The 95:5 rule and your win rate
This is the second piece on the 95:5 rule. The rule says that in any quarter about 95% of the buyers in a B2B market are not buying. The first piece showed how to count the buyers who are buying in your own market. This one shows how to count how many of them asked you to quote.
Do that sum before you decide what to fix. It will not tell you why sales are low. It tells you where to look first: at the buyers who never asked you, or at the ones who asked and chose someone else.
The sum is your wins divided by your win rate. Your win rate is the share of your proposals that you won. The answer is the number of deals you were in.
The sum is part of the training of Jo, our growth manager, and I quizzed her on it. Here it is with made-up numbers, kept easy.
Two firms sell into the same market. 1,000 businesses choose a supplier this year. Those are the buyers who are in the market. Each firm wins 30 of them.
The first firm wins 6 of every 10 proposals. 30 divided by 0.6 is 50. So it was in 50 deals, and 950 buyers chose a supplier without asking it.
The second firm wins 1 of every 4. 30 divided by 0.25 is 120. So it was in 120 deals and lost 90 of them.
Both firms won 30. The first wins most of the deals it is in, so the place to look is why so few buyers ask. The second is asked more often and loses three times in four, so the place to look first is why it loses.
The sum does not give either firm the reason. Buyers may not ask the first firm because they have never heard of it. Or they have heard of it and think the product is not right for them. The second firm may be losing on price, on the product or on how it sells. Each firm still has to go and find out.
Check the win rate before you use it. Jo's warning: "The win rate depends on what the CRM calls a proposal. If sales only log deals they expect to win, the rate looks high." So count the proposals from your records, and do not take the figure from memory.
Then divide your wins by it, and start asking why on the side the sum points to.
Lena