WHY DO WE LOSE DEALS?

Sales Coach Graham French looks at some of the reasons why we lose business to competitors… and why we win….

Why do we win business?…. why do we lose deals? Is it price? Superior product or service features? Are we kidding ourselves as to the real reasons? Does it matter if we don’t really know?

Let’s not suppose that we do know exactly why we win and why we lose. We’ll see later that the perceived reasons are contradictory and riddled with assumptions and in house “tribal wisdom”.

Of course, sales people always have an opinion about the reason and many firms ask for a win/loss form from the salesperson after the event. One US sales VP I knew included a box on the Win/Loss Report under “Reason for Loss” labelled “Poor Selling”. His wry comment: “You can imagine how many times that box got ticked”.

Some companies request a formal interview to see ask the customer why they bought from another vendor. This is good practice because it’s critically important to discover what lessons can be learned that can help shape our selling tactics and indeed our policy going forward. It’s too important to be left to the sales team, too easy to reach for the tribal wisdom, to make assumptions that the deal went the way it did because “our price was too high” or “we didn’t have all the bells and whistles that they needed”.

Customers don’t always tell the truth. If the salesperson has a good relationship with the contact person in the account, this person may want to let the salesperson down lightly by telling them that the decision was made on price or some other factor outside the salesman’s control. This is a lot easier than saying that the buying team was unimpressed by the way that the salesperson’s firm conducted their selling. More often than not we simply get outsold by our competitor when we lose. Sales directors must get as close to the truth as possible.

All significant forecasted opportunities should be subject to a win/loss analysis – ideally conducted by an external, objective agency to eliminate sales spin, any bias and self-serving. Failing that, have an executive unconnected with the account make the call. Management needs feedback which is objective.

Some interesting light on why firms think they got the outcomes they did is shed by CSO Insights, the US based sales performance measurement consultancy. In their 2008 report -   based on responses from 1500 firms, cross-industry and worldwide – they asked sales VPs, among a host of other questions, why they believed they won and lost deals.

The results give some fascinating clues as to why firms perceive that they are successful and why they don’t win. Of course, all of this is based on the company’s own perceptions and, as we will see, there are contradictions in these perceptions that point up the fact that people tend to lay the blame for losing deals on convenient factors.

Before we get into this, let’s just face a fact of life that outcomes don’t always divide into two clear cut categories – wins and losses. There is a third category, we need to examine closely if we want to improve our sales success - opportunities that have not been closed as per forecast, stalled deals. Let’s call them “no decisions”.

These, according to CSO Insights, represented 21% of all respondents’ forecast opportunities.  In my experience this percentage is often higher.) Adding stalled deals to the deals which were lost to competitors (30% of all forecast deals according to CSO Insights) we see that over half of forecast deals, didn’t materialise as expected.

The knock on effect of this is huge - on revenue and profit forecasts and cash planning, to say nothing of the reputation of the management team as far as their understanding of what is going on in their business is concerned. But let’s leave ‘no decisions’ for the moment.

CSO Insights’ respondents rated the top three reasons why they won deals and the top three reasons why they lost deals. The results are instructive but contradictory.

Why did we win? The highest percentage (56%) believed that existing relationship was one of the top reasons for winning.

The next were:

· level of support/service ( 42%)

· product superiority (35%)

· brand/reputation (35%)

It is interesting that the next reason firms believe that they won business is the quality of their support or service with, in joint second place, product superiority and brand or reputation.

Price was thought by only 22% to be one of main reasons why they won with, more surprisingly to my mind, return on investment justification coming in at 19%. (I personally expect this last selling tactic to become more important as the economic crisis deepens)

OK, so it’s clear why people think they win. Let’s now have a look at the top three reasons these same respondents said they lost deals.

Bearing in mind that only 22% firms think that price is a key reason for winning, in a surprising contradiction, 63% (the highest percentage) see competitor’s price – presumably lower than theirs – to be one of the top reasons they lost! So price is not a reason for winning but it is the main reason for losing?

Expect consistency? Think again! Perversely, only 11% of firms rated competitors’ product superiority as one the main reasons for losing whereas 35% rated their own product superiority as a key winning factor.

Other areas of apparent contradiction surround support and service which 42% said was a prime reason for winning. Yet this is also thought by just 10% to be one of the top three reasons for losing.

Competitor’s marketing message was thought by 23% to be a top three reason for losing but just 10% thought their own marketing message was a strong factor in winning.

Consistency comes to the rescue, however, with relationships. This figures highly among the reasons for both winning and losing. 60% of firms (the second highest percentage – just below “price”) rated their competitor’s existing relationship as being one of the top reasons for losing deals whilst 56% (highest again) believe it to be a key reason for why they won.

One conclusion, therefore, is that firms should spend time, resources and money building and enhancing their relationships. This is going to be easier for established companies. But there are implications for start- ups which won’t have strong relationships in place.

The relationships that win are not the simple relationship of the account manager with an individual in the prospect’s organisation. Deeper, broader relationships involving trusted partnership are what drive winning performance.

The second conclusion that I draw from this part of the report is that companies need to really understand the reason they win and lose business and make changes to improve their selling effectiveness based on solid evidence rather than tribal wisdom. Lastly, find out why that fifth of all forecast deals – the ‘no decisions’ - don’t close as forecast. Do these things better and you can expect to improve selling performance.

Graham French of gfa Sales Improvement is a specialist b2b sales and sales management coach www.sellingcoach.co.uk

CSO Insights www.csoinsights.com

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