and customer value to effectively utilize economic impact selling in your sales process. Keep in mind you are not talking to the decision- maker (Stakeholder) when he or she focuses on how much your solution costs as opposed to value that will be received from their investment.

Each component, value and cost justification, is equally important to a successful selling campaign. Further, it is critical to not only utilize economic impact during the sales process and proposal creation. Rather, be prepared to assess the value you will have delivered after the sale. You can count on your customer doing it. Certainly most organizations will “estimate” economic impact prior to purchase as part of the buying process. But equally important, many will run the same economic impact analysis after the purchase and for the life of the project.

Use tools and technology for an edge in the sales process. Develop economic impact analysis tools to be more effective during discovery, presentation and proposal phases of a sale. Sales tools are now becoming a differentiator in the decision making process and a key to selling to CEO, CSO, CIO, etc.

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