This article is based on Sangram’s brilliant talk at #GTM23 in San Diego. Watch the session in its full glory here!
Be honest – are you struggling to figure out how to show the ROI of your product to your customers? If you are, you’re not alone – 60% of the companies we speak to at GTM Partners struggle to articulate and prove ROI.
Back in 2019, before Go-to-Market (GTM) was cool, Bryan Brown and I wrote a book called MOVE: The 4-question Go-to-Market Framework. As part of our research, we had over 3,000 GTM leaders complete a survey, thanks to which we identified 15 Go-to-Market problems.
More people do that survey almost every month, and not a single one of them has given us a 16th Go-to-Market problem. If you can, let me know and I’ll buy you lunch sometime!
It would be near-impossible to address all 15 problems in one article, so today I'm going to focus on the problem that comes up the most often when we talk to GTM leaders: Your customers love you, but can’t quantify their ROI at renewal time.
So, why is this a problem? Well, if you can’t show the ROI of your product, you’re going to see some pretty serious knock-on effects:
- Low win rates
- Stalled pipeline
- CFOs blocking deals
- Poor customer retention
But that’s not all – a recent study by G2 found that receiving ROI within the first six months is one of the top three considerations for software buyers at companies of all sizes. I’d go a step further than that. I believe your customers want to see ROI in less than three months. In some cases, they want to see ROI as soon as they start using your product.
So, if you can show prospects that they’re going to get a return on their investment quickly, you’re going to close more deals. In short, it’s super important to figure out how to demonstrate ROI for your customers – and fast.
The five types of ROI
In a moment, we’re going to dive into a brand-new framework for understanding ROI, but first, let’s take a look at the five distinct types of ROI.
Let's start with the one we hear about most often: attributable ROI. It's the direct return you can show for every dollar invested. For instance, can you demonstrate to your customers that for every dollar they invest, they'll get $3 or more in return? If not, don’t worry – there are various ways to approach ROI, and that's what we're exploring today.
Next, we have transformational ROI. This isn't about direct financial returns but the significant change your product or service brings to a business.
Remember when Salesforce entered the scene? They weren't touting the financial ROI you’d get from their offering. Yet, many of us consider Salesforce the best CRM platform out there. That’s because their ecosystem and partnerships transformed how we think about sales.
And Salesforce isn’t the only example. Think about Slack and how it revolutionized team communication. If you have this kind of game-changing effect on your customers, you offer transformational ROI.
Then there's efficiency ROI. This is all about optimizing operations. If your product or service can reduce costs, eliminate the need for manual labor, and help businesses strategize better, you're in this category.
Next up, we have necessity ROI. This is about offering a product or service that's so user-friendly and valuable that people can't help but get on board. It's the kind of product that, due to its ease of use and value, becomes indispensable.
Finally, there's indirect ROI. This is a tricky one. It's when you believe your product is great, and you assume your customers love it, but you're not entirely sure why. It's what we often refer to as the "muddy middle." If you find yourself in this category, you're in for a challenging journey.
It's understandable for early-stage companies to be in the indirect ROI phase while they figure things out. But for mature companies, it's a big red flag. You’ve got to start delivering a specific type of ROI as quickly as possible because it’s just not sustainable.
The key takeaway? Your ROI doesn't have to fit a single mold. If you're only talking about attributable ROI to your customers, you might be missing the mark. We can't all claim the top spot in that category, and that's perfectly fine. Many successful brands have carved out their niche, and there's a market for every approach.
The ROI framework
Now, let's map these different types of ROI to our framework.
If you’re in the “muddy middle” I just mentioned, with only the vaguest idea of what kind of ROI you’re bringing to your customers, you’re in the instability zone.
Both efficiency and necessity ROIs place you in the competitive zone. Here, you'll face rivals claiming they can do things better, faster, or cheaper. It's a tough space, with challenges around pricing and expansion, but if you can hold your ground, you'll do just fine. Just be prepared for the competition.
At the pinnacle is the winning zone. Up here, you can charge whatever you want because you’re bringing either attributable ROI or transformational ROI.
Think about buying a diamond ring – there's no real logic to the pricing, but people buy them because they symbolize everlasting love. It's a transformative experience. If your software or product can achieve this level of transformation, you're golden.
In this zone, you dictate the market terms, and pricing becomes almost irrelevant. However, it's essential to recognize that not every company can or should aim for this zone, and the zone you’re in may change with the market landscape.
Take Slack, for instance. They began as a transformative tool, revolutionizing communication. Initially, they were in the winning zone. But over time, they transitioned to efficiency, optimizing how developers communicate and work. Now, they've become a necessity for many. Just look around – nearly everyone uses Slack or a similar tool. It's a testament to their journey through these ROI zones.
Tailoring ROI to multiple products
So, as we’ve seen, you need to figure out what type of ROI you give to your clients. But what if your company offers multiple products?
If you're trying to establish a single ROI for your entire brand, you're facing a massive challenge. Instead, it's essential to pinpoint where each product lies within the ROI framework. Each product might deliver a different type of ROI, so they each require a distinct messaging strategy and go-to-market – and a dedicated product marketer to craft them.
At GTM Partners, we recently collaborated with a company that had multiple products. Upon mapping out each product's ROI, they realized that a single product marketing approach wouldn't cut it. Each product had distinct messaging and market entry strategies. For instance, one product required a product-led approach, while another was enterprise-level, requiring a more sales-led approach.
My point is if you're using a one-size-fits-all approach for marketing and sales across diverse products, you're inevitably going to have a problem showing ROI.
Case studies: Uncovering ROI through customer feedback
We've worked with tons of companies to help them define their ROI. One method we employ is analyzing customer reviews. Platforms like G2 and Product Hunt can be invaluable in helping you pinpoint the ROI your product offers. It’s a great internal exercise: Gather your teams and evaluate your ROI strategies. This exercise can lead to some incredible revelations.
For instance, when we worked with Vidyard, a renowned video marketing company, we faced the challenging task of pinpointing their unique selling proposition. Why should customers choose Vidyard over competitors?
Through extensive research, including analyzing G2 reviews, we discovered that 94% of Vidyard's customers saw value in less than three months. This insight was a game-changer. Vidyard now highlights this fact early in their sales pitches, emphasizing the rapid value their product delivers. This attributable ROI sets them apart from competitors.
Let me share another example with you. During COVID, we saw the emergence of a wave of virtual event platforms like Airmeet and Goldcast. We conducted an ROI study for Goldcast and discovered that their customers weren't just looking for lead generation or demand drive; they craved an exceptional experience for their event attendees.
When we dug a little deeper, we found that Goldcast's Net Promoter Score (NPS) was much higher than its competitors. That was a game-changer for Goldcast. This insight became a pivotal part of their sales pitch. Instead of merely focusing on the leads they could generate for customers, they emphasized the superior experience they offered, which makes event attendees more likely to stick around.
I highly recommend that you take a leaf from Vidyard and Goldcast’s books and tune into customer feedback. Once you uncover what it is that makes your customers love you, it’s going to be much easier to get sales, marketing, and customer success on the same page and driving a unified message.
Key recommendations for GTM leaders
Let’s wrap up with a few key takeaways and recommendations to help you lead a successful Go-to-Market strategy.
- Time to rethink your sales motion: Remember back in 2014? The strategy was simple: hire more salespeople to hit quarterly targets. That doesn't cut it anymore. It's time to reinvent your approach with a cross-functional Go-to-Market. The market demands it.
- The power of a clear ROI story: This should be tailored to what your product offers and what resonates with your customers. Our recent economic impact report indicates a resurgence in brand and demand budgets after a year and a half. Isn't that a relief? We're witnessing a significant uptick in brand and demand investments.
- The need for a GTM dashboard: If you’re currently using sales and marketing dashboards, my advice is to ditch them and create a GTM dashboard. Traditional sales and marketing dashboards just perpetuate those age-old alignment issues.
A GTM dashboard shifts the narrative. When something isn’t working, instead of pointing fingers at sales or marketing, everyone acknowledges a collective go-to-market challenge. This unified approach fosters collaboration, with each department contributing its expertise to address the issue. - Focus on NRR: Net Revenue Retention (NRR) is the number one most important metric. If you're not focusing on NRR now, you'll likely face challenges down the line. I asked Yamini Rangan, CEO of Hubspot, which ROI metric she cares about most, and without hesitating, she said, “NRR. If my NRR is over 120%, I know our customers are happy and we're building a healthy business.”
