Show me the Money: Financial Justification Remains a Requirement

Financial justification remains a requirement, this according to research by IDC’s Business Value Consulting Group, with a whopping 95% of decision makers requiring proof of business value outcomes prior to considering and approving a purchase. 

Budgets are tight and buyers are risk averse, demanding diligence and assurances that proposed investments deliver a tangible bottom-line impact, positive returns and a quick payback.

As project size grows, it should be no surprise that the demand for financial justification increases, in proportion to the risk. Over 85% of projects over $50,000 now require a formal business case.

Although financial justification / ROI is required, most buyers struggle with the numbers. According to IDC, 2/3rds of buyers indicate they don’t have the knowledge, research metrics or tools needed to do ROI / business value calculations. Relying on the prospect to on their own develop the business case can lead to significant delays in the decision cycle, and results in more deals ending in “no decision”.

Without the knowledge and metrics on their own, the task of articulating value and financial justification falls to you, the vendor.  In fact, 81% of buyers expect vendors to quantify business value of proposed solutions, but require 3rd party proof in order to trust results (IDC). Independent research, models, success stories and tools are required.

Making value selling & marketing more difficult, IDC indicates that the number of stakeholders involved in each decision has steadily increased, 43% over the past 2 years. What used to take a couple of stakeholders, now includes 8-10 decision makers for enterprise purchase decisions. What used to be driven by technical is now driven by the business and finance.

As a result, one-size-value doesn’t work with so many different groups and perspectives involved. Each of these stakeholders has their own “point of value” – what issues they are challenged with and the value they uniquely perceive from your solutions.

At the same time, buyers perceptions on the "value-gap” haven’t changed, with most prospects indicating that vendors come up short on their value approach:
  • 74% of providers are too focused on features versus value (Gartner)
  • 48% of providers don’t do a good job w/ business value articulation (Gartner)
  •  #1 reason sales reps fail to make quota = inability to communicate & quantify unique value (SiriusDecisions)

Arming your sales reps and value consultants with the research metrics and tools to quickly and easily collaborate with decision makers and create financial justification / ROI proof is essential, and managing this effort as a comprehensive program crucial to revenue growth and sales success.

However, we have seen a recent trend, with several large Sales organizations cutting back on pre-sales support (sales commoditization) and some crucial value consulting / financial justification programs getting their budgets slashed.

With financial justification so critical, are you investing enough time and effort in your sales content and enablement to meet buyer financial justification needs and close the “value gap”?


Source: IDC Business Value Consulting Group – Randy Perry


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