Please note: The figures used in this worked example are entirely fictitious. Any benchmarks used have been linked to the original source. Other figures are estimates and are not related to the company I work for.
All too often, ‘overview’ demos are used to start a conversation with prospects instead of understanding their needs and requirements. Solutions Consultants are being asked to perform discovery on the fly. We call this the ‘Dash to Demo’.
This can be acceptable when the solution being sold is relatively simple, with a short sales cycle of a few months. However, for complex solutions for large enterprise businesses, sales cycles of many months or even more than a year are common. For these types of opportunities, it is the role of the Solutions Consultant to fully understand the needs of the clients.
In large deals we have found that it is rare for these overview demos, without proper discovery, to lead to a qualified opportunity. If it doesn’t result in an opportunity, these demonstrations are, in effect, wasted. According to Peter Cohan, author of ‘Great Demo!’, he has seen the proportion of ‘wasted’ demos range from 20% right the way up to 50% of total demos performed.
When looking to implement Demo Video Automation, it is a common objective to reduce the number of ‘wasted demos’ where too much time is being spent demoing to under-qualified opportunities that ultimately lead nowhere.
Almost every organisation will require a business case to instigate such a project and a return on investment (ROI) calculation is an integral part of any good business case. In this article, I will cover each required step to calculate the returns on a demo video automation solution. I will be using example data which you can plug in your own figures to calculate the ROI for your organisation.
- Calculating the Value of Reducing ‘Wasted Demos’
- Calculating the Value of Increase Win-Rate
- Putting it all together
- Final thoughts
Calculating the Value of Reducing ‘Wasted Demos’
How Will Demo Automation Reduce ‘Wasted Demos’?
Having a library of interactive overview demo videos means the relevant content can be quickly sent out to a prospect after a discovery call. If your organisation sells multiple products, this gives the sales rep the opportunity to establish which product will best suit the client’s needs and the client can watch the most relevant content to them.
By delivering tailored overview videos to prospects, the need to ever perform a so-called ‘harbour tour’ or overview demo on under-qualified opportunities is mitigated.
This, in effect, adds an additional level of qualification. If the prospect is not willing to watch the content or even share it with other stakeholders in their organisation, there isn’t a real qualified opportunity.
This would eliminate the engagement of Solutions Consultants on opportunities that would have previously exited after a single demo.
Measuring ‘Wasted Demos’
One way to measure the number of wasted demos is to start by looking at all the opportunities that closed over a full year, on which a Solutions Consultant had performed at least one demo. Completed opportunities can be categorised into four groups: won, lost, exited after >1 demo, exited after exactly 1 demo.
Calculate how many opportunities with at least 1 demo were recorded over the last full year in the categories below.
| Opportunities | |
| Won | 1,200 |
| Lost | 1,400 |
| Exited after >1 demo | 1,000 |
| Exited after exactly 1 demo | 3,100 |
| Total opportunities | 6,700 |
The reason for splitting the exited opportunities is due to the fact that they most likely exited for different reasons.
Opportunities that exited after >1 demo are likely to have exited for a specific reason since they progressed further in the sales cycle. Perhaps it was a change of priorities in the organisation, or perhaps it was a change in the budget.
However, the opportunities that exited after just one demo were most likely never fully committed to making a decision. It is unlikely they were properly qualified and therefore shouldn’t have had a Solutions Consultant assigned. The demos on these opportunities are the priority that many organisations are looking to automate. I will refer to these as ‘Wasted Demos’ for the remainder of this article.
Calculate the number of demos performed over a year on each of the four categories of opportunities.
| Opportunities | Total demos |
| Won | 2,600 |
| Lost | 2,400 |
| Exited after >1 demo | 1,900 |
| Exited after exactly 1 demo | 3,100 |
| Total Demos | 10,000 |
Calculating the time spent on ‘Wasted Demos’
To understand the benefit of eliminating these wasted demos, we need to calculate how much time is being spent on them.
Some organisations will have a process or solution to help measure the time spent on activities. If your organisation is one of these, it should be relatively straightforward to calculate the proportion of Solutions Consultants’ time that was spent on Wasted Demos over the period.
However, plenty of other organisations (especially those which are smaller) won’t have these kinds of insights available. In this situation, an estimate is required. For this worked example, let’s estimate that the time spent preparing and performing a first ‘overview’ demo will be considerably less than the time spent on a secondary demo which may be more bespoke and could even be based on RFP requirements.
In the fictitious example below, I have estimated that the time to prepare and perform an initial demo may take a total of three hours. Let’s assume the Solutions Consultant would typically perform this demo remotely and will have to put in a small amount of effort to tailor the demo since this is a first-level overview. Of course, this will differ based on several factors including the type of solution being sold and the value of the deal. We have also assumed that all follow-up demos are around double the time expenditure because these will be more bespoke and it is likely the Solutions Consultant will travel on-site.
The example below is the totals over the course of a year.
Using estimates of time spent on initial demos and follow-up demos, calculate the total number of hours Solutions Consultants have spent on each category of opportunity.
| Opportunities | Total demos | # 1st demos (3 hours) | # Follow-up demos (6 hours) | Total hours |
| Won | 2,600 | 1,200 | 1,400 | 12,000 |
| Lost | 2,400 | 1,400 | 1,000 | 10,200 |
| Exited after >1 demo | 1,900 | 1,000 | 900 | 8,400 |
| Exited after exactly 1 demo | 3,100 | 3,100 | 0 | 9,300 |
| Total | 10,000 | 6,700 | 3,300 | 39,900 |
Based on our assumption that any opportunity that exited the sales cycle after a single demo was an under-qualified, wasted demo, we could save (or re-allocate) 9,300 hours. As shown in the table below, this equates to 23% of all time spent on demos by Solutions Consultants that could be automated by implementing a Demo Video Automation solution.
From the table above, calculate the proportion of Solutions Consultants’ time that is spent on wasted demos by dividing total hours by hours spent on opportunities that exited the sales cycle after exactly 1 demo.
| Total hours | 39,900 |
| Hours spent on wasted demos | 9,300 |
| Proportion (total hours / hours on wasted demos) | 23% |
Calculating the Fully Burdened Cost of Solutions Consultant
For some more simple business cases, the results so far will be sufficiently compelling. Seeing that such a significant number of hours could be saved may be enough.
However, it is often necessary to put a monetary value on the time savings so it can be compared with other proposed projects.
If we know what the average hourly cost of a Solutions Consultant is, we can calculate the value of their saved hours.
Earlier this year, Consensus published the results of their Sales Engineer Compensation & Workload survey. They surveyed Solutions Consulting managers and individual contributors across the world on several metrics. They uncovered that the median on-target earnings (OTE, including commission and bonus) was $150k for individual contributors averaged across North America and EMEA. As such, we will use this figure as a benchmark in our example.
In an ROI calculation, it is important to look beyond the direct costs of an employee’s compensation. We should use a benchmark ‘burden rate’ to calculate additional costs.
According to Investopedia, “The burden rate refers to the total cost to a company for hiring and maintaining an employee beyond their direct compensation in wages”.
Your company may already have a burden rate that they use for financial calculations. For this example, we will use a fairly typical benchmark multiplier of 1.3 to cover the indirect costs of an employee.
Calculate the fully-burdened cost per FTE hour of your Solutions Consultants
| Average earnings | $150,000.00 |
| Working days (assuming 25 days annual leave and 8 days public holidays) | 228 |
| Hours per day | 8 |
| ‘Direct’ cost per hour per FTE (earnings / working days / hours per day) | $82 |
| Burden rate | 1.3 |
| Fully burdened cost per hour per FTE (direct cost per hour * burden rate) | $106 |
Calculating the Value of Saved Time
Finally, we can put a value on the hours saved by reducing the number of wasted demos. We can calculate this value by multiplying the number of saved hours by the average fully-burdened cost per hour of each Solutions Consultant.
Multiply number of saved hours by fully burdened cost per hour per FTE
| Saved hours | 9,300 |
| Fully burdened cost per hour per FTE | $106 |
| Value of saved time (saved hours * cost per hour) | $985,800 |
This value will vary for different businesses. However, I’m sure that for almost every business there is a significant time saving to be found, as demonstrated in this worked example so far.
It should be made clear, however, that this is not about reducing headcount within teams of Solutions Consultants. We can put a value on it, but most businesses will want to reallocate the saved time to other opportunities or activities.
The natural answer is to spend more time on discovery on well-qualified deals. Generally, we find the more focus we have on the discovery, the greater the chances of winning the opportunity.
This brings us to the second part of the benefits calculation. With additional time to dig deeper into the requirements of prospects and customers, it is reasonable to assume this will have a positive impact on the win rate of deals.
Calculating the Value of Increased Win-Rate
How Will Demo Automation Increase Win-Rate?
If you can expect to automate all first demos by using a demo automation tool, you will significantly free up the time of Solutions Consultants. However, in the first topic, we only considered demos being automated on the opportunities that were under-qualified that would exit the sales cycle directly after the first demo. This is because this would be a real, tangible saving in time.
However, for all the other opportunities which are more qualified, the time saved would likely still be spent on the same opportunities, just later in the sales cycle. With this re-allocation of effort, Solutions Consultants will have more time to spend on the discovery, tailoring demonstrations and presentations and even perfecting RFP submissions.
For this reason, I will walk you through the calculations for the benefit of an increased win rate.
Calculating Current Win-Rate
To calculate the value of the benefit of an increased win rate, we must first calculate the current win rate from the breakdown of opportunities.
In the example below, we are calculating the win rate only from opportunities last year that had at least one demo. The reason for this is that demo automation software will only affect opportunities that get to a stage in the sales cycle where a demo is required. It will not affect opportunities before that stage in the sales funnel.
Calculate the win-rate by dividing won opportunities by total opportunities
| Won opportunities | 1,200 |
| Total opportunities | 6,700 |
| Win-rate (won opps / total opps) | 18% |
Calculating the Value of Increased Bookings
In our worked example, let’s assume the 1,200 won opportunities had an average deal size of $125k. This would equate to $150m in bookings over the year. We will estimate that the additional time spent on opportunities could equate to as much as a 1% increase in the win rate. Although this doesn’t sound a lot, it soon adds up as. In this example, just a 1% increase equates to an increase in bookings of $1.5m each year.
Calculate increase in win rate by multiplying increase by current bookings
| Current bookings | $150m |
| Increase in win-rate | 1% |
| Future bookings (current bookings * increased win-rate) | $151.5m |
| Increased bookings (future – current bookings) | $1.5m |
Putting it all Together
Asserting Prudence
As we don’t live in a perfect world, we will never achieve 100% of our expectations. For example, based on your content creation strategy, you may not have video content that covers every single scenario.
Instead, we can follow the 80-20 rule. There may be some left-field opportunities where you could never have prepared standardised content for the prospect’s requirements. Or we may not achieve a 100% adoption rate of the solution immediately. In these scenarios, the Solutions Consultant may be required to be involved in the sales cycle right from the very beginning to understand the client’s requirements.
For that reason, it is good to assert prudence. If your demo automation tool is only utilised 80% of the time, you will only see 80% of the calculated benefits. I will therefore decrease the two calculated benefits by 20% in the example below.
Decrease both benefits by a prudent buffer
| Benefit | Benefit ($) | Reduction of 20% | Revised Benefit ($) |
| Reduce wasted demos | $985,800 | ($197,160) | $788,640 |
| Increase win-rate | $1,500,000 | ($497,160) | $1,200,000 |
| Total | $1,988,640 |
This total figure is the forecasted benefit we think we will realise on an annual basis by implementing demo automation.
Calculating Cost
The final stage of calculating Return on Investment is to compare the total annual benefit with the annual cost.
I want to stress that the figures used in this example are entirely fictitious and in no way represent the cost of any such solution. The numbers are here to represent a worked example of an ROI calculation.
With that in mind, let’s make an estimate that the annual cost will be $350,000 with no up-front fees for ease of calculation.
Calculating ROI
The return on investment is represented as the net benefit (total benefit minus the total cost) as a percentage of the total cost. Generally, for a business to consider a project to be financially viable, it is looking for an ROI of >100%, i.e. the benefit is greater than the cost.
Calculate the return on investment in year 1 by taking the total benefit less minus the cost
| Benefit | Revised Benefit ($) |
| Reduce wasted demos | $788,640 |
| Increase win-rate | $1,200,000 |
| Total Benefit | $1,988,640 |
| Cost | ($350,000) |
| Year 1 Net Benefit (benefits – costs) | $1,638,640 |
| ROI % (net benefit / cost) | 468% |
With an ROI of 468%, the project would be seen as financially viable and should be undertaken. If there are limited resources, as there always are, projects with the greatest ROI should be prioritised.
Final Thoughts
As shown in this worked example, automating product demonstrations with video content can generate very positive outcomes for your Solutions Consulting team both in terms of efficiency and win rate. There are far more benefits that haven’t been incorporated into this calculation. Consider the benefits of increasing the velocity of sales cycles or a reduction in travel expenses where fewer demos are being performed on-site.
However, despite having this worked example as a guide, calculating a Return on Investment can be difficult. You may find that obtaining salary information is restricted or estimating an increased win rate is near-impossible. Where estimates are used, it is often beneficial to calculate two or more estimates of ROI; one using pessimistic estimates will generate a depressed ROI whereas one using more optimistic estimates will show a higher return. The actual result is likely to fall between the two, but this way you will have modelled a reasonable range of possibilities.
As previously mentioned, the figures used in this article’s calculation are entirely fictitious for the purpose of showing a worked example. The ROI will look very different for each organisation but I hope this exercise will benefit teams in taking the step towards the future of demo automation.
As we move into a world where ‘art of the possible’ and ‘overview’ demos are being automated, Solutions Consultants can add far more value in the sales cycle by understanding the challenges of clients and proposing solutions to solve those challenges. After all, it’s why so many of us are in the profession in the first place.