Key Concepts:
- ROI Model: A tool used to demonstrate the return on investment of a product or service.
- Co-creation: Collaboratively developing the ROI model with the customer.
- Assumptions and Inputs: The underlying data and factors used to calculate ROI.
- Value Selling: Justifying the price of a product or service based on its perceived value.
Co-Creating ROI Models with Customers
The core argument is that ROI models are more effective when co-created with customers rather than presented as a finished product. The speaker emphasizes that a customer is unlikely to believe an ROI model that is simply "cooked up" by the vendor.
Validating Assumptions and Inputs
The key to successful co-creation lies in agreeing and validating the assumptions and inputs that feed into the ROI model. This involves asking the customer specific questions about their current processes, resources, and costs.
- Example Questions: "How long does this process take today?" "How many engineers are involved?"
By involving the customer in defining these inputs, you gain their buy-in and increase the credibility of the model.
Customer Agreement and Reduced Pushback
If the customer agrees on all the inputs to the ROI model, they are far less likely to challenge the output. This is because they have a vested interest in the model and understand the basis for the calculated ROI.
Using ROI Models for Value Selling
The ultimate goal of building a proper ROI model is to use it in value selling. This means using the model to justify the price of your product or service by demonstrating its potential return on investment. A well-constructed, co-created ROI model can be a powerful tool for defending the right price and closing deals.
Synthesis/Conclusion:
The speaker advocates for a collaborative approach to ROI modeling, emphasizing the importance of co-creation with customers. By involving customers in defining the assumptions and inputs, vendors can build more credible and persuasive ROI models that support value selling and justify pricing. The key takeaway is that customer buy-in is essential for the effectiveness of an ROI model.
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