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There are only 2 reasons why you lose a sale

Posted by Bob Apollo on Tue 18-May-2010

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...

Book keeper"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."

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.

Best Practices Checklist

Do you work for a B2B software developer or solution provider? I've captured many of today's best go-to-market practices in a 20-point self assessment checklist. You can download it here. Please take a few moments to complete it. I think you’ll find at least one idea that will help you create an even stronger foundation for the future.

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Topics: Sales Enablement, CRM, Revenue Management, Complex Sales