The business benefits of measuring lost sales
Understanding the reasons behind lost sales is critical to stopping the leak and increasing sales in the future. Performing a lost sales analysis is one of the best ways to identify where improvements to your sales strategy are needed. This blog will explore the benefits of using your business data to evaluate lost sales.
How can your business use data on lost sales?
There are two measurements that are essential to lost sales analysis. The first metric enables you to discover lost sales opportunities. With Business Intelligence (BI), your sales team can look at your pre-determined product combinations and see what your customers are actually buying and what they are not.
Your sales manager may find that some customers aren’t buying the mix most suited to their needs. A sales rep may discover that another customer is buying pasta but not any sauce. These are significant lost sales opportunities. In addition to pinpointing missed cross-selling opportunities, your team can drill down into the underlying data to find opportunities lost by type of customer, type of product, sales region, or individual branch, and as such draw inferences about what may be causing the lost sales.
The second measurement monitors your customers’ sales figures to quickly spot any declining customers. This metric enables you to see which customers are decreasing their purchasing volume or frequency, or those who have ceased buying altogether. Armed with this data, your sales team can quickly intervene to resolve any problems before the customer is lost completely.
What impacts lost sales and lost customers?
Once you have identified customers on the decline, the next step is to understand why. There are several factors that contribute to lost sales. It may be that you need a highly targeted marketing campaign. Or the quality of your customer service is poor. A competitor may be offering the same product at a lower price. Or your customers may not be aware of your entire product line. Whichever is the case, these factors can be resolved.
When customer service quality drops, so does customer loyalty. Unsatisfied customers typically tell twice as many people about a bad experience than they do a positive one, according to research. Use your BI to evaluate your supply chain and measure the performance of your delivery in full, on time (DIFOT). DIFOT is a key component to customer satisfaction. Lastly, make sure customer complaints are met with an effective customer service response to encourage customer loyalty.
A competitor beating your price is a common occurrence. Be careful of responding with defensive pricing, however. A price war can be dangerous to your bottom line. Instead, have your sales reps meet with your customers to emphasize the importance of value over price. Also, make sure your reps are familiar with your entire product line so they can ensure your customers are aware of all of the options available in your product range. It may be that you have a similar product at a lower price or your rep may negotiate special pricing such as a discount based on purchasing volume.
Choose the right solution to analyse lost sales
Using your ERP system for this analysis would require a great deal of customization. This would require your sales team to request reports through IT. These IT generated reports can take days, or weeks, to create and are often outdated by the time they are returned. These reports are also static, requiring another request to IT for every additional query into the first report. These reports can be so time consuming that they are often avoided, or present a significant cost to the business.
With a BI solution, however, you are able to monitor your lost sales opportunities and declining customers in near real-time. BI reporting in Phocas is dynamic, allowing you to drill down to discover which products are missing from a customer’s mix. Next, you can drill deeper to determine why a product isn’t selling. For instance, by examining product sales by individual rep, you may find that rep is consistently failing to sell a certain product. In this case, the rep may not be aware of your entire product line; or may need additional mentoring from a more experienced rep. Examining the data by region may reveal customers are only buying shampoo, but not the complementary conditioner. This might mean a competitor is offering a lower price on conditioner. Armed with the facts, you can send a rep to the customer to resolve the problem, take advantage of new sales opportunities, and ultimately reduce lost sales statistics.
With a BI solution like Phocas, your employees don’t need to be skilled in spreadsheet use. Phocas is intuitive and easy-to-use for everyone, even those whith very limited technical skills. Phocas offers answers to your questions in seconds. By drawing your data from multiple sources across your company, you now have access to one source of the truth. Thousands of customers around the world use Phocas to discover new opportunities, identify trends, spot potential challenges, increase profits, and streamline operations.
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Sales metrics to know and measure
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