Opportunity-Cost Selling

By October 6, 2014sales

opportunity-cost1

I’ve had a couple conversations in the past weeks about how to sell to key potential customers. What came to mind for me in these conversations was how poorly I was sold-to by SalesForce when I was looking to buy 50 licenses from them. The salesperson was smart on the first call by asking “why are you looking to switch from your in-house system?” My response was because our in-house CRM was losing notes my salespeople were entering and it was driving them crazy. From there it went downhill with the salesperson when he would follow up every couple weeks with better end-of-month, end-of-quarter, and end-of-year deals. I think we got 40% off by just delaying our decision.

What the salesperson never asked was, what’s the opportunity cost of your faulty CRM system on a $10 million/year business?  If he forced me to do the math it would have looked like this: $1 million sales team payroll being frustrated or wasting their time on our CRM 10% of the time = $100k/year. Lost opportunities with prospective customers on a business growing $2 million/year x 5% = $100k/year. $100k + 100K = $200k opportunity cost. SalesForce: 50 licenses x $60/license = $36k/year. $200k lost vs $36k spent. That’s a net of $14k lost for every month I waited to switch to SalesForce! How dumb of me to wait.

So applying that to conversations I had this week:
For a SaaS tool that helps development teams get better customer feedback on dev priorities: What is the opportunity cost of your development team developing functionality that your customers DON’T end up using? 25% of dev projects not getting used on a $1 million dev team = $250k. Missing the customers real needs may also slow sales growth or increase attrition on a $10 million in revenue business means for every 1% of revenue affected = $100k. So would someone be willing to pay $20k a year to minimize or eliminate $100’s of thousands of waste?

For live chat software. What’s the opportunity cost of NOT having a higher conversion rate on your website by NOT adding live chat to your sales website? What’s the cost of NOT lowering attrition by NOT giving your existing customers a quicker and easier way to  get answers to their questions (and forcing them to call or wait for an email reply).

What’s the back-of-the envelope opportunity cost for your prospective customers to NOT be using your service?

4 Comments

  • Chris says:

    It *kills me* when salespeople don’t get this! So simple, and easy, and quantifies the customer need. Arrrgh!!

    • Bill Flagg says:

      It sure makes it easier as a buyer! How do you teach a salesperson this perspective in a way they can really apply it?

  • Bill, Amen!

    I sometimes see a similar “false economy” when prospective clients decide to run a project using internal resources. In most cases they’ve known they needed to improve a process or develop a new market offer; they just hadn’t done it, sometimes for years. Usually because they’ve been crazy busy making each month’s numbers, because there’s a learning curve involved, or to avoid conflicts. Why they expect that to change…

    I think many folks do the math but hedge the heck out of the return because they aren’t sure the predicted results will occur. They need a reason to feel confident that they will. Hey, sounds like another post!

    • Bill Flagg says:

      Thanks Michael, I agree. When it’s possible I try to take the guess work out for them by doing a trial run/test to see some initial results.

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