Sales seminar: How to Avoid Being the Designated Loser

Posted: 10/2002

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

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:

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:

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:

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.

To test these hypotheses against a
current situation, draw a matrix like the one above 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 [email protected].