Doubly complex is competitive win rate, perhaps the most misunderstood and misused of all sales metrics. I’ve lost track of the number of times in the last few months that I’ve heard something along the lines of, “We rarely lose competitive deals.”
Allow me to translate this statement:
“We win most of the deals in which we participate and for which my sales team adds competitors to our CRM.”
Uh oh. It turns out competitive win rate doesn’t tell you what you really want to know, which is, “Of the prospects selecting me or one of my competitors, what percentage am I winning?” because:
- Data hygiene, part 1: Sales reps are poor record-keepers; you can’t rely on them to tag competitors in your CRM. Solutions like Chorus can automatically detect competitor mentions in your sales conversations and add this information to your CRM.
- Data hygiene, part 2: Some prospects won’t disclose which competitors are being evaluated. We’ve all marked a stalled deal as lost only to see the prospect show up on a competitor’s website a few months later. This rarely makes its way back to your CRM.
- Sampling bias: You win 0% of the deals in which you aren’t involved, i.e., the deals that never make it into your sales cycle and CRM.
At best, this methodology for calculating competitive win rate is a so-so measure of sales execution in head-to-head opportunities only. If the metric is under 50%, you know you have a problem, shortcomings be darned. But if the metric is over 50%, you really don’t know what it’s telling you about the extent to which you’re outperforming the competition.
Another approach is needed for gauging marketing program and prospecting effectiveness vis a vis the competition; specifically, to understand and quantify the deal flow that isn’t making it into your sales cycle.
I recommend engaging a market research firm to survey your ideal customer profile about buying behavior and intent and vendor brand perception. From this you can learn why prospects aren’t engaging in a serious evaluation of your company, or why they chose a competitor without considering you. Market research explains three important buckets:
- Not ready/willing to evaluate: Why is the market holding off on seriously evaluating your company? You could be missing key product features or service offerings (e.g., local time zone support).
- Don’t know you exist: Knowing how and where prospects are looking for potential solutions will allow you to adjust marketing programs and prospecting to reach them successfully.
- Negative perception: A few rocky implementations may have damaged your reputation (I’ve been there). Perhaps the market has a two-year old understanding of your capabilities (I’ve been there, too). You can only address concerns if you know they exist.
The best companies conduct market research on a regular basis because they recognize that the competitive landscape is always evolving. Combined with a traditional competitive win rate analysis, you’ll have a strong understanding of your competitive reach and your sales performance in head-to-head opportunities—and how to improve both.