Economic value propositions

An economic value proposition puts an offer into monetary terms and shows its contribution to the customer's profitability.¹ Build it from the current process, put a dollar value on the impact, and use the buyer's own success measure to shape the case. A preliminary business case is a few quantifiable benefits discovered with your champion, such as savings, productivity gains, or revenue increases.² That gives you a working version to test in conversation.

Find the economic change

Start by naming the business change the offer should create. Keep asking until you can express that change financially.

Look for monetary value in revenue gains, improved productivity, service enhancement, or speed.³ A simple test is whether the opportunity saves money or makes money; if it does neither, it may be too weak to justify a purchase.⁴

Ask:

• What does this process cost today?
• Where does it hold back revenue or productivity?
• What happens if the problem stays in place?

Include foregone opportunity in the conversation. Knowing an initiative's dollar cost or foregone opportunity cost lets you compare choices and use financial measures when deciding whether to proceed.⁵ Move on when the buyer can state the affected measure, the current consequence, and the change the offer should create.

Quantify the impact

Start with the buyer's baseline and show each assumption. The buyer should be able to trace the estimate from current conditions to the expected financial effect.

Quantify cost savings from process scale-up.⁶ If revenue is the mechanism, quantify what the problem could be worth as revenue potential.⁷ Use a bounded estimate of potential ROI and time to value.⁸

Ask which measure will show the impact, what its current value is, and what change would count as meaningful. Ask who owns the measure and which assumptions need confirmation.

Cost gives the action economic context and leaves the decision open.⁹ The buyer can inspect the tradeoff without treating the estimate as an automatic approval or rejection.

Build the business case with the buyer

Once the impact has a working estimate, turn it into a case the account can carry internally. Give the buyer something useful in exchange for the details needed to tighten the estimate.

After identifying the problem's impact, start crafting a business case, and when the prospect provides information about the current process, provide a business case in return.^{10, 11}

Build the case around benefits the buyer recognizes. Ask which benefit would get attention in an internal review, which assumption someone would challenge, and what would make the case easy to repeat to another approver.

Make expected ROI easy for the customer to communicate, because that helps the customer defend the numbers.¹² Add the buyer's human reason for acting to the quantitative case. A business case combines emotional drivers with logical quantitative drivers.¹³

Test the economics

Treat the case as a hypothesis until the account's own success measure and approval path have tested it. The next conversation should find the measure the buyer already trusts.

Ask, "How are you measuring the success of your sponsorship engagements?".¹⁴ Let the answer determine which measures appear in the case. When ROI comes up, ask the customer how to quantify it and build the business case together.¹⁵

Partner with your champion while assessing potential economic benefits.¹⁶ Confirm those benefits with the economic buyer.¹⁷ Move on when the people involved can repeat the same financial case and explain how the measure will be checked.

Turn the math into a decision

Give the buyer a measure that fits the way the spend gets approved. Use ROI or payback when the buyer needs to compare the investment with the return.

Corporate financial analysts use the payback period to value investments or operational projects and determine which to undertake.¹⁸ The ROI calculation subtracts total project cost from total annual retrofit savings to obtain net savings, then divides net savings by total project cost.¹⁹ Use the same discipline with the measure the buyer has accepted for the offer.

Connect pricing to the prospect's problems, pains, or impacts.²⁰ Tie the solution and its deployment to the organization's bottom line, revenue, and customer support model.²¹ Buyers purchase based on how a solution drives the economics of their business.²²

What not to do

Use this check before presenting the case. It keeps the estimate tied to a decision the buyer can explain.

• Enterprise buyers purchase proof or math, so leave abstract future promises out of the enterprise case.²³
• A promise that buying the product will make the customer 1.2 percent better does not constitute a business case.²⁴
• The customer business case needs more than an ROI calculator.²⁵