Focusing on value, quantifying benefits and building a business case that shows positive Return on Investment (ROI) can have a great impact on a sales pursuit. I will regularly draft a business case analysis to use as a talking point with the customer. Walking key stakeholders through the value story can be a highly effective way of engaging customers, allowing you to uncover more insights about their business, goals, pain points and challenges.
The most common question I get asked by colleagues and customers about a busines case is: “where do these benefit figures come from?” I might consider that in another post, but a colleague recently asked me an interesting question that I want to explore:
Have we built a value proposition for our competitor?
It is true that the primary value of a software solution is often independent of the vendor. And this is especially true when there are obvious pain points that automation or improved visibility can address.
If I own a bicycle and am considering investing in a car, a key value driver will be time to destination (TTD). To get to work on my bike currently takes 45 minutes. With a car the journey will only take me 10 minutes, giving me a saving of 35 minutes every morning (78% improvement). However, assuming I must stick to the speed limit, whether I drive a Ford or a Hyundai to get to work, the 78% improvement in TTD is going to be the same.
The Hyundai dealer might spend hours with me to gather data and build a business case that clearly demonstrates the benefit of investing in a vehicle over a bicyclce. I become convinced that I need a car instead of my bike, because it will save me 233 hours per year. At a time value of $150 per hour (I’m worth it), I’ll be saving $34,950 each year, and that’s from only one use case. Awesome! However, the Hyundai dealer’s work and investment of time all goes to waste when I decide to buy the Ford instead.
Is this a risk for us as software vendors, if we build a ROI model during a competitive sale?
Hopefully you’re already thinking of the limitations in the above bicycle/car scenario, and what the Hyundai dealer should do.
From a benefit perspective, all our dealer has used and quantified in this analogy is a single value driver (Increase productivity by reducing Time to Destination) that is common to both solutions. What the Hyundai dealer needs to do is identify and focus on additional things that differentiate her offering from the competition. And even better if she can quantify the value of items that are unique to her vehicle. For example, an inbuilt GPS with unique AI technology could save time with route planning and by adjusting to traffic conditions. Or maybe the fuel consumption is a differentiator that will save money spent on petrol. Over 3-5 years this saving will add up and be substantial.
When building a business case in this vehicle scenario, Time to Destination (TTD) is still an important benefit to include, even if it’s not a competitive differentiator. Maybe I as the customer need to get my wife’s approval to invest in a car and must show her a strong business case. What the vendor (car dealer) needs to add to the value story are additional value drivers or benefit statements that play to their strength against the competition.
The other obvious variable that influences ROI is cost – the “Investment” part of ROI. This is something that a vendor has more control over, compared to the competition. If all the benefits are equal between two vendors, reducing the cost will make the ROI of your solution look better. However, the risk is that you end up in a competitive discounting situation, and the emphasis shifts from value to price. As a vendor, we don’t want this to happen. We are not selling a commodity and we want the perceived value to justify a price premium.
An important aspect here is to make sure you include the Total Cost of Ownership (TCO) over time as the Investment, not just the up front cost of your software or services. Maybe your solution is more expensive to purchase, but requires less cloud infrastructure or less internal staff to run. Maybe the consulting and upgrade costs give you an advantage. Using my car analogy, maybe the Toyota requires servicing every 6 months while the Hyundai only requires a service once per year, saving the buyer more money over time. Ongoing fuel costs could also be included here in the investment section, although its important to not double-count benefits if you’ve already shown them as a cost saving benefit.
In the end, we are trying to tell a Value Story that looks reasonable. We will adjust the levers of assumptions, benefits and costs to reflect that story, supported by customer discussions, case studies and other proof points. From a competitive standpoint, make sure you hone in on value propositions that will set you apart, regardless of the calculated benefit figure.
Another angle to consider is that collaboratively creating a business case is a great way to engage the customer and build a stronger relationship. Many of our buyers lack the experience and skills to build a business case analysis and are grateful for assistance, as they navigate their internal approval and procurement processes. Offering this help in a professional, transparent way can itself be a strong differentiator against the competition.
Having a platform/tool and a methodology for value analysis is extremely helpful in conveying a sense of professionalism. Some organisations have Value Consultants and Value Engineers who operate within a Value Management Office (VMO). There are also vendors who provide collaborative platforms and expert resources. If you have access to such people and tools, make sure to use them on your opportunities. Ask the customer if they would like help from your Value Consultants to build their internal business case.
It’s also beneficial for you as the vendor to engage the customer in the business case process, because you gain more insights and detailed information about the customer’s environment and challenges. Understanding their business goals, the real cost of their current situation and their pain points can help you tailor your proposal and presentations, potentially giving you another competitive advantage.
Also, if you can get the customer to spend time with you on the business case, then they are not spending that time with the competition. And simply by talking through the ROI model, validating and adjusting the figures with the customer, you are reinforcing messages about your company and the value of your solution. And the more time you can spend with the customer, working together, the stronger their confidence in you will become. So it’s a great thing to do.
In conclusion, I would never be scared of building an ROI model that could be used to justify investment in a competitor. Focus on what makes you different, ensure the investment covers TCO, and include the customer in a collaborative process.
Have you ever had a competitor co-opt your business case at a customer?
Thoughtful Presales 