Coauthoring the ROI Model & Building the Business Case for a Pilot Test

In enterprise sales, EAEs work with the client to not only coauthor a solution, but an ROI model and an attribution model to then allow the pilot to prove out over the evaluation period.

Coauthoring the ROI model also allows us to determine the backup attribution metrics that will allow us to prove out ROI in a more robust manner. For example, we get the % of clients that come from phone calls and the average spend per client, we can use that to prove out ROI.

COAUTHORING THE ROI MODEL & BUILDING THE BUSINESS CASE FOR A PILOT TEST: Coauthor ROI model to project what sort of outcomes they can expect and the ROI of those outcomes.

PRESALE AE COAUTHORS ROI MODEL, SOLUTION, KPIS AND ATTRIBUTION TO PROVE IT OUT AND POST

SALE CP PROVES OUT THE MODEL: 1. What is click to lead conversion vs projected? 2. What is % of customers from assumptions in ROI model? 3. What is number of customers? 4. What is LTV of customers from ROI model? 5. What is total revenue associated with customers acquired? 6. What is cost to revenue ROAS multiple?

UNDERSTANDING ROI

Think of ROI as the money multiplier metric for a successful business model. An ROI model shows how dollars invested get multiplied and returned to the business. It demonstrates how successful a business model is or is not as well as a potential investment.

ROAS VS. ROI

ROAS differs from ROI in that ROAS measures revenue and ROI takes into account attributable profit

from the investment. We say attributable because we are not to take into account sunk costs that

would be incurred whether or not the investment was made. ROAS is used to simplify the evaluation when more granular attributable costs are not available. We always want to make sure to exclude sunk costs.

FACTORING IN DIRECT COSTS FROM INVESTMENT TO ROI

One thing that is important to realize is that when trying to get to a profit number from an investment when computing ROI, we need to take into account only incremental costs actually incurred by the investment. Otherwise, we are allocating cost to something that is not actually driving that expense which will make the investment seem less profitable than it actually is. The key is costs actually incurred by servicing the incremental new customer, job, etc.

WALKING THROUGH THE FLOW OF THE MODEL WITH THE CLIENT

Once you are actually in the model with the client, you should have cells that can be changed once assumptions are verified with the client. The key here is walking through the model from top to bottom to show the flow and then checking in with the client that they are following the logic of every cell. Assumptions in blue cells can be changed along the way based upon client inputs. Ultimately, you are looking at a pro forma implementation of your solution and seeing if the return multiple meets their investment threshold. If so, then you can talk about testing a pilot based upon pro forma and adjusting the number of locations for the test pilot based upon what they are comfortable with.

In order to coauthor an ROI model, you are going to need data from the client regarding:

● Lead type

● Conversion % from that type of lead to a sale

● Average sale size

● Total campaign revenue

● Profit % on job/revenue

● Total campaign profit

● Cost per acquisition

● # of opportunities generated from opportunity (pilot)

● Unit cost of opportunity

● Total campaign cost

● Time frame of evaluation

The ROAS model allows you to build the business case for the solution with your client.

Return on Ad Spend (ROAS):

● ROAS is the amount of revenue the client earns for each dollar of advertising

● ROAS = total campaign revenue / total campaign cost, ex. 5:1 ROAS

● ROI = net profit / cost of investment x 100 = % ROI

COAUTHORING & PROVING OUT A ROAS:

Key question: Are you tracking conversion rates as it relates to type of lead? For projection purposes

Starting with existing listing performance in brand engagement:

I. Percent calls

II. Percent website clicks

III. Percent mapped direction

Conversion rate of calls or form fills to estimates?

Conversion rate of estimates to transactions?

Revenue per sale

Restaurant recurring customer waterfall:

● Lifetime value of a customer

● We see the ROAS in month 3 onward

Coauthoring a solution means coauthoring an ROAS model including choosing a KPI, it’s target level and method for attribution. From there you work to prove out the ROAS model from the pilot.