Dinesh TK

0

100

200

300

400

500

600

Div 1 Div 2 Div 3 Div 4

Enquiries

Quotations

Orders

Lost

Pending

ISO 9001 : 2008 emphasize on Lost Business Analysis to improve the business or

to stay in the business.

This is based on the improved hit rates by the

companies who do effective analysis on lost orders.

Imagine your hit rate is 3%, If it increases by 1%, the sales volume would be increased by approximately 25-30%.

Effect of Lost Business Analysis

Do you routinely talk to customers who didn't buy?

Are you looking for new customers to replace lost customers?

What is your bid and quote hit rate?

Do you know what types of jobs have the highest and lowest hit rate?

What is cost of preparing bid/quote?

Lost order analysis is a systematic method of discovering why customers did not buy. Knowing why customers did not buy is critical in preventing future lost orders and maintaining a solid customer base.

Lost Order Analysis highlights what changes in products or services are needed to gain and retain customers.

Lost order analysis is specific information on pricing, service, competitor strategies and even market trends to help you gain competitive advantage.

What is Lost Business Analysis?

Serves customers instead of replacing them.

Shows why customers buy from competitors.

Indicates changes that make you more competitive.

Wins more bids on profitable projects and higher hit rates.

Benefits of Lost Order Analysis?

When you lose an order it is usually because a customer perceives the competitor product or service as a better solution. If you don’t know why they selected the competitor then you won’t be able to modify your product, improve quality problems, and offer a new product or a new service to compete.

Why Competitor?

Despite its importance, lost order analysis is a customer tool that is seldom used, particularly by manufacturers who are shotgun marketers and do not have a marketing or business plan.

More than 75 percent of small manufacturers do not track lost orders, while 50 percent were unaware of all the reasons why customers drop them as a supplier. If lost orders are that important, why don't more people seek out their underlying causes?

Lost order analysis?

Sales people don't like to pursue the reasons why they lose orders out of fear those reasons will be held against them.

Sales people are so busy trying to get new orders they don't make time to follow lost ones.

It's sometimes difficult to get customers to tell you why they gave the order to your competitors.

Finally, lost order analysis doesn't happen because management doesn't demand the information or make it a high priority. Many companies simply depend on their sales department for this information and have never developed a systematic way to dig out the real reasons.

Why no analysis on lost order

What good will it do to invest money inadvertising, hire new sales people, or develop newproducts if you don’t know why the customersdon’t buy the current products?

Ask yourself !

You might have the most cost efficient processes,highly trained employees, and high-qualityproducts, but this becomes academic whencustomers purchase the competitors productsinstead of yours. The bottom line is in order togrow you must count on most of your goodcustomers to continuously buy from you. If theydon’t you must find out why.

Analyze WHY?

A simple way to find out about lost orders andactive projects is to periodically analyze yourquotation or bids

Simple Method

Compile a list of all the quotations by sales territory or salesman.

Printout a status sheet that describes each quoted project with one quotation per page.

Check alternatives under the description of the quotation:

a. Project is active _______%.b. Project is dead.c. Project is shelved.d. Project is lost to competitor.

Simple Method

For active projects, the salesman must answer the percentage chance of getting an order.

For dead projects, the file is pulled from the active quote files.

For shelved projects, the quotation is left in the active files and reviewed again in the next six-month review.

For projects lost to a competitor, the sales representative is asked to find out the specific competitor, model, competitor sell price, and reasons you lost the order. If the answers are inadequate, the customer should be called by the factory.

Simple Method

Eight kinds of information gathered fromquotation and lost order analysis can help makingstrategy decisions

Information's

The competitor pricing information is used in“Competitive Price Comparisons” to guide you innew product design, price discounts as a tactic, andmaking decisions about yearly price list changes.

1. Competitor sell prices

If you can uncover the real or complete reason why the customer decided to buy a competitor's product, you will have insight into what strategy must be changed in the future to get the customer back or get the next order. Retaining good customers is just as important to a growth plan as finding new customers and new orders. Strategies include pricing, current products, new products, services, sales department, sales channels, and advertising and promotion.

"Most valuable customers," (MVC) are the smallnumber of customers who make up most of amanufacturer's sales volume. Losing the salesvolume from an MVC accounting for 40 percentof business can obviously kill off growth for along time. If these MVCs are profitable, youmust find ways to retain them. If you do lose anorder on an MVC account, you need to call themand pursue the reason for the lost order.

By evaluating bookings to lost orders, it's easy tosee which rep groups (or sales territories) arehaving trouble selling your product lines.Changes may have to be made to the saleschannels to achieve your growth objectives.

4. Sales rep information

Grouping lost orders by model reveals which models (or product lines) might not have a competitive advantage and should be considered for redesign or a pruning decision. If you discover the customer perceives your competitor's product to be superior, you may have to redesign the product or develop a completely new one to compete.

5. Model information

It is necessary to find out exactly whichcompetitors you are losing to most of the time.For instance, if you have 25 competitors but arepredominantly losing orders to three of them, itmakes sense to focus a lot of attention on thesethree competitors. At a minimum you should do acompetitor matrix for each of your models againstthe equivalent model of each of three competitorproducts.

6. Competitive information

The hit rate is the percentage of quotations won(orders) to total quotes issued. This is importantfor several reasons. First of all, it is a goodindication of the effectiveness of the salesdepartment. Secondly, if the hit rate drops to alow percentage, it should flag management toinvestigate why the company is losing or notclosing orders.

7. Hit rate

The last point associated with the hit rate is theoverall cost of unsuccessful quotations. It isrelatively easy to examine the total costs of theestimating or inside sales department anddevelop an “average cost per quotation”. Forinstance, if the estimating department does 500quotations per year (which cost approximately$250,000 or $500 per quote) and the success rateis 10 percent per year or 50 successful quoteslead to orders – it means that $225,000 was spenton unsuccessful quoting.

8 The cost of quotations

Remember, you can'treally develop a plan toincrease sales growthwithout knowing why youlose orders and customers.