ROI Calculators for SaaS Solutions

I spent three summers as a counselor at a boys camp in Maine. I taught canoeing and sailing and lived in a cabin with ten 12-year olds.

Before the counselors' ritual late night snack - lasagna, fried chicken, ice cream or whatever other leftovers the cook left out for us - I told the campers in my bunk the obligatory scary bedtime stories. I related the standard repertoire of haunted campsites and Bermuda Triangle mysteries, though I once went through an abridged version of "The Picture of Dorian Gray."

The stories were scary enough to get a bunch of 12-year old boys to pull the covers up over their heads and eventually nod off.

They're not likely to work, though, with older kids, including us professional marketing folks. We need something truly hair raising, stomach turning, knee knocking and toe curling.

I'm talking about something truly horrifying... like the dreaded "ROI calculator."

Whenever I got a request from sales for an ROI calculator - and without fail I would get that request - my first response was to chew up a couple of Pepto Bismol tablets. If I was a smoker, I would have had a smoke.

Why this fear of the ROI calculator?

For one, I'm very wary of how they'll be used in the sales process. In particular, I'm concerned that they tend to draw too much attention to the cost relative to other considerations. When selling to enterprises, you want to be certain that you are presenting more than the low cost advantage of your solution. With a SaaS solution, you are asking the prospective customer to enter into a long term relationship in which they entrust you with an important business application and sensitive data. Price is certainly an important consideration, but not the only consideration.

I'm suspicious of the sense of accuracy that ROI calculators purport to project. They should help the prospective customer get a reasonable approximation of the ROI from your solution. But to go beyond that by developing an overly complex contraption that calculates out to six digits past the decimal point often generates more skepticism than credibility.

I'm wary that the numbers are cooked. Rather than your running the ROI calculation on your own, it's better to let the customer enter in their own data wherever possible. If they don't have the data, and often they don't, provide "industry standard" benchmarks, preferably from an independent source.

I worry that the discussion about the precise numbers may obscure the logic. It's more important for the customer to understand all the elements that are factored into the equation than the single ROI number that pops out at the end. The sales person should be able to clearly explain how the calculator was put together. Another argument for simplicity over complexity.

I'm concerned that the ROI calculator won't be used to compare all the relevant options for the prospect. Compare the ROI on your SaaS solution not only against on-premise automated solutions, but to manual methods as well. If a prospective customer is using a paper-based system to manage expense reports, for example, compare that manual method against your SaaS solution in calculating the ROI.

I am afraid that the ROI calculator will be relied upon too heavily. Be cautious about using it to convey the entire value proposition. Some items such as lower maintenance and upgrade expenses can be calculated, but it may be more difficult to put a number on the value of high security or flexibility. In other words, know the limitations of the ROI calculator and where it needs to be supported by other material.

You'll inevitably face the scary task of putting together an ROI calculator. But if you're aware of the risks and adhere to a few rules about how to build it and use it, perhaps you can put away the Pepto Bismol and forgo the cigarette.