Tl;dr - Many companies see >70% of their pipeline opportunities lost to either a competitor or simply evaporating. That's a massive drag on sales force effectiveness. The root cause of this is nuanced and complex, and ultimately traces to a very difficult and sensitive topic. Decision makers may not have the management authority or control to ensure that the critical work on which the project's success hinges will actually be done. Ouch!
Eroding Sales Force Effectiveness
Sources differ on the magnitude, but agree on the vector. More complex deals end with no decision. For most companies, it's around 40%.
That means an industrial sales win rate of 25%. Losses to competitors of 35%. And 40% of deals just sublimate.
That's a massive impact on sales force effectiveness. 40% of the qualified deals are, essentially, apparitions.
Is it any wonder forecasts are so inaccurate and pipelines so unrealistic?
The question is why is this happening and what can we do about it?
There are a lot of factors that play into it. Let's look at them.
Reasons Deals End in "No Decision"
First, let's understand that No Decision is the easiest decision. The default. The status quo. Often, it's a decision that's made by default. And, often, deliberately by default. Why?
Size Matters?
Many think transaction size is the key factor; a $5MM capital equipment decision will be more likely to end in no decision than a $10K training software subscription.
I disagree. There's a correlation we'll explore, but not causation. After all, McKinsey research finds that:
- 71% of buyers are willing to spend >$50K in a single e-commerce transaction
- 27% >$500K
- 15% >$1MM
If they're willing to make that magnitude of purchase online, it's not simply the size of the transaction that's the problem.
Happy Ears?
A common problem is in the sales team itself. Sales reps have happy ears. When they sense the buyer has acknowledged a "problem," they immediately jump to proposing a solution.
In Dave Kurlan's Baseline Selling model, this means running diagonally across the baseball diamond from 1st base to 3rd. Even if they avoid tripping on the pitcher's mound, they've still wholly missed all of the critical steps on the basepaths from 1st to 2nd, and 2nd to 3rd.
Even if they don't issue quotes like marionettes on prospects' strings, many industrial sales teams lack an effective sales process, playbooks, deal qualification scorecards, and a clear methodology for consistently qualifying deals.
A large percentage of opportunities lost to no decision were actually never even qualified opportunities! The reps cut corners, the process was inadequate, sales manager coaching insufficient, or pipeline reviews incomplete. There were clear factors that should have been flagged.
Selling the Wrong Decision
There are actually five buying decisions that are part of any complex purchase.
- To allocate resources to consider/evaluate a project
- To include a project in the stack rank analysis for capital allocation
- To approve and allocate capital to a specific project
- To establish the decision-making process for vendor selection
- To decide which vendor receives the order
In many cases in B2B industrial complex sales and capital equipment transactions, the discussion is actually an exploration of feasibility, not a purchase process - part of the first decision.
When a plant engineer asks questions about technical capability, sales reps assume that means they're trying to figure out what to buy. In many cases, they're exploring what they would need to buy to achieve a business outcome to determine whether that's worth pursuing.
This is especially common when companies hire technical sales reps for complex sales roles.
Reps must be clear on which decision stage the project is in. If it's in the first stage and goes into the pipeline as though it's in the fifth, only a small portion will actually proceed to a yes/no decision.
Forgetting the Buying Team
Industrial sales reps (particularly with capital equipment and technical products) are most comfortable talking to plant engineers. If they've been trained to focus their conversation on the technical specifics and attributes, then those local engineers are the ones with whom they have the most satisfying conversations.
Except plant engineers don't make buying decisions.
They make recommendations for sure. They can rule companies out. They prepare analysis that's used to make capital allocation and business decisions, but they don't make them.
In fact, increasingly, nobody makes them. Traditional "decision makers" are hesitant to put their name on a decision, as we'll explore below. Further, the sensible process of soliciting input from stakeholders (maintenance, controls, engineering, safety, finance, procurement, management, etc.) has largely devolved into a process of committee decisions.
Buying teams of >10 people debate decisions with all the expected interpersonal, interdepartmental, and individual bias and priority. In many cases any individal can kill a deal, often simply by holding out. And normally it takes everyone to say yes.
That means reps MUST figure out how to sell to every buying team member - even those who prefer to remain detached from the process. Team selling and other techniques are required.
That's hard. Most reps don't even try.
Indecision & Risk Aversion
The JOLT Effect took our understanding of buyer indecision further.
The premise is essentially that our sales approach relies on building FOMO (fear of missing out) in buyers - that a problem is important and failure to act will have costly consequences. But along the way in their emotional buying journey they cross a rubicon.
Their FOMO becomes FOMU (fear of messing up.)
They become more cognizant of the potential risks, complications and hassles associated with a decision. Behavioral economics tells us that the pain of a mistake is disproportionally higher than the gain from a win. Corporate culture is increasingly risk averse.
In the world of slow-moving corporate strategy and long sell-cycle lead time decisions, it's hard to pin someone with responsibility for a mistake if they simply did nothing (took more time to consider options, delayed a decision to collect more data, decided that there wasn't a compelling enough case to proceed, etc.)
And buyers have learned that most sales reps present distorted and unrealistic ROI calculators - often so stilted that they may work against sales reps.
If industrial sales reps fail to monitor deals for the signs of FOMU or fail to take appropriate reassuring and confidence-building steps in response, deals will end due to indecision about whether proceeding will yield the results required.
But there's another insidious and related reason.
It's Not You, It's Me You
If you follow the JOLT Effect playbook, you can reduce the FOMU through guarantees, reviews, case studies, testimonials, and proactive implementation planning.
That will help overcome risk aversion, concerns about making an affirmative decision that goes wrong, and experience-borne concerns about unexpected hassles, among other things.
But that might not be enough.
In my experience the most significant contributing factor to deals that slowly die is related to change management.
In addition to the amount of work and disruption a business leader must assume to be successful and their concern about their performance and ability to get done what's required of them, on time and adequately, is their concern about their team's ability to implement.
Why? Accountability and culture.
Knowledge work is hard to quantify in takt time and productivity metrics. Because of that, it's very hard to know objectively how much you can ask someone to do. Taking a written outline of a slide deck and building it in PowerPoint is fairly straightforward, but doing the research, ideating, and developing the outline is very different.
So it's hard to say decisively and precisely how long the work people will have to do to implement a complex project will take - particularly because the specifics are only clear once work is underway. That makes every task subject to negotiation. That's the first part.
The background challenges are the common workplace conditions of general workload and the degradation of accountability. Everyone's work expands to fill their time. Email, Zoom meetings, corporate reporting and other tasks can easily consume huge amounts of bandwidth.
So, for folks who might not be interested in additional work or change, there's a convenient justification for pushing back. Culture has shifted so that individual responsibility and accountability are no longer admirable attributes but have generally become antiquated vestiges of an unkind and insensitive era.
The vague nature of knowledge work means that the overwhelmed, undisciplined, lazy, inept, and passive aggressive can avoid work by hiding behind easy excuses. Challenges from a manager evoke hurt feelings, complaints, and resistance.
This is a dark and cynical view of the workplace. I get it. Some rare companies, departments, or teams create cultures that transcend this. And obviously, each individual has their own personality, circumstances, and work ethic. it's not universal.
But remember, we're talking about 40% of deals.
Here's the conclusion.
In many cases, decision makers decide not to fight the fight. This may be a subconscious decision. It may be made by deferring to the buying committee in which individual resistance is embedded. And it may be a conscious decision that:
- the current state is adequate
- they don't have time to do the work themselves
- they don't have the energy or social capital to force others to do so
But.....nobody is going to tell you, "I'm not sure I'm a strong enough manager to force my team to do the required work to actually make this successful. I'm sure you'll do your part, and I know I can do mine, but I'm not confident my team will actually do their part."
So instead, you hear other reasons or no reason at all.
Sales Rep Effectiveness
When you understand this, you realize that closing a deal requires skill, insight, and a process that goes well beyond the solution/problem fit and convincing the buyer of the impact on their business.
The key to boosting effectiveness, and reducing the percentage of deals that end in no decision, is reps ability to elicit honest conversation with decision makers about the real work required and how that can be achieved. They may not ever recognize the root of their internal hesitance, and may be embarrassed to acknowledge their uncertainty about their management ability and will to make it happen.
Sales enablement content, case studies that address this, and realistic implementation timelines with milestones and explicit elasticity can all help.
However, first, sales reps must be coached to understand this and ask questions during qualification.
And Revenue Growth Process Engineering
The fundamental takeaway needs to be that closing any deal requires many, many, many things to go well. A single or small number of things going wrong can doom the entire project.
That means we need to consider strategy, management, marketing, sales, and technology as components of a complex and fully integrated engineered system.
That's the premise of the Overall Revenue Effectiveness™ Framework. Learn more here.
