The sales process starts with a “lead” which may include any prospective client (suspect) regardless of their strength of interest. A conversion of such a lead to “qualified prospect” involves tentatively reserving dates, establishing seriousness of enquiry.
A definition of lost business is the failure to convert a tentative enquiry to a sale. This is not to ignore the analysis of lost leads at the initial phases, but rather to focus on the decisions of qualified potential buyers. A sale should be considered complete or “definite business” once a contract is signed.
The Five Key Lost Business Questions
What? Who? When? Where? And Why?
1. What Type of Bid?
The answer to this question—what type of the business was lost?—could be divided into five components. Sales managers should classify lost business using a uniform classification system[i] that indicates:
a) the type of organization (end user, distributor, specifier, association, corporate, government, etc.),
b) the size of the bid as measured order value, volume,
c) the geographic origin (international, national, regional, state, or local),
d) the industry classification of the event (manufacturing, professional services, etc.), and
e) the types of product / service
Each of these five classifications should include a standardized set of mutually exclusive categories that capture a meaningful distribution of event types.
For example, if nearly all group business is corporate, then a more refined breakdown of the types of corporate business may be appropriate (e.g. training sessions, shareholder meetings, product introductions).
2. Who Decides?
Who made the decision not to go ahead with you? The decision making process is not always apparent to sales.
Purchasing decisions may be made by the decision maker who they may have had no access or contact with, a selection committee, a board of directors, a senior executive, or a combination of the above. Understanding the source of the decision and the process by which that decision is made is essential to the ability to influence potential clients.
3. When Did the Loss Occur?
The question of when the lost business occurs has two necessary answers for each bid:
a) the date on which notification of lost business occurred (if any) and
b) beginning and end dates on which the project the bid covered occurred or would have occurred had it not been lost.
c) This data is particularly useful in measuring positive and negative trends in sales efforts. An increase in the amounts of lost business may indicate a stronger sales effort if it is associated with a higher volume of tentative business. Increases in lost business may also indicate a declining conversion rate of tentative to definite business. Unfortunately, most lost business databases don’t include successful conversions and therefore do not allow for the calculation of conversion rates, which is a key measure of the effectiveness of a sales force.
4. Where Did the Bid Go to?
The answer to the question—“Where was business placed?—identifies the winning bidder. Information on the identity of the successful competitor combined with data on their bid offering characteristics, lost business types, conversion rates, and the reasons for lost business, can yield valuable information on the strengths and weakness of the primary competitors.
Sometimes lost business databases use “lost to a competitor” as a reason for lost business which it is not. Most lost business databases identify multiple competitors for a single event, but they often fail to identify the successful bidder. Frequently bidders are unwilling to identify the property they ultimately selected so it may be necessary to rely on reader board services to identify the specific property in which the event was located.
5. Why Was the Bid Really Lost?
Understanding the reasons for lost business is perhaps the most important information in a lost business database, yet the most elusive. First of all, obtaining honest and accurate information is difficult. Event planners may give the most convenient excuse rather than a more brutally honest answer.
For example, it is easier to say
“your price is too high”
“your sales presentation was confusing and disorganized.
Some of the reasons will be critical and bid determining ‘must haves’ and other will be desirable ‘likes’ only.
2. Turned-down business—includes possible concerns about the ability of the bidder to adhere to the terms of the contract, or other reasons.
3. Rejections—this category should be reserved for tentative business that was lost to a competitor due to a decision by the Buyer.
The reasons for lost business may apply to all three of the above categories of lost business. Often lost business reports summarize free form and unaided answers to the open ended question of
“Why didn’t you choose us?”
While free form answers may contain some of the needed information, that information can only be aggregated and properly analysed if the reasons are categorized and prioritized in a meaningful way.
• Capacity—lack of appropriate
• Services—the quality and availability of required services
• Price—may include the costs
• Appeal of the Bidder’s Offer
• Responsiveness—involves the relationship between the sales staff and the Buyer. Was the response to an RFP complete and well done? Did sales team respond to calls in a timely manner? Did the sales team understand the needs of the Buyer?
• Date Conflicts—preferred dates are not available for the project
1) Extremely negative (“deal breaker”),
2) Negative influence,
4) Positive influence,
5) Extremely positive or
6) Not a consideration.
Click for free executive summary of the Buyers Views of salespeople research study
The next Post will consider how we might collect such lost business data.