Management Consultants

Sales Effectiveness: Sales Force, Channels, Web

SALES SEMINAR
How to Avoid Being the Designated Loser

Wayne M. Thomas, D.B.A

EARLIER THIS YEAR there was a big hullabaloo about whether David Letterman would leave CBS for ABC. Millions of dollars were at stake for both networks. By becoming the center of a bidding war, Letterman gained leverage to play the bidders against each other, and then pocketed millions staying put at CBS. A critic observed that if CBS had simply put the pieces together, it would have realized ABC's scheduling couldn't possibly please Letterman. He speculated that ABC was being shopped by Letterman to pressure CBS. We will never know the whole story, but we do know Letterman's tactic succeeded.

In the telecom marketplace, prospects use the same tactic against service provider account executives and it works well there, too. My research shows at least half the proposals created are submitted for deals where a competitor was predetermined to win. The prospect was simply shopping around to compare their preferred vendor's price to "keep them honest" or to gain leverage to drive it down.

Proposal Win Rate

I recently studied 707 proposals generated over four consecutive quarters by a company that sold network and call center services and telecom/IT infrastructure support. The sales vice president was proud

that his organization was winning twice as many deals as it lost, doubling the past year's win rate. Unfortunately, he was still way behind his revenue quota.

The study produced the following initial results: 212 wins (30 percent), 106 losses (15 percent) and 389 no decision/pending (55 percent). "Wins" and "losses" speak for themselves, but what is a "no decision?" When the reps updated the true status of these pending proposals, we found only six would be won, and 383 actually would be lost. The conclusion was obvious to the sales vice president: "We were being shopped more than half the time."

In other words, the average account executive spent 110 days -- 50 percent of his time -- to provide pricing for prospects that never intended to buy. When we added in the thousands of support days burned, travel expenses and opportunity cost, the problem became staggering.

How large is this waste of resources in your sales organization? How great are the possibilities for sales growth if even a portion of this resource drain were applied to real selling opportunities?

 This article addresses three areas to improve targeting sales opportunities:

·         Guiding principles to identify situations where you are being shopped.

·         Weighing evidence to determine if it's a fair opportunity to win.

·         Improving the odds of winning in a questionable situation.

Guiding Principles

Shoppers easily disguise their true intent, since account executives, pressured to keep the sales funnel full, don't often ask tough questions to qualify opportunities. Shoppers have ready answers for:

·         Who will be making the final decision? ... "Me"

·         Is the money budgeted? ..."Yes"

·         When will the decision be made? ..."Soon"

·         Does anyone have the inside track? ..."No"

The principle to apply here is that action speaks louder than words. A prospect that needs your price "by Friday" and claims you don't need to talk to anyone else is behaving in a way that belies his words that "everyone has a fair chance."

Your antennae should go up if an unsolicited request comes from someone who is not already a customer. You should calculate the odds of winning a large piece of business from someone with which you have no relationship. Instead, you start to dream about how enormous the opportunity is, and how you're going to spend your bonus check. Why would you want to press too hard with qualifying questions that might upset the prospect?

As a rule, you are well positioned in a deal if you are in a consultative mode and helping to shape the buying process. Here are some customer behaviors you may observe to confirm your feeling at the outset:

·         The prospect probably was not "looking" before you called;

·         You spark interest and shape the opportunity;

·         Timeframes are reasonable;

·         There is open discussion;

·         The prospect is open to any good ideas; and

·         Your contact introduces you to the decision maker.

·         In the closing phase of the deal:

·         The buyer still is open to your influence;

·         The buyer remains inquisitive;

·         The decision maker is involved;

·         The prospect brings up non-service/product issues that broaden involvement;

·         The prospect promises you the last shot; and

·         You have access to the key people.

So, even without asking where you stand, the prospect's behavior gives you clues about your competitive position. Unfortunately, many of us are not good observers, and are pulled easily into a shopping situation.

In Mozart's Brain and the Fighter Pilot by Richard Restak we learn our brains are made to resolve ambiguity quickly, leading us to jump to conclusions that fit the evidence we see. For example, you observe that all your phone calls are returned promptly and all your questions about the deal are answered quickly. You could decide that you are being treated as if you have an edge.

However, these same observations also support the hypothesis that you are being shopped. Your calls may be answered quickly in order not to slow the process, not because the buyer is motivated to find the best solution. To get a better sense of where you stand, look for behaviors inconsistent with a level playing field. Why? They can kill a hypothesis rather than support it.

For example, if you are being shopped, you would have a sense the buying process controls you:

·         You had no influence in developing the need.

·         Prospect requires an unusually quick response ("Just to get a ballpark price, then we can talk.")

·         The scope of specs is limiting.

·         You cannot talk to the decision maker ("They will just rubberstamp my decision anyway.")

·         All they ask are product/service questions. They could be shopping for a stove rather than a business partner relationship.

·         You are told, "You have a good shot," when you are not sure you even understand their business.

·         Your inquiries are answered quickly to keep the process moving.

·         They say, "Give us your best and final offer," which is hardly a collaborative stance.

Weigh the Evidence

A hypothesis is a statement that has not been established as true. People determine if they believe a hypothesis by the weight of supporting evidence, but a hypothesis cannot be conclusively proven true. For centuries people believed the Earth was flat, and they had plenty of evidence to support their belief. When Magellan sailed around the world, the flat-world hypothesis was shown to be false. You can apply this approach to assessing an RFP in the same manner that Magellan's feat proved the Earth was round. You need only a single strong piece of contradictory evidence to show a hypothesis is false.

·         With an RFP, there are two hypotheses:

·         You have a fair chance to compete.

·         You do not have a fair chance to compete.

 To test these hypotheses against a current situation, draw a matrix like the one below and label the columns as shown. List significant factors you think have a major effect on the outcome of the bid down the left hand column. Focus on behavior observed rather than talk. Now, work across for each factor and note if it is "C" consistent or "I" inconsistent with the hypothesis above. What do you conclude when you work downward to evaluate each hypothesis? The hypothesis with the least compelling inconsistent evidence should become your preferred hypothesis.

While all the factors are consistent with "We Are Being Shopped," this is not conclusive, because consistent information could support several hypotheses. The inconsistent information is much more telling. The weight of this evidence screams the hypothesis "We have a fair chance to compete" is unlikely. Therefore, the favored hypothesis was that they were being shopped. After extravagantly committing resources to the project, the team was stunned to learn they did not get the deal. In hindsight, it was no surprise.

Improve Your Chances

If you get an unexpected RFP, assume you are being shopped. Determine where you stand by weighing evidence using the test described above. Show your manager your conclusion and get his agreement to support you if you decide not to bid or to use a strategy such as the following.

Tell the prospect it is your company policy not to create a proposal without at least three interviews with executives affected by the decision. If you will expend effort, they must demonstrate their sincerity, too. It is absurd to think you can develop an excellent proposal for someone's unique business requirements without doing this.

If you are denied the interviews, write them declining their request to bid. Use this as an opportunity to communicate your sincere intentions around their business. Copy several executives and briefly describe your results at similar companies.

If you get the interviews you request, ask questions to assess what needs executives have beyond those outlined in the RFP. Ask what would solve their problems. If you have solutions, you can take a giant step toward leveling the playing field by enrolling that executive as a supporter of the new capability you can provide that is not called for in the RFP. You want to create your own edge over the incumbent or intended recipient of the business.  

Answer the RFP, adding in your cover letter and executive summary that your proposal provides a superior solution, since it addresses critical needs and solutions beyond those identified in the RFP. Outline how you plan to address these needs with your services. Estimate the ROI of your new solution to demonstrate it is a compelling offer. Develop your solution in the proposal. Copy the executive whose needs you have addressed and follow up with others who seemed supportive.

Now, compete on the new field you created.

Dr. Wayne Thomas is CEO of Thomas & Company Inc., a Sudbury, Mass., management consulting firm. He also is chairman of the Telecommunications Industry Association's network sales channels group. He may be reached at Wayne@ThomasAndCompany.com.

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