Closed Lost Reasons - Don’t Let Sellers Grade Their Own Homework

All companies collect closed lost reasons for their sales opportunities. Data collected on closed lost reasons (in your CRM such as Salesforce or Hubspot) can inform product positioning, pricing, sales motion, messaging, and your product roadmap.

Unfortunately, very few businesses get any actionable insights from the closed lost reasons they collect.

Here's why and what your organization and team members can do about it.

• If there was no decision to go with an alternative, keep them warm on your value props and have a follow up date in 90 days 
• vs. if they went with an alternative, activate a competitor specific nurture sequence and have a follow up date in 6 months 
• vs. if they put the project on hold for a particular reason, enroll them on specific sequences related to budget, team resourcing etc. and follow up in 45 days. 

Do’s and Don’ts of Collecting Closed Lost Reasons

Before diving into why companies fail to take advantage of valuable insights from their closed lost reasons, it makes sense to point out some do's and don'ts.

Do collect data based on hypotheses.

You can collect data based on hypotheses (or even gut feelings) from your go-to-market (GTM) team. Whether the suggestions come from product, product marketing, or revenue organization teams, they need to be specific and based on hypotheses as to where your product in its current state may be falling short (against the alternatives.)

Ask your GTM to connect to their gut feelings about where the current positioning for the product and the offering do not align (for instance product positioned as an Enterprise solution but lacking a key integration with a complementary tool commonly used by Enterprise companies.)

Don’t ask your consultants or friends what your close lost reasons should be.

You may be tempted to ask external consultants or friends working at a different company what closed lost reasons you should be using in your CRM.

Your product and product marketing teams already have a sense of why you may lose deals or which solution alternatives could claim the sale.

Start with those reasons and make sure they point to the root cause of why a deal was lost. i.e. if you know you typically lose deals because you don't have a SSO integration, you can have something like this set up as your close lost reasons: 

Dropdown - Close Lost Reason - Product Gap

Dropdown (dependent) Close Lost Reason Detail - SSO Integration

Text - Close Lost Detail - Give seller to include open text context

Don’t just ask your sellers to fill out closed lost reasons.

There are good reasons not to just rely on sellers' input about closed lost reasons.

Mainly, sellers are too close to the deal and there is an incredible amount of  confirmation bias involved in the seller's judgment.

Sales managers should be the ones to determine the closed lost reason as part of one-on-one sales coaching.

Close Lost Reason = Other

The ”other” bucket can be valuable as well. However, “Closed Lost = Other” is only helpful if:

• Additional open and text-based context is provided

• The 'Other' bucket is frequently reviewed to promote trending reasons to picklist values

• Go-to-market (GTM) team is informed of emerging trends, so action is based on new data

Why the sales manager involvement?

Sellers are too involved in the potential sale to evaluate why they may have lost it. As a result, they tend to gravitate toward symptoms rather than root causes.

For example, 'lack of budget' could be the root case or it could be a symptom. 

Root cause - the buyer allocated $3K annually for the initiative. Your product costs $56K.

Symptom - As the buyer went through your demo, they decided they can make do with Excel as an alternative. They ultimately didn't see value in the product.

Finding the root cause requires the sales manager to ask the seller questions that the seller should have asked the prospect.

Getting to the bottom of why a deal was lost is an effective form of call coaching, and the closed lost reason should be an “unintended byproduct” of this coaching process.

Sellers shouldn’t be the ones who ultimately determine why the deal was lost... It is not about “hygiene” or even “honesty.”

You simply can’t grade your own homework. Sellers are too close to the deal to objectively evaluate the root cause, although they will get better at it over time and with consistent training.

Until then, it’s the sales manager's job to conduct a post-mortem on lost opportunities.

Sales Managers’ Role and Benefit to the Seller

The evaluation of closed lost reasons should be part of pipeline reviews with sales managers. 

The one-on-one review of each closed-lost deal provides an opportunity for situation-based sales training - was the seller speaking with the right individual, could they have taken a multi-threaded approach, did they ask the right questions, did they handle objections well?

The role of the sales manager should be to conduct a post-mortem on deals lost to train each seller to do better and aggregate market feedback to make the sales collateral and approach better and better each quarter.

How Revenue Operations Fits In

RevOps is there to provide the right processes and training to orchestrate the dissemination and use of data. At the end of the day, there needs to be a culture in which each team (Sales, Product, Product Marketing, etc.) can and are driven to make data-informed decisions.

Here is how RevOps can help:

• Help revenue leaders determine the right close lost reasons to implement in your CRM
• Set up the fields and validations to collect the data
• Facilitate the creation of playbooks based on closed lost reasons - what do we do to follow up? 
• Implement and maintain the mechanics of the follow up sequences - i.e. automated email sequences, auto-task creation based on closed lost reason to follow up on a particular time frame
• Package the data from closed lost (and won) and help the rest of the organization consume it to gain insights.