Learning From Losses

Quick Summary: There is an outcome for every prospect that starts the sales process. Understand them.

Abstract:

There is an eventual outcome for every prospect that enters the sales process. The ideal outcome is an order from the prospect.  However, there are six other outcome categories.  Characterizing each prospect as they leave the sales funnel, is an insightful exercise that can help formulate better winning strategies for future prospects.  Essentially, there are “wins” even with the losses.

Contrary to most sales forecasting techniques, think of all sales probabilities as being 50%; either you receiver an order or you don’t!  This article discusses the 50%, non-successful prospect sale outcomes.  Every prospect pursued results in an outcome.  Ideally, that outcome is a sale, the positive 50%.  There are, however, several categories of the apparent negative outcomes.  Some significant lessons can be learned from those losses.  Unfortunately, in many instances, the sales rep or organization, will “lick their wounds” and moves on in the pursuit of other opportunities instead of understanding why they lost.  Understanding the loss can help them win in the future.

This article discusses what a sales organization should do after a loss occurs.  There are, however, several other activities that should be pursued before the loss occurs.  The reader is encouraged to review the article in Sections 1, 2, and 3 of Volume 5, “The Top Line” in this collection.  Of the 75 articles in those sections, the six articles listed below are probably the most relevant regarding actions that should be taken during the pursuit of prospects.

Article No.

Title

Quick Summary

5.010202

All Probabilities are the Same

Sales probabilities are always 50%, an order is received or not.

5.010207

Learn by Flushing, Not Filling

A stagnant sales funnel consumes valuable resources.

5.010211

Tomorrow Will Be Different: Why?

Past performance IS indicative of future results unless changes are made.

5.020501

There is Always a Reason

Thoroughly understand sales impediments and develop plans to avoid or resolve them.

5.020503

Impediments: A Sales and Marketing Tool

Objections from prospects can help to optimize products

5.030302

Unqualify Fast

Conserve resources by unqualifying sales opportunities early

 

As mentioned above, every sales opportunity that enters the sales process eventually results in an outcome.  At one extreme is the receipt of an order.  At the other extreme is an opportunity that eventually withers and dies due to a lack of action.  The withering and dying outcome is the most destructive of all outcome.  It consumes precious resources that could have been directed to other, more positive outcomes.  Between the two extremes, there are five other potential outcomes.  Categorizing by outcome and analyzing each opportunity can be very useful – if done objectively. Over time, certain trends will, most likely, appear that can be used to develop strategies that can positively impact the outcomes.  The seven outcomes listed in terms of desirability are listed and desired below.

  1. Received the Order

This is obviously the best outcome. It is positive proof that the prospect agreed that you are solving a problem that needed to be solved and they were willing to pay you for it now.  This statement is further explained in article, 3.010002, “A Quick Blink Test in this collection.  Not only did the prospect make a purchase, but they also bought from you and not someone else!  Their reason for their purchase may have been based on price, features, awareness, past relationships, or any number of other reasons.  As discussed in other articles in this collection, objectively understand “why you won” is important to understand.  For this article, it doesn’t matter why you won; all that matters is that you did!

  1. Not You

Although you are disappointed in not receiving the order, the loss proves that the prospect did find a need and value in purchasing someone else’s offering that was similar to yours.  This situation is still considered a “win” because the prospect’s purchase shows that they agreed that “someone” was solving a problem that they agreed needed to be solved and were willing to pay for it now. Many entrepreneurs and established companies develop products thinking that customers will (quickly) see the need or advantages and embrace their offering only to find out that their market positioning assumptions were not correct.  There are three, almost universal, fallback rationalizations that are used to “explain” a loss to a competitor.  They are convenient but simplistic and rarely hold up to any scrutiny.  Think of these three “explanations” as indicators of deeper problems.  They are: “Our price was too high”, “We lacked certain features”, and “The Prospects Just Didn’t Get It”.

  1. Not Them (either)

For someone unknown reason, the prospect simply dropped off the radar and made no decision to buy from you or anyone else.  It could be a shift in strategy, plans, the macro-economy, or a host of other reasons.  The worst case is that they will not return your phone calls or provide any explanations to you.  With no data, you cannot make any assumptions about them or your offering.  Framing a request with “I understand that you have decided not to move forward, and I respect that decision.  Can you provide me (make it personal) with some guidance to help me in the future?”  Pressure sales tactics will not work.  Wait a while, check their press releases and Google, ask other suppliers, monitor their overall business results.  Until you “know”, classify this situation as “we don’t know”.

  1. Not Now

It is often said that timing is everything.  When things do not proceed as we anticipated, there is an add-on to that statement, “and our timing was not right”.  There is a world of difference when a prospect says “not now” versus when they say “not ever”.  The “not now” response indicates that there may be a future opportunity – when the timing is right – to revisit the opportunity.  This response, however, could have been only a nice way for a client to ease their true feelings of “not ever”.  As an illustration, a company selling a new set of high-tech snow skis may receive a legitimate “not now” response from a client in Maine in May or June.  However, they may receive the polite but insincere “not now” response from a client living in Miami when they are really thinking “not ever”.   Think about the prospect’s own business.  They may be operating under timing constraints.  For example, overnight carriers make virtually no new changes to their operations during the rush holiday season., major decisions are rarely made during M/A negotiations, and many organizations move very slowly during extended holiday or vacation periods (especially European based companies).  Remember, your timing and urgency may not align with your prospect’s timing and urgency.

  1. Not Interested

This category is, by far, the most difficult to understand.  Prospects can have totally different reasons for being not interested. Care must be taken to generalize results until a sufficiently large number of not interested prospects are identified.  Reasons could vary from your product and service simply not viewed as high enough priority to get attention, to the prospect’s existing methods are viewed as adequate or even superior to your offering.   The previously mentioned excuse that “the prospect just didn’t get it” is never an appropriate response.  The more appropriate statement is “if the prospect didn’t get it, it’s because you didn’t give it.” A highly effective approach is to follow the “5 Why’s” method as popularized by Sakichi Toyoda, the Founder of the Toyota Motor Company.  It is started by asking the simple question of why the customer was not interested.  Then, no matter what the response, ask the “why” question again.  Repeat the process for a total of five times. By the fifth iteration, the root cause or answer to the not interested assessment usually becomes “obvious.” 

  1. Not Ever

This blunt response, often never said but implied, is the worst-case prospect-related outcome.  Even when received, optimistic sales reps are likely to hear “not now” instead.  It is always tough to take no for an answer.  Using the snow ski example, a sales rep may rationalize that their life-long Miami resident prospect may change their minds if they ever decide to move to Maine!  Not only does the “not ever” response represent the only true negative outcome, not accepting it can result in a far greater loss; the loss of time additional time spent in pursuing the “opportunity”.  The articles in this collection, 5.010207 “Focus on Flushing Not Filling” and 5.030302 “Unqualify Fast”, discuss the need to move on as quickly when it is determined that the likelihood of closing a sale is low.  If the not ever response occurs repeatedly, it is probably a strong indication that the fundamental criteria used to transform a “suspect” to a “prospect” and have them enter the sales process needs to be re-visited. 

  1. Withered and Died

This last category is not a prospect outcome.  Rather, it is a refusal by the sales rep to accept the reality that the prospect should no longer be pursued and removed from the sales process.  A funnel full of these prospect situations is used to infer a level of busyness, an inappropriate metric that actually stymies the forecasting process.  Others, not understanding, the low or zero likelihood of success, may take inappropriate actions.  An approach to “force” acknowledgment of these prospects is to require the sales rep to explain why a prospect should be kept in the sale process if certain progress milestones are not met.

Performing an outcome analysis for each sales opportunity that moves past the “suspect” stage (i.e. they should be interested) to the “prospect” stage and enters the sales process.  That refection should result in each opportunity being categorized in one of the seven outcomes listed.   Then, with that data in hand, the company can look deeper into the root cause of the outcomes and identify trends and potential corrective actions that can be taken to improve the situation in the future.

 

Article Number : 5.020504   

A Handy Reference Guide for Executives and Managers at All Levels.

9 Volumes 37 Chapters ~535 Articles

Browse Select Read Download

 

 

The weight of your world does not have to be on your shoulders.
The articles in this site will help to lift that weight from your shoulders.
Pick an article similar to how you pick a route on a page of an atlas.
There is no need to look at other articles, just as you ignore other pages in an atlas.
It is easy to start a business but it is hard to run. Bumps and unexpected sharp turns in the road are always present.
Others have traveled the road before you; learn from them. This site may help.