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Linda Richardson: Loss Reviews = Higher Revenue

I recently spent some time talking with Linda Richardson, founder of the huge sales training firm Richardson, and author of the best selling books" target="_blank">Sales Coaching and Perfect Selling. She recently refined a methodology to improve revenue by examining situations where the sales team LOST the deal. This idea is easily implemented, and obviously useful. Here's an excerpt from our conversation:
  • Geoffrey James: How are sales teams weathering the difficult economy?
  • Linda Richardson: The number one concern is how to increase revenue. We know that revenue, overall, is dropping and that salespeople are working harder than ever. However, despite the fact that sales people are spending more time selling, research from CSO insights indicates that fewer sales teams than ever are making their forecast.
  • GJ: What can sales teams do to start making their forecasts?
  • LR: I believe that the best thing that a sales team can do to improve overall sales performance and forecast is to institute a practical program of reviewing lost deals. While sales people often informally ask why they lost a deal, they almost never get the true story. For one thing, they're usually downhearted and thus unable to listen very effectively. In addition, the people who didn't buy often feel bad about disappointing the sales rep, so they pull their punches.
  • GJ: How do you get around that problem?
  • LR: A manager or somebody who was not involved in the actual sale should be prepped up on the specifics of the deal, and make the call to the customer. That person can then dispassionately interview the customer to find out the real reasons that sale was lost. When this is done on a regular basis, you get phenomenal data that helps you pinpoint exactly where the organization and the sales person needs help.
  • GJ: Can you give me an example?
  • LR: Suppose a sales rep assumes she lost the deal because a competitor was able to spend more time with the customer or has better social connections with the decision-maker. A loss review might reveal that the real problem was a feature that was lacking in the product being offered. That, in turn, can help guide product development. Conversely, if a sales rep blaming a weak product for a competitive loss may discover that the real problem was how the sales rep pursued the opportunity, in which case some sales training would be appropriate.
  • GJ: How do you get failed customers to cooperate?
  • LR: You have a senior member of the sales staff (but not the rep assigned to the opportunity) send a letter thanking them for considering your product, and stating that you understand how important this decision was to them. Then you ask if they would share some feedback so that you, as an executive, can understand more deeply what the organization needs to improve and hopefully provide better service in the future. Almost everybody yes to that kind of request.
  • GJ: What kind of questions do you ask?
  • LR: Why we were not selected as your partner? What was the key deciding reason? What were the other factors influencing your decision? What did we miss out in our solution? How did our proposal align with your needs? How did our presentation compare to those of the winning firm? Was there an objection to our price? What did our competitor offer? Essentially you find a lot of ways to ask the same question. Then, when you're done, you make sure to send a thank-you note to the customer.
  • GJ: What if the interview learns something painful about the sales rep?
  • LR: Some sensitivity is required here because you don't want the sales rep to feel as if he or she is being judged. The key is to focus on what needs to change in order to improve performance, whether it's organizational or personal to the individual rep. Otherwise, the organization and the individual is destined to making the same mistakes again and again, which makes it difficult or impossible to increase revenues.
  • GJ: What are the obstacles to implementing this kind of program?
  • LR: The big obstacle is building trust between the sales person and the manager, because that relationship may involve both the ego of the sales person and have ramifications for the sales reps career. The trick is to present the process as a way in increase sales, rather than a program to winnow out non-performers. If the problem is with the individual rep, you want to make sure that the result is something that the sales rep can make actionable for the next call.
NOTE: If you like what Linda Richardson has to say (and who doesn't?), I highly recommend the following post:
It's based upon a previous interview with Linda and it's probably one of the most useful posts I've ever written.