Why professional services firms don’t win work
There are two things that firms need to do to improve their sales conversion rate.
We know a lot about why firms win work. Clients need to associate a firm with the type of project they’re looking to commission: This isn’t just about brand permission, but also whether a firm’s price point is reasonable given the work involved. Firms that pass that initial test need to demonstrate that their ability to do the work—their expertise, the way they work, and how they convert that raw expertise into something of use and value to a client—is better than their competitors’.
So, it’s tempting to think that when a firm loses work, it’s because clients think it lacks the skills required and/or they aren’t convinced it will deliver the outcome clients need. But our research shows it’s not that simple.
The major strategy firms make much of their relationships with senior executives, arguing that this makes it easier for them to by-pass procurement teams: They’re right to some extent, but not entirely. One in 10 clients say that when a firm loses, it’s because it doesn’t have as strong a relationship with the client organisation as the firm that won. But the number one reason why any type of firm doesn’t win work they might have been considered for is that they’re not on a clients’ preferred supplier list. In straightened economic times, there is inevitably far more scrutiny of expenditure, but even when a project has been signed off at the top, the length of time it can take to register a firm that’s not already on a client’s preferred supplier list can significantly delay the start of a project. One senior executive we interview recently said:
“It’s just too much hassle…especially if a project is urgent—and most are—we’ll simply go with a firm that can start the next week.”
Lack of expertise certainly plays a part—it’s the third most likely reason why a firm loses—but clients’ perceptions may also be influenced by the next most important reason, that a firm’s proposal is inadequate. In other words, although a client’s sense of a firm’s expertise (it’s brand permission) might mean that the firm will be considered, firms often don’t do enough to demonstrate this experience when pitching for the work. Moreover, where a client isn’t sure of a firm’s expertise in a given area (a firm’s brand not being considered relevant is the fifth most important factor), the proposal can play a decisive role in demonstrating the depth of a firm’s knowledge. This is a reminder that no firm can take its expertise for granted: Clients certainly don’t.
The reasons why firms lose vary by type of firm. While the preferred supplier list hurdle matters to everyone, strategy firms are right to say that their relationships give them an advantage: They’re less likely to be beaten solely on the basis that another firm has a deeper relationship with the client. Strategy firms are, however, more likely to lose because they’ve not demonstrated the necessary specialist skills: Could they be guilty of taking this for granted?
“Consulting” firms—we grouped the mid-tier strategy firms in here alongside other general consultancies to distinguish them from McKinsey, BCG, and Bain—are less likely to lose on price, but the Big Four are most likely to do so. It may be that the latter have pushed up their prices in the last two years, to the point that clients no longer view them as good value for money. Alternatively, it could be that some of the Big Four are discounting, making the others look poor value for money by comparison. Inadequate proposals are an issue across the board.
At a time when professional services firms are trying to make every sales opportunity count, what should they do?
- Firstly, if they’re pitching for work from a client where they’re not on the preferred supplier list, they need to start the process of being registered immediately rather than waiting until they’ve won the work (otherwise, they are less likely to win it).
- Secondly, they need to make sure their proposals are exceptionally strong and demonstrate the firm’s depth of relevant expertise at every turn.