On Reflexion - what we've been thinking...

There are only 2 reasons why you lose a sale

I'm happy to share the second in our series of guest blogs from Donal Daly, CEO of the TAS Group.  In this article, first published in his Sales20Network blog in April 2010,  Donal explores the factors that affect sales win rates - and concludes that there are only two reasons why you lose a sale.  

I am sure you'll enjoy his perspective - over to you, Donal...

"One of the issues that I’m often asked about is how to improve Sales Win Rate.  Sometimes the question is presented as “What’s a good Win Rate?”, or “What percentage of deals that I bid for should I win?”  Of course there is really no universal answer to this question – and the reason for that is that it’s the wrong question.  In my opinion, energy is more productively spent in determining why you lose deals, and in my experience, the explanation follows a fairly predictable pattern. If that is true, then if you can identify the common attributes of lost deals, you can work to avoid deals with those attributes, or focus on how to overcome the weaknesses that gave rise to the failure. Then by definition, your Sales Win Rate will improve.

In reality there are really only two reasons why you lose a deal:

• You Should Not Have Been There (pursuing the deal) In The First Place, or
• You Were Outsold.

I will substantiate this claim a little later, but first I want to share some alternative perspectives.

When I ask sales managers why their teams lost a specific deal the most frequent responses include things like:

1. “Well, he wasn’t speaking to the Decision Maker.”
2. “She didn’t understand what the customer really wanted to achieve.”
3. “We should never have bid in the first place, the customer is locked into our competitor.”
4. “Our solution just wasn’t a good fit, and he (the sales person) tried to squeeze a round peg into a square hole.”
5. “The competitor had a stronger relationship with the customer.”
6. “There was never a project there in the first place.”
7. “We didn’t understand the personal motivation of the Decision Maker.”
8. “He couldn’t get the customer to understand our value proposition.”
9. “She never realized that the budget was way too small for our product.”

Responses from sales people to the same question include many of the above, but there are sometimes some additional reasons given:

1. “We’re just too expensive.”
2. “We couldn’t provide a reference because we’ve never sold to that type of customer before.”
3. “I never knew [the deal] had to be approved the technology committee.  He never told me that.”
4. “The customer just doesn’t get it. I don’t understand it – she really needs our stuff.”
5. “I never knew that the competitor wrote the RFP.”
6. “He never told me that Capability X was important.”
7. “My [internal] sponsor just didn’t have the juice to make it happen – even though he told me he did.”

For mid-to-large deals in an enterprise B2B market, the costs incurred in pursuing a sale will typically range between $10,000 and $100,000. Our research at The TAS Group has shown that it takes 50% longer on average to lose a deal than to win one.  Think about that for a moment.  If your sales team is spending more time losing deals than winning deals, what’s that going to do to your quota achievement?  Or, if you could fix the problem, what impact would that have?

No matter how you look at the reasons given above, in truth there are really only two reasons why you lose a sale:

1. You Should Not Have Been There (pursuing the deal) In The First Place , or
2. You Were Outsold.

It’s as simple as that – just two reasons. In my experience, failure is weighted fairly evenly across both. So, let’s look at these in a little more detail.

Reason 1. You Should Not Have Been There In The First Place

At The TAS Group, we discuss ways to help sales teams win 4 of 7 deals, instead of 3 of 10.  This means that you pursue fewer opportunities.  It’s not about ‘getting up to bat’ more often. In fact it’s the opposite.  In practice it means determining at the outset if your solution can uniquely and competitively add value to the specific customer that you are targeting. Of course it means research, and work, and understanding of what the customer wants to achieve, and how your solution might be applied to solve their specific problem.  This information is only useful if you understand what the competitor might be offering.  Often, it’s as simple as defining your ’sweet-spot’ customer – listing the attributes that describe the profile of the customer to whom you can competitively add value. When you hear yourself saying “We’ve not sold to this type of customer before – but I think I can make it work.” – then move on. You’re wasting your time.

If you look at the ‘lost deal’ reasons listed above, items 3,4,6, and 9 in the Sales Manager’s list, and items 2 and 5 in the Sales Person’s list fall into that category – you should not have been there in the first place.

Reason 2. You Were Outsold

Sometimes this is hard to accept. I know that in my case, if it’s not Reason 1, then I’ve been outsold. I didn’t understand what the customer wanted to achieve, I was not politically aligned in the customer’s organization, I didn’t understand the customer’s buying process, I chose the wrong competitive strategy, I failed to articulate my value proposition in terms that the customer understood, I failed to demonstrate ROI for my solution, or, more likely, a combination of a few of these.  Looking at the lists above, items 1,2,5,7,8, and 9 in the Sales Manager’s list, and items 1,3,4,6 and 7 in the Sales Person’s list fall in to this category. I’ve been outsold – someone else did a better job.

Now, even if you’ve done a great job in qualification – and that’s what you’re doing to pass the ‘Should I Be There In The First Place?‘ test, you won’t win all of the deals.  Sometimes, you will be outsold, 3 out of 4 is a realistic Sales Win Rate target.

* * *

When I express the perspective outlined here, I get a range of reactions, ranging from animosity (“Who does he think he is? He doesn’t understand what I go through to win a deal”) to guarded acceptance and excitement (“Wow, if we could actually achieve that, it would be incredible. We should give it a shot.”).

As we’ve watched our customers move to these kind of ratios it’s been really gratifying to know that we’re making that kind of difference for some.  I’ve spoken at length to those who excel on this journey, and there are a number of common attributes – some organizational, and some with respect to the tools they use to help them.  Organizationally, the companies just seem to be run better, and sales is viewed as the engine that fuels growth, and investment is commensurate with that view.  From a sales tools perspective, the common elements are a sales process that maps to how the customer buys, deep analysis of the customer’s political structure, and collaborative interaction with the customer to truly understand their business problem and what they want to achieve.

The following movie links give an overview of components of how the Dealmaker Sales Performance Automation platform is used to support these three goals.  Though, as it uses our Dealmaker product, it’s a little self-promotional, and I don’t like to do that in the blog, it’s the best way I can think of to elaborate on the areas that I think add considerable value and I’ve seen executed well."

• Sales Process
• Political Alignment – go to the 3min mark in the movie
• Collaboration

I hope that you've enjoyed Donal's perspective, and that you'll understand why we see such value in our relationship with the TAS Group. You can learn more about Dealmaker here.

Is your CRM System a Sales Prevention System?

Most sales organisations have some sort of CRM system in place. Many have made significant investments in the system. Yet simply implementing CRM – just like just running a sales training course – offers no “magic wand” for improving sales performance.  In fact the energies expended on them are often wasted.  

Time after time, we come across Customer Relationship Management solutions that bear little or no relation to how a vendors’ most promising prospects actually buy, or what the vendors’ top performing sales people actually do.

There are 5 danger signs that indicate that a CRM system is actually behaving as a sales prevention system:

1. Unhelpful Stage Definitions

CRM deal stages (often implemented “out of the box” using CRM system defaults) are based on sales person activity, rather than tangible evidence of what the prospect has done or committed to do.  Deal status is often based more on hope than reality.  The resulting mismatch between sales perception and what’s actually going on in the prospect’s decision process is a primary source of inaccurate sales forecasting.

2. Give – Get Imbalance

Sales people are expected to give far more in terms of data entered than they ever get back in terms of feedback received.  The problem is frequently compounded by the data falling into a “black hole” with no evidence it is ever subsequently used by management for any practical purpose.  Sales people need to believe that the information they enter is used by management to help them improve their chances of winning.

3. Poor Forecast Accuracy

Sales forecasts - particularly at the detailed level - are all over the map.  Even if the projected headline revenue number is achieved, the way in which the number is made up bears little relationship to the deal by deal forecasts, and relies on heroic selling rather than intelligent use of resources.  CSO Insights estimate that detailed sales forecast accuracy for the average company is now less than 50%.

4. Static Sales Process

 The sales process and stage definitions that are reflected in the CRM system are static rather than dynamic, haven’t been reviewed or changed for ages, and have failed to take account of changing market conditions, buyer behaviour and sales best practice.  This failure to adapt to changing conditions is often particularly striking at the bottom of the funnel, during the prospect’s decision making process.

5. Failure to Reflect Prospect Decision Making Process

Many CRM and associated sales forecasting systems have failed to capture the nuances of today’s risk-averse prospect decision-making process.  Even after a vendor has been told they are the chosen solution by the decision team, most organisations now submit proposed expenditure – even if already budgeted – to a rigorous review process that all too often results in a decision to do nothing or to spend the money on a completely different area judged to be of higher priority.  CRM systems must reflect the difference between being chosen and the subsequent steps involved in approval.

Avoiding Sales Prevention

How have successful CRM users managed to avoid these issues?  By basing their CRM process around a clear understanding of who their best prospects are, and how and why to buy - and by embedding the customer decision journey (example below) into the system.  

 

 

In addition to having the discipline (and the common sense) to only collect information that is of clear value in tracking the buying process and managing sales efforts, these CRM champions have established clear stage definitions and dynamic sales processes, and many of them have benefited from (amongst other initiatives) well researched prospect profiles, systematic opportunity scoring and sales playbooks.

As a consequence, they can boast near-universal levels of sales adoption of the CRM system - and are getting real payback from their efforts in terms of shortening sales cycles, increasing win rates and improving forecast accuracy.

Dealing with the Consequences of Inaction

You've found a well-qualified prospect with an urgent need that you have a superior solution for.  You've helped them through the sales process and other competitive vendors have been eliminated.  Congratulations!

But now you have to confront the strongest competitor of all - the tendancy, in these risk averse times, for buyers to fall back and determine that their best choice right now is to preserve the status quo and decide to make "no decision".

"No decision" is a fearsome competitor. If you can't master it, there is a serious risk that your well-qualified deal will end up going nowhere.  How can vendors take steps to avoid this outcome?

Firstly, in the current climate, having a strong ROI is a necessary but frequently inadequate element of your proposal.  Competing against no decision requires that you elevate the consequences of inaction in the minds of your prospect.  You need to help them come to terms with the thought that bad things are likely to happen if they simply continue with the status quo - you need to be positioning yourself as the lowest risk option.

Next, you need to understand your prospect's approvals process.  These are increasingly complex and lengthy, and frequently require influencing people who are inaccesible to you.  By now, your competition is probably a bunch of completely different projects, or a decision not to spend any money at all.  You need to ensure that you have equipped your champion inside the prospect to do your selling for you.

Finally, whatever the outcome, you need to ensure that you learn from the exercise by conducting a proper independent win-loss analysis.  These should never be left to the sales person responsible - there is simply too much valuable learning that could be lost.

Hopefully, you'll be celebrating a win.  If you've put into practice the recommendations in this and my last two blogs, you'll already be in the top quartile amongst your peers in terms of sales effectiveness.

Facilitating the Buying Process

OK.  So you've managed to engage with a well qualified prospect who has issues they cannot afford not to deal with, and you're well placed to help them solve them.  How can you increase your chances of winning?

The most important decision you can now make is to concentrate not on how you are going to sell but on how you are going to help your prospect to buy - through facilitating your prospect's buying process. 

How and why do your prospects choose to buy?  Who are they likely to turn to for advice?  Who else is likely to be involved in the process?  Hopefully, you'll be starting with a sales process that reflects the typical process of buying in your markets - and then adapting it to what you are learning about this particular prospect.

If you're an eagle salesperson, knowing how to advance the sale will probably come naturally to you.  But if you're one of the vast majority of sales people who could do with some support, you'll hopefully be able to call upon a sales playbook that provides a framework for having issues-led conversations with your prospect.

Finally, you'll want to build credibility and trust.  Top performers distinguish themselves by having a rich collection of stories and anecdotes that allow them to sell through storytelling.  Somehow, when they talk with prospect, it always seems to come across as a conversation, rather than a pitch.

Companies who have been able to master these three disciplines invariably manage to move more of their prospects further and faster through the buying process than their product-pitching competitors.  But they still have to ensure that the prospect is comfortable with committing to them.

That's the subject of my next article...

Time to Sell Smarter

These are tough times for many B2B vendors.  Revenue targets are looking increasingly challenging, forecasting is proving difficult, and sales and marketing budgets are being cut - often dramatically.

B2B selling is going to have to adapt and evolve - quickly.  Faced with these pressures, one thing is certain: most vendors cannot afford to rely on “business as usual” in unusual times.

In this challenging climate, driving sales teams to simply “sell harder” is a monumental waste of energy and almost always counter-productive.  Vendors have no option but to “sell smarter” by identifying closely with their best prospects, taking pains to deeply understand how and why they choose to buy, and focusing on facilitating their buying process.

So what's involved in making this happen?  I've observed a number of techniques that can help.  First is taking the time to really identify with your prospects through prospect profiling.  Demographic data is no longer an adequate basis for segmentation - you need to understand your prospect's issues and behaviours.

Next, vendors need to get smarter about qualifying. There's sometimes a temptation to hold on to all the prospects you can find, no matter how unlikely, but today's top performers are doing the opposite - they are actively qualifying projects in or out using opportunity scoring.

The next valuable technique is value mapping.  Rather than pitching a laundry list of (mostly irrelevant) features to the hapless prospect (a technique know as "show up and throw up" in some parts of the industry) sales people need to carefully align the prospects most pressing issues with the vendor's most powerful capabilities.  If you have a misfit, it's time to look for a better qualified prospect.

These three techniques can help ensure that the right sort of deals enter the top of the sales funnel.  Of course, you'll still have to help facilitate the prospesct's buying process - which is the subject of my next blog...

Why CRM Is the Right Investment in a Bad Economy

There's a very interesting article in the latest edition of Selling Power (registration required).  They quote market research from Gartner that suggests that despite budget pressures on almost every aspect of business, CRM expenditures are likely to hold up - and in fact are projected to grow in Europe by 4% from 2008 to 2009.

There's a simple and powerful rationale: to win in today's markets, vendors need to target their prospects more selectively, and to execute their sales strategies impeccably.  Nobody wants to be spending scarce sales resources on poorly qualified opportunities that aren't going to buy.

Most of the investment is going into improving the effectiveness of the CRM systems they already have in place.  It's become critical that these investments are both a technical and commercial success, and a more intelligent approach to CRM implementation is yielding tangible benefits.

We're seeing a particular surge in interest in pipeline analytics solutions from vendors like Cloud9 Analytics.  These tools are proving highly effective in extracting actionable intelligence from the mass of sales data companies have been accumulating. 

We've also been involved in a growing number of projects to review and where necessary re-implement CRM systems in order to better align them with facilitating the buying process - rather than simply monitoring the sales cycle.

It seems that the traditional reputation for CRM projects costing too much, taking too long and delivering inadequate results is being sucessfully challenged.  With the benefit of clear visibility of what's really going on in their pipelines, sales organisations are able to focus in on changes and to react while there is still time to influence outcomes.

As Selling Power observes, having a CRM system that delivers isn't a nice to have any more - it's a must have.