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Reduce Price Resistance by Making the ROI Case For What You Sell

Written by: Mark Satterfield

Article Overview: In order to make prospects understand why they should spend money on your goods or services you need to demonstrate the return on investment that they will receive. This article explains how to do that.

Reduce Price Resistance by Making the ROI Case For What You Sell

It's clear that marketing and selling high value services requires a different approach than selling tangibles or less expensive products. Thus, the importance of being able to make the business case for what you offer. By that I mean that since you're going to ask people to pay money for what you do, you need to develop a case for why they should do so.

The business case has two important components. The first of which is being able to communicate what you do in a manner that engages your prospects. The foundation for developing your business case depends on understanding and being able to communicate the answers to these questions:

-What's the business problem that you solve?
-Why should prospects hire you vs. your competitors?
-How do I know you can do what you claim?

These are the questions you need to have a good answer to before you start doing any marketing. It often isn't easy to answer these questions. If your answers are simplistic or too basic, you'll only convince people to do business with you who are already predisposed to do so. And while it's nice to have a network of these people to draw from when you start out, you'll quickly discover that in order to thrive (or even survive in these days) you're going to have to convince people to do business with you who don't know you, or aren't referred by someone in your network. Then the game changes.

The second component of developing your business case is to communicate the ROI (return on investment). However here's a problem lots of consultants and advisors face. In a typical discussion the "I", the Investment, is the only hard number that's fully discussed. Since the "I" is what it's going to cost someone to hire you, it's crucial that it not be the only number that's out on the table. The key number that needs to be discussed is the, return. That's the important number since the difference between the investment and the return is what makes hiring you economically viable. But how do we make sure that the return clients get is fully discussed?

The answer is achieved by asking a series of questions. In fact it's a series of 3 questions. Nothing complicated. If you master how to apply these three questions, you'll ensure that the ROI of your services is fully understood, and you'll find that you hear "I can't afford you" a lot less. The three questions are as follows:

-Where are you at currently?
-Where would you ideally like to be?
-What's the value of the difference?

To illustrate how this works, let me use an example of a hypothetical firm selling marketing services. The problem many companies face is that they don't have enough leads. They aren't generating enough inquirees from the right type of people. Let's see how these three questions are used to build a ROI case for this type of services.

Question ##1 might be phrased like this: "How many leads are you currently generating?" In this case they say, ""4 leads a month."

Question #2: "What would you like it to be?" In this example let's say they answer, "12 leads per month."

Question #3: "What's the value of the difference?" Now it's likely that we'll have to ask some additional questions in order to determine the value of a lead. For example, we would probably ask additional questions such as, "What's your closing ratio?" and "What's the value of a new customer?" Thus if someone said that their closing ratio was 4-to-1, and the value of a new customer was $2000, we now can do some simple math.

They've told us that they are currently generating 4 leads a month (which results in 1 sale) and they want 12 leads a month (which results in 3 sales). This means that if the marketing program is successful, they'll go from $2000 per month in revenue to $6000 per month. That's an increase of $4000 per month. If the marketing budget is $600 per month, that's over a 650% ROI. It's going to be hard for any sensible and serious prospect to say that they can't afford that investment.

Remember that if you don't get the conversation focused on the return that people get, then the only number they'll pay attention to is the investment that's required. And an investment without a return is simply a cost.

Try using these questions in your next face-to-face meeting and I think you'll be very pleased with the results that you get.

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Article Tags: business case, business problem, game, good answer, key number, money, prospects, return on investment, roi return on investment



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