A few years ago, I was sales manager for an international sales team in a multinational technology company. We provided high-value products and services and there was a formal decision committee responsible for approving sales opportunities from early identification to, hopefully, a successful close.
I was concerned about our low sales win-rate and thought that we were chasing too many unwinnable or unlikely tenders, diluting our overall sales effort. Our activity level was high, but quality was low.
Increasingly, I played the devil’s advocate in the decision gate meetings, urging the team to ‘no-bid’ the less likely cases. But every opportunity had its passionate champion and even if we agreed that the chance was low, there was always the old; “we can’t afford not to bid, it will damage our customer relationship”.
Then one day, I was sent a tender for review which, incredibly, included the name of our major competitor’s product in the title;
Tender for provision of <Competitor’s Product>.
Excellent, I thought, finally, our chance for a no-bid decision! This is the ultimate unwinnable tender.
I will never forget that meeting. Here was a tender that we clearly had no chance of winning and yet, unbelievably, I was hearing arguments that a non-conforming bid stood a good chance. Eventually, I lost my cool, pulled rank and we no-bid.
The sky didn't fall down, we worked on other bids and a strange air of relief and calm fell over the technical sales team. Furthermore, the customer continued to talk with us.
We could dismiss this as just an amusing story, but chasing unlikely business is something I have seen in many companies and industries. Why are normally rational people so intent on wasting company resources on low chance gambles? How do we make sense of this phenomenon?
I think there are three psychological forces at work and each represents a cognitive error or bias that we need to guard against:
The cost of bidding seems low compared to the potential payoff. Like buying a lottery ticket, it appears to be a low cost for a large payoff. Unfortunately, low cost is an illusion. The real cost of chasing low-chance business is the high-chance business you missed out on. Opportunity cost, not bidding cost should be top of mind when considering a bid.
2. Fear of Loss
The flip side of false hope is avoiding the feeling of loss experienced when that hope is extinguished by a no-bid decision. We irrationally feel the loss as if we lost the tender when really we lost nothing but an unlikely possibility.
3. Diversion from real work
For sales people it’s easier to think “this tender will make my number” rather than getting out and doing real sales work finding more business. This is a normal human frailty and a primary cause of missed quota in B2B businesses all over the world in every industry.
The solution is eloquently described in a sales novel (!) called “Selling to Zebras”(Jeff and Chad Koser, 2008).
Every company needs a clear description of what its natural prey looks like. If you are adapted to hunt zebras then don’t be distracted by other animals.
Zebra identification cannot be left to the sales department, they will hunt everything that moves. A cross-departmental team should agree the ‘zebra checklist” with a scoring mechanism to set a go/no-go threshold and you should make zebra discussions a common theme of your sales and management meetings:
“Black and white stripes, check! Four legs, check! Equine family, check! – go for it!”
Our sales consulting company was created because of our Managing Director, Sue Findlay’s, frequent frustration when she was running her ‘winning tenders’ consulting business. When approached to support urgent tenders, Sue would often find there was little chance of success because either the business was not qualified (not a zebra) or the sales team had not done the necessary pre-tender sales work.
Strictly defining and sticking to your ‘zebra’ means that your sales team will have time to do the all-important pre-tender sales work.