Why you should ask your vendors for an ROI analysis breakdown

All educational institutions work with vendors in one way or another. Some like to bring lots of their services in-house and have almost internal agencies who do the work where others tend to outsource quite a few projects. Either way, when you are preparing a new project you have to factor in an ROI (Return on Investment) analysis in the discussions.

For a college or university it still comes down to money and this almost always comes from one of three sources: student tuition, donations or government spending. Because of our audience here I’m going to strictly focus on web marketing projects and those are almost always for increasing enrollment or giving.

Whether you’re going through a website redesign, bringing on a new email marketing system or outsourcing video you always need to take a step back and factor in how this is going to help you increase revenue from one of these sources. The great thing about the web is we can test and get analytics on almost everything. Because of this, not measuring the ROI of a project is basically irresponsible and lazy.

Here are some reasons why you should be asking vendors for an ROI analysis.

First step in setting up solid project expectations

When we first start on a new project there are a lot of unknowns and things to figure out. Before we get too far into the details, establishing the ROI can help us figure out how much of a budget we need for the project because we will have a better understanding of everything that we can get out of it.

For a vendor only a bad sales rep doesn’t present the case of how your service/product is going to impact and significantly help the bottom line of your prospective customer.

As the customer if you have a boss from whom you need sign off or approval in the first place very few things are as compelling as an ROI analysis. This analysis can greatly speed up the decision and approval process for everyone.

Aligning your goals with the original objectives

If we are thinking about the ROI in financial terms then we are also probably thinking about the costs that go into it. You are going to be much more cautious of the timeline and resources that go into something when you also know the expected output.

I know all of us have been caught in projects that die in committee meetings. What is the cost of having one of those committees in the first place? Seriously, if you have 12 people in a room that are getting paid on average $25/hour then you just spent $300 for that hour-long meeting where nothing was accomplished. Was that really worth the time? Were there not more valuable things that half of those people could have been doing? If the meeting was about a project that will cost $1,000 for a vendor then you have to step back and realize that the project costs just went up 30% for that meeting alone. Can you tell I’m not a big fan of committees?

Dealing with scope creep

When a project gets blown out of proportion, and they almost always do, having a baseline ROI understanding helps you quickly grasp if the added tasks are really worth it or not. Do you really need 12 people’s input on a decision or can a single person sign off on it?

Sometimes scope creep is a great thing too though. If something comes up that can have a greater impact on the project then it can quickly be justified as worth it because you prepared your ROI analysis ahead of time.

Once again for vendors this is in your best interest too because scope creep is one of your worst nightmares if you are getting paid on a per project basis instead of a per hour basis.

Final Thoughts

If you are going to need one anyway to get a big project off the ground, why not make vendors do the work for you? One of the great skills I learned while in sales was to quickly learn from the prospect if your service/product is a “nice to have or a need to have”. If you are in a nice to have you are better off just moving on.

Also as a vendor you should really be thinking about the value proposition that you provide and why your customers need your services. For example at nuCloud we have created an Interactive Campus Map ROI calculator to help show the value of our solution specifically to enrollment because that is usually the main reason that our customers are looking for our product.

Photo Credit: Money by 401K

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About the author

Kyle is the CEO & Co-Founder at nuCloud and formerly the webmaster at Wofford College. He also spent almost 4 years at HubSpot doing a range of jobs including inbound marketing consulting, sales, management, and product management. Kyle is an active contributor in the social media spectrum. Although his background is technical, he claims to know a thing or two about marketing, but mostly that revolves around SEO, analytics, blogging, and social media. He has spoken at multiple national conferences and done countless webinars on topics ranging from e-mail marketing to social media and Web analytics. He's definitely a fairly nice guy.

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This post was written by Kyle James - who has written 255 posts on .eduGuru

http://twitter.com/jamesrunkle James Runkle

Kyle – Like you, I’ve moved from working within academia to working for an outside agency. And, I really like the point you make about the university figuring out the ‘internal’ ROI (as you write, is it really worth it to have 12 people in a room for a meeting? What’s the ROI on that?).

It’s also important to keep in mind that sometimes ROI isn’t as straight forward as people would like it to be. Certainly, as a vendor, having the university clearly define “success” (AKA, it is impressions? Percent increase of campus visits? Deposits? etc, etc…) really helps the vendor provide value. Because, of course, each of those goals have very, very different approaches as to how they should be achieved.

When I was working inside the university in marketing and enrollment, I definitely was guilty of relying too much on the vendor to tell me what I wanted, instead of telling them what the goals are and then asking them for creative solutions in reaching those goals. Of course, until the destination is determined, no one can tell you the best road to take to get there.

Thanks, Kyle, great article and looking forward to more!

http://doteduguru.com Kyle James

@James – good point. I guess one thing else I should have added is that for the purpose of doing ROI I’m probably thinking about a project that will take 1+ month of manpower or is greater than some defined monetary cost like $1,000. Of course these are just estimates I’m making up. Meaning if you have someone coming to shoot an event and will cost $200 you probably don’t need an ROI analysis from them but if you plan on spending $10,000 over the course of a year on photography then you should understand how that helps the bottom line.

Gil Rogers

It is CRITICAL for the proper metrics of value be established on the front end and measured consistently on the back. Too many times I work with folks that forget their original goals OR achieve their goals but realize they wanted to accomplish other things. Thank you, Kyle, for starting this conversation.
http://www.printrunner.com/Sticker-Printing.aspx mae_custom_sticker_printing

I’m not a fan of long meetings either. Employees are being paid every hour. So might as well ensure that each minute is spent productively. I bet companies can save much if they only know how to stick to the session’s agenda.

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Why you should ask your vendors for an ROI analysis breakdown

First step in setting up solid project expectations