Successful sales pipe management can yield substantial rewards, and yet, it can also be one of the most frustrating tasks that a sales manager can perform. Done correctly, there are measureable gains in revenues, and in departmental morale. Done incorrectly, it can be a horrible waste of time that demoralizes everyone involved. This quick guide will go over the basic structure of a good pipeline and help you get started in structuring your sales pipeline in an effective way.
Why do I need to manage my sales pipeline?
Surprisingly, there are many businesses that do not manage their collective sales pipeline, but rather leave the process to each individual sales person. As you can imagine, this provides little insight for managers when comparing across the company.
The problem is that selling is a process. And no process improves without insights into how it is progressing. How do you know if one of the sales reps is a non-performer, who may need training, or mentoring, or dismissal? How do you know if one of the steps in your process is not working? Is the demo insufficiently covering key aspects of your product? Is the process stopping at the time of price disclosure? Are the leads from marketing unqualified and not sales ready?
These and many other process questions can be identified and improved by effective management of your sales pipeline.
How do I structure my sales pipeline for success?
1. Create a crisp definition of each stage
This is where many people fail. The definition of each stage in their sales process is vague and hard to classify the stage of each deal. Sales people tend to be optimistic, and push each deal as far forward as possible. This can be a disaster for sales forecasting and the cause of many missed targets. These definitions need to be stated clearly and objectively. There should be clear understanding of exactly what is required.
Another problem in this area is the definition of the process stage by deliverables of the sales process. For example, completing a demo is a common point in many sales processes. However, this could be wrong if the customer didn’t comprehend the product fully, and may require another demo.
The best way to define the stages is by mirroring the buying stages of the customer. Completing a stage only occurs when the customer is clearly finished and ready to go on the next stage. The final goal is to have unambiguous descriptions of client actions that demonstrate completion of a stage.
2. An example of a potential buying cycle
- Status Quo – needs to see options to improve or solve problems
- Interested – needs to see what is possible
- Exploration – needs to see all options available
- Studying options – needs to dig in to validate this as a possibility for them
- Picking an option – needs help to select the right option
- Consequences – needs help in understanding the risks of the decision
- Deciding – needs to build a final case for purchase
3. Buy a good tool
To effectively manage the level of detail that is required, you will need a good CRM tool. CRM software can help generate and assign leads, track where each customer is in the sales cycle, view customer history and keep tabs on accounts and renewals. This will allow you to look at pipeline trends, and to dig deep into the details that make up those trends. All the information is centralized to allow easy access. Every interaction with the prospect can be easily captured (mobile allows capture in the field), and analyzed to penetrate the true trends in deals.
CRM will also make the pipeline visual through graphic dashboards, and alert you to activities that aren’t working. CRM also makes sale forecasting an easy calculation, although you will need to stay diligent on the correctness of the details underlying the forecast (like deal probabilities). CRM also brings insights into the success of your sale processes stages, and allows you to focus on the most unsuccessful areas for corrective action.
Lastly, CRM can also help to speed your sales process with automation features. This will keep your sales force from bogging down in routine procedures. For example, upon completion of certain tasks, template emails can be automatically sent (i.e. a confirmation of an appointment).
4. Keep your eye on the flow
Successful sales pipe management always focuses on four things, quantity, quality, effectiveness, and balance.
Quantity– No pipeline can be successful is there isn’t enough flow of leads to achieve your goals. Once you have been measuring your process for long enough, you can begin to see the conversion rates at each of the selling stages. With these conversion rates, you can then back calculate the number of fresh leads that are necessary.
Quality– We all know that no two leads are alike, and that their probability of success is often different. In time, we learn that there are common characteristics that help to identify the better leads. It is critical that we monitor the quality of the leads to maintain deal flow. One very critical aspect to monitor is the quality of the leads at the beginning of the pipeline. Each lead entering the sales pipeline will begin to cost the team in hours and efforts. The better we can filter these leads, the more hours we make available for quality deals. Another effective strategy is to quickly move leads that are not “time ready” to a lead nurturing program (see article “Are You Throwing Away 70% of Your Sales Everyday). In this manner, they are not consuming precious sales time, but are still advancing to a future sale.
Another key metric for monitoring quality is the age of the lead. Although not true with every lead, it is a general axiom that the higher the age of the lead the less probability of success in landing the deal. Are you freshness dating your leads?
Effectiveness– Effectiveness is a measure of our success at each of the stages. It is commonly measured by the conversion rates at each stage. Are these rates increasing or decreasing? Are there improvements we can make to improve these rates? Also, how do these conversion rates correlate with the lead quality? Another measure of effectiveness is the stage cycle time. The faster the time through the stage, the more effective we will be in processing more leads. Many people discover effectiveness by phone calling the past deal misfires and determining the underlying cause. In the end, your need to ask yourself “Are you improving or not?”
Balance– Everyone that has driven a freeway understands that traffic slows during rush hour. And yet, the freeway can handle much more traffic during non-rush hour periods. A sales pipeline works in a similar manner. Sales people will rush toward leads that are near closing, and then rush back to the young leads when the near closing deals wither. Deal flow can definitely improve if deals in the pipe are monitored, and a uniform amount of leads are introduced in each period.
Metrics make it happen
To borrow an old phrase, “If it’s not measured, it’s not happening”. Fortunately, there are many metrics that can help you understand the dynamics of your sales process. We have assembled a sample of some of the more common ones below.
- Win rate
- Cycle time by stage and in total (Age in stage)
- Actual sales to budgeted sales
- Conversion rate by stage
- Age of lead
- Size of pipeline
- Lead to marketing qualified lead %
- Marketing qualified leads to opportunities %
- Opportunity to customer %
- Lead to customer %
- Average deal size
- Average margin per deal
Sales pipeline management can generate many rewards to a business. Besides the improvements in revenues, it can provide a method of improving the processes that support your sales generating efforts. It can also help to smooth revenues and provide forecasts that your business can depend on.
Today’s CRM is the inexpensive tool that can make these efforts easier, and reduce complexity. With new insights, you can better understand your prospects, and serve them deal winning information in an effective process. OnContact CRM is a comprehensive solution that will keep management of your sales pipeline easy and visible. With its 360 degree view, it will also keep you abreast of all customer activities and keep your team working together towards total customer satisfaction.