Understanding the effective and ineffective elements of the sales process can be challenging for any sales team. However, a thorough knowledge of your best and worst performing activities is vital for forecasting revenue and achieving goals.
For a clear view of advancement and improved performance management, companies require a streamlined, reliable sales pipeline. In this discussion, we will thoroughly explore sales pipeline management, addressing queries such as: What constitutes a sales pipeline? What makes it important? How can you develop a pipeline that truly makes a difference?
What Defines a Sales Pipeline?
A sales pipeline serves as an essential instrument that graphically represents various potential buyers as they progress through distinct phases of the purchasing process. It acts as a structured approach to monitor and oversee sales-related tasks, encompassing specifics about each potential client, transaction, and associated financial aspects.
The significance of sales pipelines lies in their ability to reveal crucial insights that enhance productivity, performance, and ultimately, your company's financial outcomes. Given that sales professionals already handle numerous responsibilities, such as generating leads, engaging with customers, compiling reports, closing deals, and more, they require immediate and effortless access to detailed updates on the status of prospective buyers. Neglecting to employ a sales pipeline system in your sales management strategy can lead to the loss of vital information.
To fully grasp the concept of a sales pipeline, it's equally important to understand what it is not, especially since it's often mistaken for other terms in the sales lexicon.
A sales pipeline differs fundamentally from a sales funnel.
While both concepts are closely intertwined, each possesses unique attributes. The sales funnel focuses primarily on leads, viewing the sales journey through the potential customer's eyes. It depicts the rate of lead conversion at each sales stage. Essentially, the sales funnel serves as a broad representation of the lead qualification journey, starting with a large influx of potential leads at the top and narrowing down to a smaller number of actual customers at the bottom.
Conversely, a sales pipeline is centered on potential revenue streams, adopting the seller's viewpoint. It highlights the necessary sales actions to achieve sales quotas or revenue goals. This pipeline visually represents different phases of the sales cycle, such as prospecting, conducting needs analysis, presenting proposals, negotiating, and finalizing deals, and shows how potential revenue is distributed across these phases.
A sales pipeline is distinct from a sales forecast:
While a sales pipeline and a forecast are both crucial for accurately projecting future earnings, understanding lead conversion rates, and guiding strategic decisions to enhance your team's effectiveness, they are not the same. Consider the sales forecast as a component of the larger pipeline, useful for estimating prospective earnings in a set timeframe.
Accurate forecasting emerges when an opportunity reaches the fully qualified stage in your pipeline. This involves sales representatives estimating which deals are likely to close, often using weighted percentages, classifying deals, or the aggregate of sales committed to in a certain period. Many revenue teams use revenue intelligence software to craft these forecasts from their sales pipeline data. These applications assist in pinpointing necessary adjustments in the pipeline to meet revenue targets.
In comparison, your sales pipeline should encompass all your prospects, offering a comprehensive view of everything from newly found opportunities to those nearing closure. While your pipeline provides insight and planning for each phase of the sales cycle, your forecast is a prediction based on more detailed hypotheses within that pipeline.
What does managing a sales pipeline entail?
Fundamentally, a sales pipeline serves as a graphical representation, showcasing the spread of potential earnings across various stages of the sales cycle. The art of sales pipeline management involves overseeing this representation by evaluating the volume, caliber, and maturity of deals to ensure the sales force has adequate prospects to meet their objectives.
Sales groups find themselves in a scenario where addressing immediate revenue demands is not sufficient; they must also proactively plan for upcoming months, quarters, and years. Effective pipeline management examines the entire scenario, guaranteeing that the pipeline's condition and progression are aligned for the team to achieve their targets both presently and in forthcoming periods.
However, maintaining a healthy sales pipeline isn't always straightforward and problem-free, highlighting the necessity for a robust pipeline management approach. This approach enables sales teams to implement corrective measures for rectifying any discrepancies, filling any potential shortfalls, and refining deal qualifications to steer back on course.
While there is no magical recipe for effectively managing a pipeline, certain strategies can prove beneficial:
Establish benchmarks for tracking advancement
It's important to establish essential benchmarks that consistently gauge the health of your sales pipeline and overall sales efficiency. Consider monitoring:
- Number of new leads each month
- Total number of deals
- Overall value of the sales pipeline
- Average deal size
- Average pipeline velocity
- Success rates of sales
- Close probability
- Lead response time
- Sales targets achievements
Understanding the Steps in the Sales Pipeline
To fully utilize the clarity and effectiveness of a sales pipeline, it's essential to grasp the various phases it encompasses. It's crucial to acknowledge that the particular sector your business is in and your distinct business approach can influence these stages.
In this section, we'll explore typical phases frequently found in a sales pipeline:
1. Prospecting
Prospecting, also known as lead generation, is a vital initial step in the sales process. Before potential clients can make a purchase to alleviate their challenges, they first need to be aware of your product or service. During this phase, salespeople pinpoint and approach prospective leads who match the characteristics of their ideal customer.
Activities in prospecting typically encompass tasks such as dispatching outbound emails, making cold calls, connecting via LinkedIn, and executing various marketing efforts. For businesses that lean on inbound marketing methods for lead generation, this phase is often referred to as lead generation.
No matter the terminology used, this phase holds significant importance, as a notable 82% of purchasers report they are open to scheduling meetings with sellers who take the initiative to contact them. Given that companies experience a decline in their customer base annually due to natural attrition, it's essential for your team to recognize the value in drawing in prospective clients who can then be converted into actual buyers. It's crucial to understand: expanding your customer base is key in counterbalancing potential sales losses, making the development of a robust prospecting strategy worthwhile.
2. Lead Qualification
It's a reality that not every prospect will convert into a genuine customer. Matching the profile of your ideal customer isn't a guarantee they'll progress through the sales pipeline. Interestingly, while 61% of B2B marketers forward all their direct leads to the sales team, only about 21% of these leads end up being appropriate for further action.
Lacking a process for assessing potential customers, sales representatives may spend excessive time pursuing leads that are unlikely or unable to purchase your product or service. Even more concerning, they might end up selling to clients for whom the solution isn’t a fit, leading to increased churn and customer service challenges down the line.
It's critical to differentiate between promising and less promising leads, and this requires incorporating an evaluation process in your pipeline. This process should clarify several key aspects for each potential customer:
- Can the prospect afford your product or service?
- Does your offering address the specific needs or problems of the prospect?
- Does the prospect hold the decision-making power for purchases, or do they need approval from other key players?
- Is the prospect prepared to make a purchase immediately?
By providing valuable information to prospects (and gauging their interest in it), sales teams can more effectively identify leads that are truly worth pursuing. Ensure that your sales force is equipped with a robust approach for addressing doubts or concerns, which can convert initially uninterested leads into viable opportunities.
3. Outreach
In this part of the sales process, the approach is quite clear: once a sales representative confirms that a lead is suitable, they initiate contact to actively engage with the potential customer.
About 62% of buyers prefer to be approached by sellers when they are actively searching for a solution to their issues. By reaching out to qualified leads with a customized message, sales representatives can gain an advantage over their rivals and gently guide leads towards a decision. It's vital for representatives to first investigate the potential customer's key concerns and develop a compelling argument for how your product or service addresses these issues, then initiate contact with the lead (through phone or email) while the opportunity is ripe.
4. Fostering Relationships
Developing significant connections with clients is key to closing more deals and doing so more swiftly. Strong connections, formed through a client-focused approach, can lead to a 4 to 8% increase in sales compared to competitors who do not focus on high levels of engagement.
Your strategy for managing customer relationships should also span the subsequent stages of the pipeline, as cultivating rapport and trust is not a one-time effort. By actively listening, creating tailored content, sharing the ethos of your company, personalizing each interaction, and gathering and responding to feedback, representatives can forge robust relationships that ultimately boost conversion rates.
5. Calls, demonstrations, client interaction
After a representative establishes a connection with a potential client, the next step is to arrange an appointment. In this phase, sellers showcase (and frequently demonstrate) your offering, aiming to establish its worth to the potential client.
A surprising 58% of client interactions are deemed unhelpful by buyers. This alarming statistic highlights the importance of adhering to best practices during this crucial pipeline stage to enhance the likelihood of success. To make a memorable impact and sway the buyer's decision positively, it's essential to:
- Highlight the distinct advantages your product or service offers to the buyers.
- Work jointly with the buyer to formulate a shared action plan (SAP) that incorporates their feedback.
- Enlighten them with insights and concepts.
- Gain a deep understanding of the specific obstacles in the their sector or market.
- Conducting effective client interactions can demand considerable effort and be a complex task for busy managers and representatives. They frequently find themselves hastily jotting down notes throughout the meeting, which can be distracting, prone to mistakes, and difficult.
Contemporary sales teams increasingly depend on virtual cassistant tools to enhance their calls without hampering their efficiency. These solutions deliver conversational insights, immediate coaching, live transcriptions and note-taking, and practical data. This enables sales professionals to concentrate on the client during the meeting, while still retaining precise records for subsequent follow-ups.
6. Closing deals
Securing a contract involves more than a mere agreement. Initially, a comprehensive proposal must be provided, detailing how your offering will meet the client's needs, the justification for the cost in relation to the value provided, and the unique benefits your company holds over competitors.
Subsequently, the client may engage in negotiations, potentially multiple rounds, to reach a consensus on the project's scope, pricing, and expectation management. This phase can often be intricate and protracted within the sales process, requiring both parties to engage in give-and-take until a mutually satisfactory arrangement is reached. Given that sales professionals often cite addressing concerns and achieving consensus among different decision-makers as significant hurdles in finalizing contracts, it is crucial for your sales team to be adept at negotiating effectively without yielding unnecessarily.
After these discussions reach a conclusion, the moment arrives to (at last) finalize the agreement. Depending on the business nature, this step may involve contract signing or simply executing a transaction.
Creating a Sales Pipeline
Undoubtedly, implementing a sales pipeline can enhance team productivity and effectiveness. However, developing a pipeline tailored to your distinct business requirements, sales methodology, and clientele can seem challenging.
Below, we provide fundamental guidelines to assist you in establishing a sales pipeline that will aid your team in boosting efficiency and increasing revenue generation:
Identify Your Ideal Customers
Begin by pinpointing the target audience for your product or service. Creating an ideal customer profile (ICP) involves analyzing your direct competitors to gain insights into which types of businesses and individual profiles are most likely to benefit from what you offer.
Compile a detailed roster of potential client companies and their key influencers. This list may become extensive, so employ a system to meticulously record all pertinent details (such as the company, contact data, and any interactions). While smaller businesses might opt for basic tools like spreadsheets for this task, it's important to consider that such methods are less effective for larger or scaling businesses.
Many companies turn to their CRM systems to maintain these records, as these systems offer a centralized, analytical, and constantly updated repository for all data concerning prospects, leads, and clients. This approach is generally more robust than using applications like Excel, but it may still fall short as your business expands.
Advanced sales organizations are increasingly investing in sales execution solutions that address the deficiencies of their CRMs. These platforms streamline repetitive tasks, maintain data accuracy, and harness the power of machine learning, ensuring efficient management and engagement with contacts in your pipeline, regardless of the rate of your business growth.
Establish and organize phases
Sales representatives often face a high workload, and the pressure to meet their objectives can result in burnout and increased staff turnover. Your pipeline should alleviate some of this pressure by efficiently tracking and overseeing the various tasks they need to perform daily to achieve their targets.
To set up the phases in your pipeline, map out all the tasks your sales team needs to carry out on a daily basis. Focus on identifying those tasks that significantly influence your sales, and then allocate each task to a specific phase in your sales process. While the aforementioned stages can serve as a reference, your pipeline should be customized to mirror your company's unique sales methodology, so tailor it to fit your specific needs.
While traditional sales instruments like CRMs aid in defining these phases, they often lack comprehensive capabilities for complete visibility and optimization of the pipeline. Consequently, an increasing number of teams are adopting sales pipeline management tools, which simplify the process of establishing these stages and enhance their effectiveness. Sales pipeline management software enables you to discern which tasks yield the most favorable results and assists in designing a pipeline that boosts your team's efficiency, productivity, and profitability.
Enhance Your Pipeline Stages
It's important to remember that your sales pipeline is a dynamic entity, not something fixed. As it becomes operational, you may observe that certain activities or types of discussions yield more favorable outcomes. This observation might suggest that such activities or discussions deserve their own stage within your pipeline. Conversely, you should consider eliminating stages that prove to be unproductive.
In the process of enhancing your pipeline stages, ensure that your team uniformly understands each stage. Employing a visual guide or roadmap is beneficial here, as it outlines the customer's journey and sets a clear sales methodology for your representatives. This roadmap should encompass the following elements for each stage:
- The types of activities involved.
- The time spent in each stage.
- Key sales questions to ask.
- Criteria for progressing to the next stage.
Utilizing these insights to evolve your pipeline over time allows for a more precise prediction of future revenues. However, this task can be challenging if you're relying on disparate systems, manual methods, or a basic record-keeping system for pipeline management. Such approaches often lead to overlooked issues, putting you at risk of unforeseen setbacks and losses, particularly when market conditions change.
To counter this, some companies are turning to more comprehensive tools that offer a unified perspective of pipeline health and indicators of buyer interest. These tools enable the creation of more accurate forecasts. Additionally, they incorporate early warning systems that alert teams to potential pipeline problems before they impact forecasts. This approach allows for proactive adjustments and issue resolution, preventing problems before they escalate.
How does sales pipeline management software fit into the picture?
In today's business landscape, sales executives are tasked with overseeing a revenue generation system that eliminates uncertainties in the sales pipeline, thereby enhancing the precision of forecasts. For this purpose, integrating the appropriate technological solutions is essential. Sophisticated sales pipeline management software meticulously monitors each step in your sales process, evaluating their effect on your pipeline and their contribution to outcomes. This enables you to pinpoint the specific actions that genuinely drive revenue growth.
