Losing proposals can be more dangerous for a company than not having the opportunity to bid on it.
The Excuses Companies Tell Themselves
Frequently, companies casually brush off unsuccessful bids for the business, putting failed proposals down to unreal price expectations, misaligned client profiles or clients who are not in the buying stage. These excuses sound like: "They don’t have the budget." "They aren’t our clients." Or, "They’re just kicking tyres."
The Reputation Cost of a Lost Bid
Not only can losing a contract be detrimental to a company through lost revenue and the time and resources invested in preparing a proposal, it can also damage its reputation.
- It can indicate that the company cannot deliver on its promises.
- An unsuccessful bid might suggest a product or service is not as competitive as others on the market.
These factors affect a company’s reputation and make it harder for it to win future proposals or contracts, especially if it relies on repeat business in a niche market.
Why Clients Rarely Switch, Even When They Should
Customers often hesitate to change suppliers, even when the product or service is mediocre, due to their familiar relationship with the current supplier. This situation is often referred to as the devil you know scenario, where customers feel more comfortable sticking with the supplier they know, even when the product or service is not ideal.
Changing suppliers of products and services requires effort and energy for the customer. It takes double the effort, twice the energy and often unsustainable concessions to win back a contract a second time. This scenario can have far-reaching consequences for a company’s image and bottom line.
Economist George Akerlof observed a similar pattern in his Nobel Prize-winning study of used car markets: when buyers cannot verify quality directly, they price everything as average, and the best sellers quietly get pushed out. Boeing ran into the same dynamic in 2008, when a major aerial refuelling tanker contract went to a rival. Rather than accept a vague explanation, it pushed for a detailed review of exactly why it had lost, corrected the specific issues that review uncovered, and won the recompeted contract in 2011. Digging past the convenient excuse is what turns a lost bid into a future win.
Turning the Ratio Around
While it is true that some potential clients do not have the budget, are not ideal customers, or are not seriously looking to buy, all of these circumstances should only ever represent a small percentage of the business proposals a company submits.
If a company is submitting an abundance of proposals but few are being accepted, there are a few steps it can take to improve its company profile, increase its revenue and improve its bottom line.
Revise the Proposal Writing Process
The proposal writing process may need revising to ensure proposals are well-structured, concise, and communicate the company’s strengths and value proposition clearly. The quality of the presentation should exceed the potential client’s expectations.
Assess the Competitiveness of the Offer
The competitiveness of the company’s products or services may need assessing. This process, called a value proposition analysis, can help identify gaps or weaknesses in a company’s proposals, such as a lack of differentiation from competitors, unclear or unproven benefits, or misalignment with the customer’s needs.
Target the Right Clients
A company’s marketing initiatives must attract the right kind of clients. If marketing efforts are not effectively targeting ideal customers, it can result in a high volume of unqualified leads or proposals, wasting valuable time and resources.
By implementing these strategies, a company will improve the number of accepted proposals, increase revenue and ensure its favourable long-term position in the marketplace.
Takeaways
- Monitoring winning and losing proposals, and constantly taking steps to improve the ratio, is essential for healthy business growth.
- Genuine budget, fit or timing issues should only ever explain a small share of lost proposals, not most of them.
Why does losing a proposal matter beyond the lost revenue?
Because it can also damage a company’s reputation, signalling that it may not deliver on its promises or that its product or service is less competitive, which makes future proposals harder to win.
What is the “devil you know” scenario?
It describes why customers hesitate to switch suppliers even when the current one is mediocre: the familiar option feels safer, so winning them back later takes double the effort and often unsustainable concessions.
What is a value proposition analysis?
It is a review of a company’s products or services that identifies gaps such as a lack of differentiation, unproven benefits, or misalignment with what the customer actually needs.
How much of a company’s lost proposals should genuinely be down to budget or a bad-fit client?
Only a small percentage. If most losses are being explained away this way, the real issue is more likely the proposal, the offer, or the marketing that generated the lead in the first place.
References
- The Sveriges Riksbank Prize in Economic Sciences 2001 – Press Release, The Nobel Prize, NobelPrize.org. nobelprize.org/prizes/economic-sciences/2001/press-release
- GAO Sustains Boeing Bid Protest: Agency Recommends Air Force Reopen the Bid Process, U.S. Government Accountability Office, 18 June 2008. gao.gov/press-release
- Air Force KC-46A Pegasus Tanker Aircraft Program, Congressional Research Service, via the Defense Technical Information Center. apps.dtic.mil
