Knowing the right time and context to use value selling tools is crucial for B2B sales success. Two popular tools are Return on Investment (ROI) and Total Cost of Ownership (TCO). While both can prove cost effectiveness, they have different purposes and are most effective in specific sales situations.
Return on Investment (ROI)
An ROI analysis is most effective with customers who are hesitant to take action or are struggling to secure budget approval. It provides customers with the business and financial justification needed to move away from the status quo.
ROI tools can help you close more deals by estimating the total value created by your solution, the required investment, and the cost of delaying a decision. When customers understand the cost savings and/or sales growth associated with your solution, you can demonstrate the economic benefits of choosing your solution over the current situation and justify your price.
Showing buyers the financial impact of inaction can increase your sales close ratio, raise your average selling price, and shorten the sales cycle. It removes any doubt about how quickly the solution will pay for itself.
Total Cost of Ownership (TCO)
A TCO analysis is a financial comparison between your solution and that of a competitor, alternative, or competing technology. It should only be introduced when you are in direct competition with at least one other vendor or when your customer has acknowledged the need for change and is actively evaluating alternatives.
TCO tools highlight the lifetime net value of your offering and help build a business case by demonstrating the superior financial benefits of your solution over alternatives. It is a powerful tool for addressing price objections and closing deals.
Timing is critical when using TCO. It should be deployed only when a competitor or alternative has been identified and is in contention to win the deal. Introducing TCO too early in the sales process may expose your buyer to competition prematurely. Using it too late can result in missed opportunities to convince decision-makers.
Conclusion
Understanding when to use ROI or TCO tools is essential for B2B sales success. By selecting the appropriate tool based on the sales situation, you can provide the necessary financial justification for your solution, increase customer trust, and close more deals.
An ROI analysis is effective for overcoming customer inertia and securing budget approval by demonstrating the total value your solution delivers. A TCO analysis is valuable when competing against specific alternatives. It is important to avoid introducing TCO analysis unless you are in direct competition and to use.
By making informed choices and aligning your value selling tools with the right sales context, you can enhance your credibility, increase your chances of closing deals, and achieve greater sales success.
Resources
Connect with David Svigel on LinkedIn.
Join the Value Selling for B2B Marketing and Sales Leaders LinkedIn Group.
Visit the ROI Selling Resource Center.
