Going Beyond Cost – Benefit Analysis
A critical element of any high impact sales process is “creating business justified solutions.” I’d venture a guess that fewer than 20% of the deals I review have even the most rudimentary business and financial justification. For too many, sales people provide a price, and maybe a list of features and benefits that might be translated to business value–but we encumber the customer with the job of justifying the solution themselves.
Everyday, I read blog post after blog post about dealing with “discounting and price shoppers.” Questions about pricing and discounting dominated discussion groups (probably second to finding qualified prospects). But we see very little discussion about the business and financial impacts of solutions for customers.
I cringe when someone finally does a rudimentary financial analysis, develops charts to present it, culminating in a closing chart proudly stating “The ROI on this project is 6 months.” (If you are wondering about this statement, please pick up a book on elementary financial analysis right away).
In some ways, this is not just a customer issue. Perhaps we have trained customers too well. Too many customers focus only on pricing and don’t demand a strong financial analysis. So they let sales people off the hook.
Let’s pile one more thing onto this steaming pile of issues: The lowest market research data I’ve seen on the number of highly qualified deals culminating in “No Decision Made” is 24%. In our audits of customers, we often find much higher numbers. We are astounded by the number of deals won at the departmental and functional level, only not to be approved at the executive level (despite all the great qualifying questions). The reasons behind virtually all of these is “the business case didn’t align with our corporate investment priorities.”
Customers need strong business justified solutions! Even if they aren’t asking for it, to get approval for the investment, a compelling business justification is mandatory!
A great business justification is too important to leave in the hands of the customer! They may not have the knowledge to do this well, they certainly don’t have the time. So it’s up to the sales person–it’s a mandatory part of our jobs to do this for every deal.
The reason we don’t do it–and our customers don’t do it, is that it’s tough work. It can also be dull, boring work. It requires attention to detail, lots of data collection, and great analysis. All of this is tough and takes time.
To develop a great business justification, we have to really understand what our products actually do–not how they work, not all the features and benefits, but how they help improve customer results. We have to understand our customers and how they work–at a detailed level. We have to understand their KPI’s and how we impact them. How do our solutions improve productivity, whose, how, how much, how do we measure the productivity improvement? Do they reduce costs, which costs, how much, how do we understand the impact of the cost reduction? Do they improve customer service, how, how much? Do they improve workflow, what does that mean in terms of cycle time, process savings, how do we implement, how do we track and measure? And on and on and on. We have to understand the current state of the customer’s operations. Then we have to gain agreement on the improvements they expect, showing the performance difference in clear business terms–as expressed in dollars, euros, pounds, yuan, yen—and all adjusted for risk.
We can’t do this alone, we need the customer engaged in this. They need to own the results of the analysis.
But that’s just the starting point. We have to tie this analysis to the strategic initiatives and impact to the organization? We have to engage the CFO’s staff. We have to understand the impact on the Balance Sheet, Income Statement, and Cashflow. We have to understand our customer’s investment strategies–how do they allocate funds and management attention to the various projects and initiatives competing for limited resources? Do we have the buy-in and support of the Financial organization?
Success, our customers’ and ours, mandates strong business and financial analysis. Are we developing and presenting compelling business value? Are we gaining the customer agreement on that business value? Are we aligned with the customer priorities?
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