In today’s B2B SAAS market, closed lost analysis is often seen as of secondary importance to closed won analysis. However, the reality is that closed lost transactions are just as important in order for the company to continue growing its business. It is one of the top metrics Sales and Marketing leaders should review to understand customer retention more closely.
In this post we will look at why you lose a transaction and examine some of the reasons why your prospects may not go on to become a customer. We will also explore how you can use these insights for future marketing campaigns in order to increase your chances of closing opportunities.
Why do you lose a transaction?
It may or may not shock you to learn that the reason why a buyer decides not to purchase your product or service is… because they decided not to purchase it. It seems an obvious answer but often the true reason is hidden in a myriad of other reasons as we will soon discuss.
However, before we dive into what you may have done wrong, I want to first discuss why it is important to do a Closed Lost Analysis. In today’s world of the internet, you can quickly find lots of companies that will tell you how to achieve closed won transactions. However the same is not true for closed lost analysis.
Why do you need a closed lost analysis?
All businesses have competitors, and all your competitors are out to get the same customers as you. You may also know that most of the customers in your industry purchase products on a frequent basis. It means that the competition for a customer is at an all-time high.
How can you stand out from the crowd and create loyal customers that only buy from your company and never from one of your competitors? It’s very difficult, but it is done regularly.
By understanding the reasons why customers say no to your product, you can start to focus your marketing campaigns on how you can address these reasons and start closing more transactions.
Why do you lose a sale? We have 5 main reasons:
- Customer Confusion: If customers are confused about what you offer and how it would help them solve their problems, then they probably won’t take action.
- You don’t ask them to buy: If you never give your potential customers a reason to buy, they won’t buy.
- You don’t ask them to buy at the right time: If they don’t make the connection between your product and their problem then they probably won’t take action.
- Your sales cycle is too long: Are you selling a high ticket item that requires several visits? If so, your sales cycle might be too long and people will start looking elsewhere for alternatives.
- Price: Sometimes it’s as simple as just having too high a price.
Your customers have to buy into your product for it to work, if they don’t buy into it, then they won’t buy your product. This is why closing lost sales is so important. If you can understand why the customer isn’t buying your product, you are in a better position to make sure that these reasons are less applicable next time around.
How to do a closed lost analysis?
In order to carry out a closed lost analysis, you need to follow these steps:
Step 1: You must first decide on all the closed deals that you want to analyze. A good approach is to start with your top 10% most valuable customers and if possible also include some of the lost opportunities that you can still access.
Step 2: Before analyzing why the customer did not buy from your company, it’s very important to first analyze how they found your company in the first place. You need to understand how you are currently being marketed in the marketplace and compare it to what your lost opportunity customers found.
Step 3: Once you have learned what the customer did in order to find your company, you can start analyzing why they didn’t buy from you. It is vital that you first look at all of the closed lost transactions and then do a follow-up analysis on the closed lost records of your top 10% most valuable customers.
Step 4: Before you actually start analyzing the information, it’s very important that you set out your clear objectives for the research. You want to be able to quickly find any common issues that all of your lost opportunities have in common and find ways to improve them for future marketing. If you do not first set out your goals, then it will be difficult to know when you have finished analyzing the information.
Step 5: Now it’s time to get stuck into the actual closed lost analysis. The first thing that you do is look for a pattern in the data. Are there any common customer journeys that led to your company website?
Step 6: You need to now analyze what is happening on your website. Is there any information that is confusing? Can you explain the value proposition of your product/service in a different way, so new customers are more inclined to buy?
Step 7: Once you have completed your analysis of the website, move onto the prospects’ journey through the sales funnel. Can you see any common mistakes that lead to a sale not being completed?
Step 8: The final step in your closed lost analysis should be to look at the information you gathered from step 4. What are the top 3 issues that are preventing customers from buying? Can they be improved for future marketing campaigns?
In order to carry out this analysis, it is essential that you create a ‘closed-lost reason’ field on your CRM instance so that you can track things more efficiently. Build an easy report or dashboard using simple BI tools to keep a track of your closed-lost opportunities.
The key to creating a good closed lost analysis is the thoroughness of your research and analysis. It is important that you take sufficient time and cover every aspect of the “pain points” that your prospects have.
When you have completed your closed lost analysis, you will be able to see what mistakes you have made and how they can be improved upon going forward.
Analyzing closed lost opportunities using a top 10% segment:
It is always preferable to do a Closed Lost Analysis using data from your top 10% most valuable customers. This is because you can analyze their information for the whole year, rather than having to look at each month separately. This gives you a much better overview of what is happening with your company and what you can do to improve it.
Depending on your situation, you may have closed lost customers that you still have access to. It is always preferred to use this data rather than having to rely on available information from the internet or even worse, just guessing.
Closed lost analysis is crucial because it enables you to learn from your mistakes and stop them from happening again. This is how you can increase your profits, reduce the amount of time that you spend marketing and even reduce the amount of money that you spend on marketing.
The analysis of closed lost business opportunities or “lost sales” is a powerful sales management tool that enables you to manage your sales team to a much higher level than before.
By conducting a closed lost analysis, you have the ability to see exactly what mistakes are being made, why they are being made, and how they can be improved upon in the future. This enables you to improve your marketing strategy for future campaigns.
The closed lost analysis is showing how effectively you are closing business opportunities. If you are finding it difficult to identify sales opportunities that could close into business deals, then this may lead you to try harder and push for more closed lost analysis.
Measuring closed lost analysis is also a great way to measure your customers’ loyalty and level of satisfaction with your products or services. It allows you to see where offering value-added products or services could be beneficial to your current client base, which can help to increase customer loyalty and the number of repeat purchases.