In our work with clients, we’ve evaluated sales opportunities that were both won and lost. When we’ve asked about the lost opportunities, a common culprit frequently rears its ugly head— price. In fact, in 74% of the loss analyses we conducted the salesperson blamed a lower-cost competitor as the reason they lost. Yet, when we interviewed their customers, “price” or a lower cost competitor was the reason given only 22% of the time!
Price is easy to blame and sometimes it really is the culprit. But frequently it isn’t.
Price as Scapegoat: a Case Study
While working with the sales team of a large manufacturing company, we discovered that salespeople were constantly complaining to management about losing deals because their price was not competitive in the market.
Management thought the current pricing model was correct, but to be sure they needed a deeper analysis with real feedback from lost prospects. So, Ignite Selling was hired to interview these past clients and former prospects.
What are the Reasons for Lost Sales?
The first things we explored were the decision criteria used to evaluate our customer against other companies being considered. Although the definitions used by the prospects to describe their decision criteria weren’t always the same, the most common criteria mentioned were integration with existing systems, supplier innovation, reliability of systems, service, and price.
We then asked the prospects to rank their top two criteria. Surprisingly, price was only in the top two for 15% of those prospects surveyed.
Instead, most prospects cared more about integration and reliability. One customer was even quoted as saying, “If the product couldn’t integrate easily with our existing systems, it would only mean more work for our staff.”
The second area we explored in our client interviews was the key influencers involved in making the decision. Our client had assumed, based on their sales team’s feedback, that in most cases the CIO had the final authority. Unfortunately, the prospects we spoke to said otherwise. Yes, the CIO played a role, but in the end, other influencers had far more say in the decision than the salespeople believed.
After we had completed our analysis, we took this feedback to the salespeople and their manager.
They were surprised. Even more, they were disappointed. They had industry reports proving that their product was the most reliable product on the market. They had references that could speak to its ease of integration, yet they still lost. And equally important, they discovered that their competition was speaking with individuals that they weren’t.
Unfortunately, this is a common scenario. Many salespeople don’t know the decision criteria, much less which criteria that is most important to the customer. Salespeople also assume, often incorrectly, that they are working with the person most likely to help them seal the deal.
Opportunity Thought Process: How do You Lose a Sale?
If you’ve lost a major opportunity recently, why did you lose? If your answer is price, then we’d like you to peel back the onion to see if there is more to that answer.
Maybe this will help. Answer the following questions about a recent lost opportunity:
- Other than “price”, what were the customer’s decision criteria they were using to compare you against the competition?
- Which of your unique capabilities were NOT considered in this customer decision criteria? Why not?
- How did this customer rank the decision criteria from most essential to least essential?
- How did this customer perceive your company’s ability to meet these criteria compared to the competition?
- Based upon the top three key influencers involved in the decision, whose criteria mattered most?
- How did the decision criteria differ from the top three key influencers?
- What did you do to validate the decision criteria you were provided?
- Who is your competition speaking to that you’re not?
If you’re not able to truthfully answer most of these questions, it’s time to look in the mirror and ask yourself if you might be making some assumptions that led you to lose your last sale.
How Do You Win More Sales?
Many salespeople often spend much of their time evaluating opportunities on their own. Our experience has shown that the best plans are developed with opinions and input from multiple people, including managers, peers, and maybe even an internal champion.
These alternative perspectives can help ensure that we’re not making assumptions and an opportunity is evaluated from a variety of angles. When done right, it takes a little more time to explore the answers to these questions, but in the end, we can promise you that you will win more and lose less!