According to a study by the Aberdeen Group, companies that conduct win-lose analytics have higher customer retention, opportunity conversion and annual revenue growth rates than those that do not.
However, less than 20% of companies conduct win-loss analysis of their opportunities.
A lost deal is perceived as a trauma beyond the sales function and senior management: building a complex offer often required the mobilisation of many internal resources, who feel they have worked for nothing and often have to be content with a laconic: « we were too expensive ».
The explanation has the merit for the buyer of being simple and putting his supplier under pressure for the next opportunity. However, it is never enough: how did the competitor manage to make the difference, with what objective arguments? Shouldn’t we be afraid that this situation will happen again in the future?
Conversely, while it is always more pleasant to open the champagne to celebrate a deal, understanding why we made the difference will allow us to repeat the performance again, or to reconsider perhaps too aggressive pricing and a potential lost margin.
Whether business is won or lost, a good understanding of why is essential for the business. For it to work, however, this process must be systematic: first by determining the level of importance at which the analysis should be conducted, and then by following a well-defined process in advance.
Price alone can never be considered as the cause of failure, or else there is a real problem: why would the business that is too expensive on the last case not be too expensive on the next ones? And how then to explain past successes?
The first step is to investigate the reasons for both success and failure by interviewing the right people at the customer’s premises. As described in a previous article, on average 6.4 people are involved in a purchasing decision. It is therefore important to talk to all of these people in order to cross-check the information to make it as reliable as possible (CEO, CFO, Purchasing Manager, Technical Manager, Marketing…). Of course, the sales representative plays a key role by contacting them or having them contact the customer’s preferred contacts.
A few examples of failures linked to an « overpriced » offer:
The company is not one of the strategic suppliers but of the challengers. Therefore, unless it offers significantly cheaper, the client will favour the strategic ones. In this case, too expensive means at about the same price as the established competition.
The company is one of the strategic suppliers, but it has already won the previous deals, and the buyer wants to rebalance its supplier portfolio. Too expensive may mean that the price is good but it is the competitor’s turn.
The company has offered on the basis of too high a cost, for example because :
An offer not totally in line with the customer’s needs due to a lack of sufficient listening.
An offer that is too qualitative, given the expectations of the customer who is not prepared to pay for over-quality. For example, a product with a guaranteed lifespan that goes far beyond its obsolescence on the market.
An insufficiently creative offer: a competitor has found a technical trick that allows him to display a lower price.
The company offered on the same cost basis but :
A challenger broke the prices to « get in ».
A competitor made a costing mistake. This reason is less rare than it seems. I myself had a question from the technical director of a client who asked me following a significant business takeover « but how did you manage to offer such a price? ». The answer came later: the costing was out of step with reality and we dragged this negative margin business like a ball and chain for several years. Enough to give champagne a bitter taste.
This list of examples, far from being exhaustive, will have to be defined specifically for each company. However, it is well understood that the companies that obtain these explanations will be able to implement corrective actions adapted to be more relevant at the next opportunity, and why this process in place makes them more competitive than their competitors.
This article can also be found on LinkedIn.