How To Stop ‘Closed Lost’ Screwing Up Salesforce Dashboards
No-one likes a loser.
Or to be thought of as a loser.
So the term ‘Closed Lost’ is not going to be a favorite for your average salesperson.
Yet Closed Lost is the standard Opportunity Stage picklist value for removing a deal from the pipeline. And it’s a picklist value that salespeople hate to use.
Impact of not setting deals to Closed Lost
But here’s the problem.
Failing to set dead wood opportunities to Closed Lost has a number of adverse consequences:
- Over-inflation of the sales funnel. Managers and salespeople do not have a robust view of the strength (or weakness) of the sales pipeline.
- Incorrect sales performance reports. Effective management of the sales team depends upon having accurate information e.g. opportunity conversion rates. These reports, in turn, require unsuccessful deals to be closed out.
- Salesforce clutter. It gets increasingly hard to see the wood from the trees in salesforce. This makes it more difficult to focus on the opportunities that have true value.
- Lack of funnel leakage information. It becomes impossible to understand at what stage opportunities are leaking from the sales pipeline.
- Reduced competitor information. It becomes more difficult to identify how many deals and of what type of deals that are lost to competitors.
How to use the Closed Lost Opportunity Stage
No self-respecting salesperson likes to set an Opportunity to Closed Lost. But that doesn’t mean it hasn’t got a place on the Opportunity Stage picklist.
Closed Lost is appropriate in the right circumstances. It’s appropriate when a deal has been lost to a competitor during a pitch, tender or other competitive situation.
So let’s not beat about the bush. If another business has won an opportunity at our expense then the salesperson should set the deal to Closed Lost.
But many of our clients that have high quality pipeline visibility and sales forecasting accuracy, also use two additional Opportunity Stage picklist values.
Additional Opportunity Stage picklist values
In addition to losing to a competitor, there are two other reasons why deals should be removed from the pipeline.
- The customer doesn’t make a purchase. No deal takes place – for anyone. Yet salespeople often have an anathema to using Closed Lost to describe the outcome of these opportunities.So instead of Closed Lost, many companies use an Opportunity Stage picklist value such as No Purchase to remove these deals from the sales pipeline.
- The opportunity is qualified-out. In fact this is a legitimate reason for ‘losing’ a deal. As Bud Suse says, coming a close second is a cardinal sin in sales. Don’t waste time, effort and resources on opportunities you are unlikely to win.So instead of Closed Lost, many companies use an Opportunity Stage picklist value such as Qualified Out to remove these deals from the sales pipeline.
Gather additional information on Closed Lost deals
Adding two more Opportunity Stage picklist values in addition to Closed Lost is not necessarily the end of the matter however.
Businesses, quite rightly, often want to gather more information. They want to understand the underlying reasons why a deal was removed from the pipeline.
One way to do this is to create a Reasons Lost picklist field. A validation rule forces salespeople to make a selection from this list.
The problem with this approach is that sales people invariably select a value relating to Price. Which might indeed be the case. But it’s rarely the only reason. (Failure to communicate value might be the true reason!).
There is no killer solution to this problem. However many of our customers gather information on Closed Lost deals in a qualitative format. They have a text field called Lessons Learned in which salespeople identify what could have been done better in the sales process.
It’s not perfect. But experience shows it does provide more information in a useful format than simply selecting from a Reasons Lost picklist. Use this information to analyse sales processes, up-skill and develop salespeople, modify the pricing and discount strategy, develop new product features and create a culture of learning and sharing.
What to do next
The first step is to create additional Opportunity Stage picklist values to Closed Lost. Then educate salespeople and other users on the circumstances when each value is appropriate.
Now that you have done this, here are five ways you can benefit from the removal of dead opportunities from the sales pipeline.
- Pipeline visibility. Get a robust view of the sales pipeline. Use this blog post to learn how to do this, If You Only Create One Dashboard Chart Then Make It This One.
- Win Rates / Opportunity Conversion Rates. Analyze variance in win rates between teams, individuals and territories. Use this blog post, Measure And Compare Opportunity Win Rates Across Sales Teams.
- Stage Movement Analysis. Understand at what stage in the sales process your team is removing deals from the sales pipeline. Determine whether it is early or late in the sales cycle. It’s chart #5 on our list of 12 Charts That Should Be On Your Sales Dashboard.
- Competitor Analysis. Understand the ratio between deals lost to competitors versus Qualified-out and No Purchase. Apply this information to evolve sales strategy and tactics. Present the data in an informative way using our 5 Tip Guide To Effective Salesforce Reports.
- Improve sales morale. No-one likes a loser – so don’t force your salespeople to feel like one. Acknowledge to the team that not every deal can be won; not every customer will make a purchase; and that some deals aren’t worth pursuing in the first place.
Closed Lost isn’t the always the only problem with the Opportunity Stage however! Read more about our sales process and opportunity stage recommendations.
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