At our quarterly town hall meeting at Barrel, one of the questions asked was: “What are the top reasons why we don’t win projects?”
The answer we gave at our town hall was something like this:
There are numerous factors ranging from our pricing, our body of work, the impression we made on the prospect, who referred the prospect to us, etc. that contribute to why someone ultimately decided not to work with us. The challenging thing is that when we lose and ask the prospect for feedback and reasons why they went with someone else, it’s hard to tell if they’re telling us the full story. Oftentimes, it’s a polite “your price was too high” or “the other team said they could do it faster”. Other reasons we’ve heard are “we just felt the other team had slightly more relevant experience” or “we felt the other team was a better fit”.
The truth is, the real reason could be a myriad of factors and even the prospect may or may not fully understand why they chose someone else. We know this because every now and then, a prospect who chose someone else reaches back out and asks if we’re still interested in taking on the project or taking over midway after firing the winning agency.
So without a clear picture of exactly why we lose, we need to do our best to reduce the variables that can hurt our chances and cover all bases. This means putting forward our best, most presentable selves and being prepared to answer any and all questions thoroughly and with confidence.
Since the town hall, I’ve been continuing to think about the question. There’s something unsatisfactory about not knowing exactly why we lose. So, as the great Charlie Munger would suggest, “Invert, always invert.”
What are the top reasons why we win projects?
From what I’ve heard from clients over the years, these are the reasons why we win:
Every new agency relationship is a risk in that the prospect is committing time and money to collaborate with relative strangers on initiatives that can greatly impact the careers of certain stakeholders. This is often why prospects seek out agencies to repeat work that they’ve done in the past. It’s about mitigating risk.
An agency can position itself by showcasing case studies and thought leadership that detail how they’ve expertly solved the very problem a prospect is looking for help on. The stronger the positioning, the greater the chance the agency can increase its chance of winning and even charge a premium.
If the prospect is unconvinced that an agency can be that much better than the other in solving a particular problem and that the type of work that needs to be done is more of a commodity than a specialty, the prospect will value pricing and shop around for the best deal.
Depending on the agency’s cost structure and business model, competing in price doesn’t always have to be a losing proposition. Offering a low price, winning many deals, and growing volume can be a formula to scaling a business. However, pricing just to win and landing a money-losing project is a sure way to go out of business.
Price can also be a tie-breaker in situations where competing agencies all present themselves as experts with great case studies and understanding of how to solve the problem. With equal degree of confidence in all the options, the prospect is likely to go with what feels like the best deal.
This is related to relevant experience but rather than expertise in solving a particular kind of problem really well, the presence of star-studded brands in a portfolio that the prospect aspires to lends a halo effect to the agency by association (e.g. if amazing brand X worked with this agency surely we ought to as well). It’s the agency equivalent to having social proof.
I’ve seen cases where this factor is so strong that the by virtue of having worked with the prospect’s favorite 2 or 3 brands, we immediately became the #1 choice even before discussing price or the specifics of our experience and capabilities.
How the prospect finds the agency can be a powerful factor. A weak referral source is often a Google search that leads to an organic search result or an ad. The prospect is likely to view agencies found this way to be a dime a dozen. As an agency, you hope the prospects that find you this way will be thoroughly impressed with your portfolio and get in touch to talk about a huge project with a large budget. This rarely happens and most “leads” through paid or organic search channels are tire kickers.
The referral source that’s most desired is someone that the prospect respects. The greater the respect or admiration the prospect has for the referral source, the greater your chances of winning. Imagine a prospect: she is a founder of a venture-backed direct-to-consumer (DTC) brand looking for an agency to help her with branding and a new website. These are referral sources she may come across:
- The VC who led the round and is also a board member. This VC has worked closely with other successful DTC brands and has a good relationship with an agency that did branding for many of her portfolio brands. This agency is very, very expensive but boasts an impressive portfolio. The VC can make a direct intro to the agency’s founder.
- The founder of another DTC brand in a slightly different space. He recommends using an agency that he thought was very affordable, scrappy, and fast. Their website looks pretty nice. The founder offers to connect the prospect with someone at the agency.
- The prospect’s friend, a former co-worker when she used to work in finance. The friend recommends her roommate’s agency (where the roommate is a designer) which has some nice work showcased on their website. The friend is still in finance working up the corporate ladder.
The prospect may reach out to all three options, but it’s most likely that the first two agencies will be held in higher regard and it’s even possible that a decision has already been made even if the prospect is going through the motions of vetting different options.
We’ve been the agency in all three of these scenarios and countless others. When we feel that our referral source is on the weaker side, we know right away that our chances to win are less likely. Unless we have a very strong way to differentiate and position ourselves in the mind of the prospect, we know we’ll be fighting an uphill battle. This is why when someone can’t even remember who recommended us or doesn’t feel strongly one way or another about the person that recommended us (e.g. a passing acquaintance like a tech vendor or random person who replied to their LinkedIn request for agency names), we need to stop and ask ourselves if the opportunity is truly worth pursuing.
I’ve written about 8 different types of referrals that an agency might receive (client, investor, platform / solution partner, services partner, agency partner, referral agent, employee, friend / acquaintance / family). What I didn’t explore in that article was the fact that the quality of the referral depends very much on how strong the prospect’s respect or admiration for the referring person is. This is not always easy to discern or find out, but it’s worth asking a few questions about whenever a prospect reaches out. Potential questions you might try testing out:
- How’d you hear about us?
- In what capacity have you worked with [the referrer]?
- How long have you worked with [the referrer]?
- Is [the referrer] playing any role in helping you select the right agency?
- What did [the referrer] say about us and why we may be a good fit?
Beyond the four primary factors highlighted above, the other “winning” factors I’ve come across over the years are varied and often one-offs. It’s most likely that these factors were paired with one or more of the ones above. For example, the price was right and one of these minor factors put your agency over the top.
- “Trust”: I put this in quotes because it’s usually about familiarity and has to do with pre-existing relationships or some kind of trait that puts the prospect at ease. For example, when the prospect is of the same ethnicity as the agency founder, this can sometimes be advantageous. Or having gone to the same alma mater, having been from the same town, or having mutual friends in common. These things strengthen the sense of familiarity and eases the prospect’s willingness to trust.
- Speed: I don’t love winning on speed because there are so many variables to a project that can impact timing, but sometimes having a nimbler process with the ability to turn things around much faster than the competition can truly be a winning factor.
- Process: Some prospects are really into the ins and outs of the process and judge the agency based on their articulation of how a project is supposed to go. This is a variation of relevant experience because explaining process is another way to demonstrate that you’ve solved a similar problem before.
- Other social proof: Having been featured in a respected publication or been mentioned on social media by “important” people are less direct forms of referrals that are often the result of good PR and marketing efforts by the agency.
- Thought leadership: A whitepaper, blog post, or column in a respected publication can strike a chord with the right prospect and become a winning factor. This has been rare for us, but I know there are agencies that depend quite a bit on content marketing to land clients.
- “Chemistry”: This, too, I put in quotes because in most instances, people are polite to each other and there’s friendly interactions that all feel warm and fuzzy. Every now and then, it’s possible to have a deeper connection with someone during the course of a few conversations and build rapport that gives you the edge over competitors. It’s rare but it sometimes happens when the rep on the agency side is especially passionate about a topic or field that aligns with the prospect’s interests. I remember one instance when a client cited our conversations on media/journalism and my clear interest as a factor in choosing our agency. Definitely not something to build your business development practice on, but humans are complex and make decisions in unpredictable ways.
So, what are the top reasons why we win projects?
It’s a cop-out answer. It’s most likely a combination of factors with relevant experience, price, client roster, and referral source being the top contenders sprinkled with none to some of the miscellaneous factors.
But here’s the bigger takeaway: in order to win more deals, put effort behind the following:
- Build expertise so as an agency you’re really good at something and known for it.
- Be sure people know the marquee clients you’ve worked with because that’s an easy way for them to get a quick impression.
- Proactively build relationships for the long-term with potential sources of referrals, especially with those who will command the respect and admiration of future prospects.
- Qualify leads on price so you don’t waste time fighting a price war if you’re unwilling to compete on price.