For a software, payback period is one of the cornerstone efficiency metrics. To put it shortly, payback period is how long it will take your investment to be recouped by the money you made by using the software. Let’s say you invested $1000 in a yearly subscription and generated $2000 by using this software after 12 months. This means your average payback period is 6 months. The quicker you get your money back, the better.
Usually the only factor that is taken into account when choosing a software provider is the subscription cost. But there are also some underlying criteria that can reduce (or increase) the payback period length. Let’s explore them in more detail.
The Payback formula
This is often believed to be the only factor to calculate the length of the payback period. It’s really one of the most clear and transparent criteria. However, it’s important to look at eventual extra costs and manpower involved that can dramatically change the complete picture. Ask your software provider the following questions:
- What is the minimum commitment period?
- What are the extra costs for changing limits or adding users?
- Are there any extra costs for integrations with other software?
- How many team members need to be involved and for how long?
2. Time to launch
Two weeks for training and onboarding, three weeks to set up integrations with your CRM and project management tools, a couple of months to integrate into the existing processes and dashboards – you haven’t even started to actually use the software and you’ve already paid for several months. Whenever you can choose, look at how quickly you can perform a measurable action with your new software and see if it really works as you expected.
Let’s look at Account-Based Marketing tools as an example. ABM is believed to be a complex and long-term process that requires several months to establish and see the first results.
N.Rich is an account-based GTM and marketing tool that allows to launch campaigns and see the first results within a minimum period of time. While major ABM software tools require several months to set up and get the ball rolling (with a commitment period of least 24 months), N.Rich clients spend on average 10 days from an onboarding call to going live, with only a couple of team members involved on a part-time basis.
“With this new advertising software we decreased our customer acquisition cost by 70%!”
“How many customers have you gotten with it?”
Absolute numbers are important, but it’s also important to see the bigger picture. Is this really making an impact and how long will it take to scale your results? What are the ways to quickly scale and set your marketing flywheel in motion? Ask your software provider these questions before you make your final decision – this will help avoid illusions and misunderstanding during the work process.
This aspect mostly relates to advertising tools. Spending several thousands dollars in a day and seeing no tangible outcome has never been so easy, and this is one of the biggest marketer’s nightmares. How can you be sure your new software is optimizing for the real results, not vanity metrics?
At N.Rich, we focus on engagement (CPE – cost per engagement) to lower costs. This is why we ditched CPM as an outdated metric. It used to be relevant for TV decades ago, but with the rising “banner blindness” it’s the engagement that really counts. N.Rich takes into account signals such as:
– Advertiser’s content reads on publisher websites
– Advertiser’s video views on publisher websites
– Advertiser’s site visits
N.Rich doesn’t optimize for the number of times an ad was served (with no guarantee someone interacted with it). This allows us to engage up more accounts and achieve lower CPC compared to major CPM-oriented platforms, which is quickly reflected on the payback period.
Look at a test we conducted with N.Rich vs one of the biggest ABM providers:
When you get new software on board, you usually have a lot of questions regarding all the possible aspects. Why isn’t the CRM integration working? How do I invite another colleague to collaborate on this report? What is happening with my data? Why are the results different from Google Analytics?
Let’s say you ask 25 questions within your first month. Whether they are answered in 30 minutes or 12 hours makes a huge difference: you can end up spending half of your first month waiting for a response from customer support. Spending money on your subscription along the way, obviously.
One of the ways to avoid it and discover if the support team is quick and active is by reading the reviews on G2 and similar sites.
N.Rich boasts the best possible score for the quality of its support: 10 out of 10 based on user reviews. Every second review mentions the support team as proactive and helpful at every stage, before and after the implementation.
Looking at the bigger picture
Not every software you buy is going to pay off quickly. Sometimes the investment literally goes down the drain, despite the optimistic calculations. Analyzing multiple aspects besides just the cost helps set realistic expectations in terms of timelines, resources required from both sides, the outcome expected and the organization of the entire process. This also helps approve the new investment internally, with the financial and legal departments usually involved in the process. The more you clarify in the beginning the quicker you can try your new tool in action.