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How To Communicate Value Proposition And Return On Investment

As part of my ongoing value and pricing series, the following article will show you how to position your organization’s contribution to value creation to support greater value sharing.

As part of my ongoing value and pricing series, the following article will show you how to position your organization’s contribution to value creation to support greater value sharing.

Too many entrepreneurs, when asked about the value or profitability of their product or service, shrug their shoulders and say, “I can’t really tell.” If you don’t appreciate this, think how hard it is it is for your prospects and customers! And if they can’t appreciate it, what are the chances they will buy it?

 

We offer you an easy way to identify all the value elements of your product or service and articulate them in a way that your customers know quantitatively exactly what your value is to them. They will see such a high ROI that they will be foolish not to buy from you.

 

The main idea here is that you communicate ROI by looking at your value proposition through the eyes of your customers. In other words, why should they spend their little bit of money on you instead of putting it to other uses?

 

Your customers want to know how long it will take to recoup their investment or make a profit. Many will want to see a recurring return.

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There’s an old marketing adage, “Make your product free.” People pay more when they think it “costs them nothing.” You do this by adding so much intrinsic value to your offering that it far exceeds what it costs to the customer; get it right and in their perception it’s free.

 

Added value with your product or service:

First, list all the ways you create value for your customers.

 

Your product or service…

 

– Will you help the client to increase their income? Does your product/service increase sales? Would you like to establish further contacts? Would you like to strengthen your competitive position in your market? Shorten the sales cycle? Are you getting more repeats and referral offers?

 

– Do you allow them to increase prices or at least keep them at the same level? Will the value you create allow your customer to charge higher prices for their offering?

 

– Save costs? Does it reduce initial or ongoing costs? Does it reduce overheads like utilities, rent, or travel expenses? Would you like to save on material, equipment, personnel and third-party services? Does it offer cheaper installation or longer life? Does it reduce the number of errors?

 

– Allow you to replace some existing costs with lower ones?

 

– Allow reduction? Does this allow the customer to reduce staff or support staff?

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– Avoid upcoming or anticipated expenses? Does it help to avoid costs completely?

 

– Increase the perceived value of your products and services. Does it increase the perceived value of what your customers offer?

 

– increase productivity? Are you improving your customer’s productivity or their employees’ productivity? Does it increase production or manufacturing productivity?

 

– Are you giving them more control? Does it offer your clients the ability to track results, lead generation, revenue, profitability, performance, or other key success factors?

 

Then go through the list and calculate how much each of them costs for each of the value creation opportunities. It can be an absolute amount, a percentage of income, or a percentage of cuts.

 

Create evidence for each of your value claims. Evidence can be in the form of worksheets, testimonials, case studies, success stories, printed statements, and even research.

 

Add all the items of value to get the total by combining income and savings into one number. Again, the total cost can be, for example, an absolute monetary number. B. $ 645,000 or a percentage of sales.

 

Finally, calculate your ROI by comparing the total cost with the cost of your product. You can think of the ROI (return on investment) or the “payback period”. Either way, you’ve quantified the value of your product, justified your price, and made it much easier for your prospects to make a purchase decision.

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Success Story

One of our customers sells enterprise software for between $ 150,000 and $ 250,000. After 9/11, their sales cycle extended to eighteen months, with most of the potential deals ending “unsolved.” Potential customers knew they needed to replace their old software, but they simply couldn’t justify the cost in the absence of economic growth.

 

To speed up the sales process, we conducted an ROI analysis using exactly the steps described above.

 

First, we have listed all the ways the software has saved or made money for the customer, including replacing old software with high maintenance costs, reducing computer rental costs, reducing material waste, reducing the number of customer service representatives needed and reducing the time their sales representatives spend on calls. , improving the accuracy of sales offers, increasing potential sales AND increasing overall sales profitability.

 

By assigning a dollar value to each item of value and providing evidence, our client was able to demonstrate a payback period of approximately 9 months and a significant positive return on investment thereafter.

 

The first two prospects who heard this value proposition said the same thing: “We’d be crazy not to buy this,” resulting in two of the shortest sales cycles and, coincidentally, two of the biggest one-off sales in history.

 

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