Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Lost Business Analysis


Published on

Published in: Business
  • Be the first to comment

Lost Business Analysis

  1. 1. Dinesh TK 600 500 400 300 200 100 0 Div 1 Div 2 Div 3 Div 4 Enquiries Quotations Orders Lost Pending
  2. 2. 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.
  3. 3. Effect of Lost Business Analysis Imagine your hit rate is 3%, If it increases by 1%, the sales volume would be increased by approximately 25-30%.
  4. 4. 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?
  5. 5. What is Lost Business Analysis? 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.
  6. 6. Benefits of Lost Order 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.
  7. 7. Why Competitor? 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.
  8. 8. Lost order analysis? 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?
  9. 9. Why no analysis on lost order 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.
  10. 10. Ask yourself !  What good will it do to invest money in advertising, hire new sales people, or develop new products if you don’t know why the customers don’t buy the current products?
  11. 11. Analyze WHY?  You might have the most cost efficient processes, highly trained employees, and high-quality products, but this becomes academic when customers purchase the competitors products instead of yours. The bottom line is in order to grow you must count on most of your good customers to continuously buy from you. If they don’t you must find out why.
  12. 12. Simple Method A simple way to find out about lost orders and active projects is to periodically analyze your quotation or bids
  13. 13. 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.
  14. 14. 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.
  15. 15. Information's Eight kinds of information gathered from quotation and lost order analysis can help making strategy decisions
  16. 16. 1. Competitor sell prices The competitor pricing information is used in “Competitive Price Comparisons” to guide you in new product design, price discounts as a tactic, and making decisions about yearly price list changes.
  17. 17. 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.
  18. 18. "Most valuable customers," (MVC) are the small number of customers who make up most of a manufacturer's sales volume. Losing the sales volume from an MVC accounting for 40 percent of business can obviously kill off growth for a long time. If these MVCs are profitable, you must find ways to retain them. If you do lose an order on an MVC account, you need to call them and pursue the reason for the lost order.
  19. 19. 4. Sales rep information  By evaluating bookings to lost orders, it's easy to see which rep groups (or sales territories) are having trouble selling your product lines. Changes may have to be made to the sales channels to achieve your growth objectives.
  20. 20. 5. Model 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.
  21. 21. 6. Competitive information  It is necessary to find out exactly which competitors you are losing to most of the time. For instance, if you have 25 competitors but are predominantly losing orders to three of them, it makes sense to focus a lot of attention on these three competitors. At a minimum you should do a competitor matrix for each of your models against the equivalent model of each of three competitor products.
  22. 22. 7. Hit rate  The hit rate is the percentage of quotations won (orders) to total quotes issued. This is important for several reasons. First of all, it is a good indication of the effectiveness of the sales department. Secondly, if the hit rate drops to a low percentage, it should flag management to investigate why the company is losing or not closing orders.
  23. 23. 8 The cost of quotations The last point associated with the hit rate is the overall cost of unsuccessful quotations. It is relatively easy to examine the total costs of the estimating or inside sales department and develop an “average cost per quotation”. For instance, if the estimating department does 500 quotations per year (which cost approximately $250,000 or $500 per quote) and the success rate is 10 percent per year or 50 successful quotes lead to orders – it means that $225,000 was spent on unsuccessful quoting.
  24. 24. Remember, you can't really develop a plan to increase sales growth without knowing why you lose orders and customers.