Sales Closing Ratio

Sales Closing Ratio measures the efficiency of the sales conducted by a business, a division, or an employee. It is identified as the number of sales that actually get done over a period of time in ratio of the number of presentations made ₁. Sales Closing Ratio can be calculated according to the formula:

Sales Closing Ratio Example:

If an salesman has done 10 presentations for a product or service for 10 different customers for this week, and 3 of those ended up getting closed, then his/her Sales closing ratio would be

The result will be 0.3 (or 30%)₂

Why is the Sales Closing Ratio useful?

Sales Closing Ratio can provide vital information when used across division, across products, and across marketing campaigns. It helps business owners identify channels preferences based on their ratios, and plan their marketing and sales strategy on that.
 
To understand the value we are talking about, let's consider this example: an online store has three main products (A, B, C) that it is selling online. For these products, it has created three separate ad campaigns on Facebook to run for a month concurrently. At the end of the month, the business calculates the sales closing ratio for these 3 ads based on how many clicks they have triggered and how many actual sales. Let's say that the ratio for the products (A, B, C) were (10%, 20%, 30%).
 
You can see here, by comparing the results, the business knows to focus on product/campaign C as it has the highest sales closing ratio, bringing the business more revenue.

Can Sales Closing Ratio be improved?

While the closing ratio depends on the sales person skills and competencies, there are a number of considerations that can help increase it, such as:

• Understanding the customer

  First thing is to well understand the prospective customer. What does this customer like and dislike? what are the pains he/she suffers from, and gains they need? value proposition canvas can help you learn the customer jobs, pains and gains and learn how to address them.

• Understanding the product

  To understand the product well, you need to understand the full value proposition and how it addresses the customer pains, gains, and jobs. Once you get the value proposition concept and the customer, you need to understand how the product is unique and its competitive advantage

• Understanding the Target Market

  Understanding the customer and product are not enough to improve the closing ratio. Understanding the market as a whole and how it is tending is essential. You need to consider target market pointers to address the market correctly.

• Pitch well

  Pitching well is one of the most important considerations for raising the closing ratio. When done correctly, a well-presented product will beat a better product that is badly presented almost always. We have a full guide on Pitching your startup and products to prospects here with downloadable guides.

• Don't sell. Provide value.

  Today with a global market that is hyper-connected via internet and where customer power is rising to unprecedented heights, it is a tough business environment. Customers today are sensitive and susceptible to new offerings, and can easily compare alternatives and get the best deals. It is therefore essential to focus on loyalty rather than sales. Loyalty makes customers want to buy because they simply like what you stand for, and for your business ideals, not necessarily because they need the products or services you are offering.
   
  Having said that- the main focus of your business should be on creating and providing value to the customers, not sales. As the value of what you offer and stand for increases, so will the sales and closing ratio increase.

• Learn from mistakes

  You can do everything right and still get a low closing ratio. Here, it is important to learn the reason behind this. This could be something related to the business itself and its image, the product and its features, or the presentation and pitch. Collecting feedback on the performance of your sales process is essential in identifying such gaps in order to build recovery strategies.