Depending on where the prospect is in the buying process (or your sales cycle), there are different tools (or calculators) to help you with your value-based selling approach.
In the earliest stages of the sales cycle, you want to establish the prospect’s pain and how much that problem is costing them. This will help set you up for a conversation about how much your offering can help. A value calculator helps you show how much money the prospect is leaving on the table each month, or how much they’re spending that’s unnecessary. This helps you establish the “value” of solving the problem. (Here’s a good example of a value calculator.)
The main reason you want to use the value calculator early in the process is that it helps you avoid a price discussion until you’ve clearly defined what the prospect’s problem is and how your offering can add value. This is why a value calculator can be a great lead-generation tool for marketing. If you add it to your website or make it a landing page in an email campaign, prospects can use it in a self-serve way to estimate how much the problem is actually costing them and how much they might be able to reduce costs or increase sales. Again, this tool doesn’t address pricing or how much you might be charging them.
As you get later into the sales process, there are two types of tools you can use to communicate value. One tool is great for when you’re in a competitive situation and you’re trying to differentiate: a TCO (Total Cost of Ownership) calculator. This tool can help you make a case for why you’ll be better able than the competition to create value for the prospect.
The other type of tool to use later in the sales process is an ROI tool, which helps you make a case that the prospect should invest in your offering (as opposed to why you provide better value than the competition as in a TCO calculator). An ROI tool provides the prospect with the financial justification for your solution. In other words, it will show how much they’ll save, the payback period (aka, the break-even point from investing in your offering), and cost-to-delay-per-month (how much they’re losing each month by not investing in your offering). These metrics really help when the CEO or CFO gets involved and wants to see a cost justification for investing in your offering.
The type of tool you use depends on what information you want to reveal, and when. Unless your pricing is publicly available, you would rarely make an ROI tool available until the sales cycle is well underway. Here’s why. You could scare the prospect off early by indicating how much your offering might cost them, let’s say one million dollars for discussion purposes, because they won’t stick around long enough to hear about how your offering can save them ten million dollars.
It’s important to note that the ROI calculator is not used to set your price but to justify your price. (There are tools to help you with price-setting, like PROS, LeveragePoint, Vendavo, or Zilliant.) Most selling processes will tell you to resist talking about price until you’ve gotten the prospect to realize, “Yes, this is a big problem and it’s costing us X amount of money.” This is where a value calculator is a great tool to help establish the cost of the problem. Be careful trying to use an ROI tool to establish your pricing because if a prospect believes you’re going through an assessment simply to set the maximum price possible, then they might give you artificially low numbers in an effort to minimize the amount they might spend on your offering. This can create distrust on both sides, which is never a good way to start a business relationship.
When used at the right place in the sales cycle, all three of these tools, the value calculator, TCO calculator and ROI calculator, can establish a strong business relationship with your prospect.
At what stages of the sales cycle do you discuss value? Share your thoughts in the comments section.