One of the findings in the most recent Sales Performance Optimization Study, from CSO Insights, revealed that the win rate for deals has reached an all-time low.
Does that surprise you?
Does this represent a change in buyer behavior?
Is it a result of more competition?
Are salespeople less effective?
Is it the economy?
Has there been a decrease in demand for our products and services?
Is sales process having an impact?
Let's discuss the degree to which each of these possible reasons may be the actual cause.
Change in Buyer Behavior - Behaviors are always changing and while it may be true that sales cycles are getting longer, there are only four buyer-side behaviors that can really impact sales outcomes:
- Access to Decision Makers,
- Making price a primary criteria for decision-making, and
- An eventual decision to do nothing.
The reality is that all four behaviors have always been in play and there is nothing to suggest that any of them are suddenly having any more of an impact than before.
More Competition - Competition tends to be somewhat cyclical, but for some businesses, the effects of globalization, the internet, mergers and acquisitions and the ability to buy from anyone, anywhere, at any time, have increased the number of customer options. Practically speaking, most companies do not increase the number of vendors they decide to speak with. If they usually select from among 5, they are still selecting from 5. It's too much work to look at 10 and most companies are attempting to create less, not more work for themselves and their staffs. So, while there are more companies that can provide products and services in more locations, companies are not including more of them in their searches.
Ineffective Salespeople - The latest reports indicate that there are now 15.8 million people selling in the US alone. Objective Management Group (OMG), having assessed 700,000 salespeople, tells us that one key piece of data remains unchanged. The divide between effective and ineffective salespeople remains the same. There is still an elite 6%, another 20% who are quite effective, and then the rest, 74% continue to be ineffective. With the sales population increasing to nearly 16 million in the US, 74% of a much larger number means that there are simply more salespeople that are ineffective. The two primary areas of ineffectiveness continue to be the inability to sell consultatively (customer-focused) and ineffective qualifying. While these two factors make a considerable contribution to lost sales, the reality is that they aren't contributing any more today than they were in the past.
The Economy - There is no question that the economy is still having its troubles. The Obamacare fiasco is scaring business owners and consumers alike. I spoke with an owner yesterday who was totally freaking out over the 40% increase in his costs to provide health insurance.
Despite that, the report in question indicated that the loss rate is at an all-time low. That has to include 2008-2010 when the economy was really in the tank. So, while the economy isn't creating a confidence-fest, it shouldn't be having any more of an impact than it has in the years 2011-2012.
Decrease in Demand - If you're selling typewriters or newspapers, sure. If you own a travel agency selling anything other than tours and corporate travel, sure. But all indications are that for most other products and services, the only thing going down is margins, so I don't believe that this could be the cause either.
Sales Process - Despite the pleas from me and a host of other sales experts, it is my opinion that most companies are not taking sales process seriously enough. Oh sure, they have sales processes, but OMG's data says that these processes are either ineffective or not being followed in 91% of the cases. Salespeople are in love with the demo - perhaps more than ever - and when you combine that with the following factors...
- The internet,
- Availability of knowledge and information,
- Technology to demo online and on-demand,
- Free trials, and
- Demo-centric metrics,
...it's no wonder that companies, their sales leaders, and salespeople are demoing early, skipping over the most important milestones in the sales process and selling much more transactionally than they would like to admit. But demos are like the 15 minutes of previews we see at movie theaters. As each preview finishes, we make a 1 of 4 decisions:
- Must see it as soon as it is released.
- Can wait for it to be released on DVD.
- No hurry - we can see it anytime.
- No way. No interest.
Your prospects are making the very same decisions about your demos and if your demo isn't creating reaction #1 above, then the quotes and proposals that follow are sure to create...losses.
My assessment of the all-time low win rate is that there are a combination of factors that may be having a slight impact on this metric. However, the ease of getting people to watch a demo, while failing to follow a modern, best-practices sales process, is the biggest factor.
I have written extensively on sales process and you can find more on that topic here.
Image credit: dskdesign / 123RF Stock Photo