It is the ROI, not the ROC, Stupid!

by Himanshu Jhamb on September 30, 2009

ROI ROCIn my earlier post on June 10, 2009 I shared an example of what ROI looks like. In this post, I am writing about if ROI is not seen as ROI, how your possibilities get killed even before you start to act on them. This happens when customers confuse the ROI (Return on Investment) with the ROC (Return on Cost).

ROI is a constitutive component of how we measure Value; so needless to say, it is a critical part of how we choose to transact (or not), in any situation. Then there is the Investment which is a critical part of the ROI. The biggest pitfall is how this shows up for your customers. Consider this example:

You are at the crossroads of your career. You work very hard at your job, day in day out… day in day out… day in day out… you get the picture. The more hard work you put in, the more of the same results are being produced (e.g. getting only a 2-5% raise year after year after year… ). There is no certainty of the promotion you’d hoped you’d get in your upcoming review. You met your goals, you fulfilled your promises and all that happens at the time of review cycle is you’re told the company did not meet its numbers so you’ll just get a 2% raise or worse, nothing at all.

At this point, you say “This is not working”. I need to go learn some new things. I need to look for where I can get more education… different education and with that you set out looking for it. Then you come across two choices; one education costs $20,000/year and the other $2,000/year. This is the crossroads at which you make a choice and the importance of this choice is huge because it will have an impact on perhaps your entire life.

The choice is made in how you think about this. Before I go further lets clearly distinguish that the “I=Investment” IS NOT “C=Cost”. Cost is usually thought of as something you have to pay in order to get something else RIGHT NOW. Investment is thought in the context of something you have to pay in order to get something bigger (than what you paid) in the future .

Most people look at the ROI as the ROC and that conversation closes the opportunity there and then. So, when you are talking to your customers about the value of what you are offering, make sure you CLEARLY bring forth that the price tag associated with your offer, is not a COST to them, it is, in fact an INVESTMENT, that they are making into a future possibility that will MORE THAN cover the investment they are making at that point.

If they still insist on looking at the “I” as the “C” ask them a simple question: “It is clear that you have considered the Cost of doing this. Have you considered the cost of NOT DOING IT!”

Try this in your next conversation. It works in bringing forth the ROI very clearly… and the results will show for themselves.

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