Dave’s ultimate ROI sales tool

April 1, 2009
Return on investment trumps simple payback when selling green

Plumbing contractor

Here’s how you overcome price objections when you are selling high-efficiency equipment: sell return on investment. ROI allows customers to sweep the fog from their eyes to clearly see why an investment in high efficiency HVAC products is in their best interest. Today we’d call it being “green,” but it allows you to avoid having folks concentrate on simple payback, which often exceeds three years time and using payback that exceeds three-years is a sure-fire way to turn a hot prospect stone-cold. The ROI approach also takes the focus off of the total price (sticker-shock) and refocuses their attention on the much smaller and easier to accept difference in price. Let’s call this cost difference the “CD.” After all, they were already willing to purchase the lower cost lower efficiency product(s). All they really need to decide is if they’re willing to invest in a system that will help them be green by saving green — their green — and that requires giving you more green. Everyone wins. Well, not the utility company, but no one’s crying any tears over cutting their take.

You need to project the annual operating costs and that renders the potential cost savings for energy consumption. We’ll call this “ES” for energy savings. Let’s say that comes to $400.00 in the first year.

The formula looks like this: ES ÷ CD = ROI (as a decimal number that we multiply by 100 to get the percentage-value). Suppose the difference in cost for the new systems comparison is $2,000.00. ROI is calculated as follows: 400 ÷ 2000 = .20 x 100 = 20%.

Try matching a 20% ROI with pretty much anything previously considered a typical investment strategy — even prior to the collapse of the economy. The ROI, in this case, is an investment in energy — their energy! Put yourself in their shoes — would you purchase the cheaper system knowing you’d be stabbing yourself in the wallet? You’re simply providing them with something that’s ultimately in their own best interests.

If you want to add some interest, you can take the first year’s energy operation projection (for both systems) and project annual operating costs over a longer time-span. Energy costs increase by more than 5% annually (looking back over several decades of info on DOE’s [Department of Energy] web site). As you move forward year-by-year, the annual ES grows — just like compound interest in a savings account – only better and faster.

The icing on the cake? The ROI you’re providing is tax-free and, as such, it’s actually worth more than its face-value. And, it kicks in as energy use for the new system(s) is activated by letting your customer(s) keep more of their hard-earned money from each paycheck.

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