- What are the ‘real’ reasons we lose deals?
What are the ‘real’ reasons we lose deals?
How often do we actually perform any analysis of why we lose deals? Even if we complete this type of investigation are we sure the reasons we discover are the ‘real’ reasons why we lost the deals? Understanding the ‘real’ reasons why we lost a deal will improve our ability to qualify opportunities, reduce our pre-sales costs and increase our likelihood of winning.
I must admit that I wasn’t always the most efficient at holding regular reviews of the reasons why we lost deals. I always like to focus on the positive. The deals we won ‘against the odds’, the competitors we replaced from incumbent positions in their clients and so on. But over time I have begun to realize how important regular reviews of the deals you lost are in improving your ability to win in the future.
Such review exercises will definitely be painful. So it is important that you get some gain from this pain. No sales person likes to talk to their manager about the deals they lost. So in my experience sales people naturally look for excuses which they could not have overcome and as managers we can be all too ready to empathize and accept these reasons on face value. “The competition put in a low price to buy the business”, “the CIO wanted to bring in the firm run by a friend of his”, “the prospect had a corporate policy to go off-shore”, “the competition managed to convince them that they had the necessary prior experience” and so on. Sounds familiar?
The fundamental way you win the majority of professional services engagement is to convince the prospect that you can complete the task better than the competition. Price is clearly important, but you won’t win it simply because you are the cheapest. Also, you won’t lose it outright if you have convinced the prospect that you are better than your competition, but are more expensive. You might be asked to make your price more competitive to get the decision in your favor, but you won’t lose out before being asked.
I think if you do loss analysis properly, with a harder edge to your questioning of your sales team, you will be able to distill the ‘real’ reason(s) you lost into one or more of the following three areas.
Firstly, to influence the decision you need to convince the decision maker(s) that you have some differentiator(s) over you competitors. Secondly and more importantly though is that you must also convince the decision maker(s) that your differentiator(s) is actually important to them. So often in the qualification stage of the sales process I am told that the reason why we will beat an incumbent competitor is that we have some unique differentiator over them. For example, we were the only competing firm with experience in the given industry sector or of the type of engagement they have requested in the tender document. Sadly equally as often when I later dig deeper in the loss analysis session I discover that although we definitely had this unique differentiator, we hadn’t actually spent any time specifically trying to convince the prospect it was important in their evaluation criteria. Even if we did manage to convince the prospect it was important, our incumbent competitor had managed to convince their customer that they also had this experience. It isn’t hard to do if you are the incumbent supplier and you have the benefit of already having built a trusted relationship with the decision maker(s).
Finally and most simply were you really talking to the decision maker(s)? We all like having a person on the ‘inside’, a contact cultivated over time who is supportive of your firm. In various sales methods this person is often termed ‘the coach’. Perhaps this is a contact who has done business with you at their previous company and called you from their new company. As they want to work with you again they are even giving you advice on the best way to position your firm against the competition. Even when you think you should qualify out of an opportunity your contact/ coach manages to convince you that it is worth bidding as they are supportive of you. In these circumstances too often you find out too late that your contact did not make the ultimate decision, he was simply an influencer of the decision. During your loss analysis session do not accept the excuse that your contact/ coach was giving you positive feedback all the way and some other reason led to our loss. The real reason you didn’t win was because we didn’t talk to the decision makers.
So now we know these 3 key reasons how do we ensure we don’t lose deals because of them? The answer is to mitigate against them in the qualification stage. Make sure we can have access to the ‘real’ decision makers. If we can’t always qualify out. If you can’t come up with a differentiator over an incumbent then qualify out (price isn’t a differentiator against an incumbent competitor). Having identified a differentiator over your competition ask for opportunities during the pre-sales process to pitch your differentiator to the decision maker(s). If you don’t get an opportunity to convince them other than at the final sales pitch or by elegant prose in the proposal then qualify out. If you do get to meet them and you can’t convince them your differentiator is important then qualify out. If you can convince them it is an important evaluation criteria* then make sure that you also ask directly whether they think this differentiator is unique to your firm.
Obviously there are many other factors to consider in qualifying an opportunity such as considering what the compelling reason is to undertake the engagement (can it be canceled?) and whether their budget is big enough. However, in professional services sales spending face time with the decision makers is a pre-requisite to winning an opportunity and is particularly true when you are competing against an incumbent supplier. I’d be interested to hear your experiences of completing a more detailed loss analysis of the deals you have lost over the past 12 months and the reasons you discover.
* Many prospects won’t tell you who are the competitors or what is the size of their budget. However, rarely will a customer not tell you what their evaluation criteria are (and the relative importance), which is in many ways more useful. Particularly companies who use independent consultants to help them with the evaluation process will always have a set of evaluation criteria and an associated scoring system. In this case make sure your strengths can score high and weaknesses are lowly scored – otherwise qualify out. Indeed, if your prospect says they have not got any set criteria then this is time for alarm bells to ring – in this scenario it often indicates that there may not be a business justification for the engagement – qualify out and save yourself the effort.