What do you know about the real value of sales pipelines to your business?
In previous Varicent articles, we’ve talked at length about all of those sales pipeline stages and metrics, what they mean to your sales team, and how best to manage them; which is invaluable advice worth referencing. Now, we’re delving a little deeper with some sales pipeline analysis, so you can better understand the sales pipeline and manage it in a way that heralds sales success and growth.
What’s the Best Sales Pipeline Model for You?
Here’s the thing. You know what should be included in the standard process, but how do you build and maintain a sales pipeline that’s suitable for your business model? What specific value do those data analytics and metrics reports bring and what are the critical differences between a sales pipeline and sales forecast? Read on for solutions and answers and be prepared to have your minds blown by a few surprising benefits of sales pipeline software you may not have considered.
Recap – What Should a Sales Pipeline be?
Okay, I know we promised you a heap of new info, but before plowing on, let’s get the definition and purpose of a sales pipeline straight.
The perfect sales pipeline covers every stage of the sales process from the first contact with an opportunity, prospect, or lead through the proposal to aftercare and repeat business. This whole customer journey can be captured in your business's customer relationship management (CRM) tool. A manager, using pipeline dashboards and reporting, should be able to accurately pinpoint where the customer is and predict revenue for both the business and the sales rep. For the latter, that means accrued commission on top of their salary. There should be a set and finite timeframe for a sales pipeline and along the way, multiple touchpoints to view real-time and historical data on dashboards that capture the sales pipeline reports that reflect the stage and success rate thus far.
This pipeline methodology wasn’t dreamt up just to give analysts something to do. A study carried out by Harvard Business Review showed that companies with an effective pipeline management system had an average growth rate of 5.3 percent. That’s a 15% higher rate of growth than companies without an effective sales pipeline management strategy.
In short, a well-managed sales pipeline, in tandem with supporting sales software, potentially provides the following advantages:
- More streamlined sales sales
- Ability to forecast business results
- View of how to allocate resources to support sales
- Analysis of the sales strategy is working for your business, and what isn’t
- Captures current fiscal and territorial progress
- Frames where you are from your KPIs and targets.
While there are endless variations of the sales pipeline, the most straightforward and widely recognized model is this one, often represented by an inverted pyramid:
Sales Pipeline vs Sales Forecast
Hold on a minute... sales forecast? That’s not a stage, is it? No, it isn’t. And is that an alternative name for the sales pipeline? Again, that would be a no. Within the sales community, there’s been much debate about the differences and similarities between these two terms. To really understand and appreciate the robustness of a sales pipeline (and to make sure that you win that debate the next time someone quizzes you), it’s worth splitting it out from a sales forecast.
Quite simply, while we know that a sales pipeline represents the long game and covers the entire process, a sales forecast focuses on the deals that are most likely to close in a specific time period.
Behind that snappy definition is also a difference in purpose. In the case of the sales pipeline, a sales rep is constantly using their CRM dashboard to gauge where a customer is in the sales process. They can then utilize the analytics to plan their next move. A sales forecast has a specific purpose—it represents how close an individual or team is to achieving their target and therefore, what further actions need to be taken to get there.
It’s fair to say that the sales performance management software that supports your sales pipeline should contain forecasting capabilities, as early evidence of a possible “miss” allows you to shift quotas, reassign territories, and any other factor that may be a barrier to hitting sales goals.
What About Sales Pipelines Vs Sales Funnels?
The term sales funnel gets confused and conflated with sales pipeline even more often than sales forecast. Again, it’s a part of the sales pipeline, but by no means the full picture. In fact, visualizing an actual funnel is a smart way of separating this concept into stages.
Picture a siphon, the sort of thing you use to transport dishwasher salt into your machine. In the same manner that wide opening quickly narrows to control the amount going in, the sales funnel represents the big number of initial leads and prospects as these reduce to more likely customers and actual conversions in the qualification stage of the sales pipeline.
Let’s be realistic. Not even the most skilled, fortunate, and determined sales reps can maintain all of those original prospects without some losses or leads tailing off. That would most likely create an unmanageable quota. In short, the sales funnel is no longer relevant past the qualification stage, but much of the really hard work goes in at this point. It’s the wisdom of understanding which lead has “legs” (i.e. answers your calls, sets up a meeting, shows some intent to purchase) versus the leaden leads that will drop off that takes a sales rep beyond the funnel and into negotiation.
How to Start Building your Perfect Sales Pipeline
Now we’ve established what a sales pipeline isn’t, let’s consider some of the key considerations when modeling and navigating your sales pipeline.
1. Know your Potential Customer
Like preparing for a marathon, the training and build-up are as important as the race itself. Identifying prospects and getting lead generation going in the right direction involves the same care and attention. Think about:
- Who is your product designed for?
- What does that customer look and what are their needs?
- How do you secure and find the right type and number of prospects?
It’s also worth bearing in mind that a potential customer is carrying out their own purchase analysis, most likely using their CRM tool to answer queries such as:
- Does this product meet my customer demographic?
- Is it affordable/useful/marketable?
- Does this clash with a similar offering?
Whether you’re in the business of selling directly to your customer or are reliant on a distributor or retailer to get your product to market, the research, and analytics count in equal amounts.
Getting these customer metrics accurate is the key to forming a solid layer to that upside-down triangle. Sales performance management (SPM) software is often seen to be more about tracking the trajectory of the sales rep, but there’s a good deal of supporting software that is rich with metric reports reflecting the performance of a product, as well as custom fields that help you break down the demographics of potential prospects. By creating customer personas before the meetings and negotiations kick in, you’ll come closer and faster to those more likely to be interested in what you’re selling.
The other areas of rich data and analytics that you should be considering at this early sales pipeline stage are the wider state of the economy (in other words, is this the right time to be launching and reaching out to new customers?) and if you’re mining in an area that’s already been stripped of its assets.
2. Know the Winning Numbers for your Sales Pipeline
A sales pipeline process isn’t something that’s thought up overnight, nor does it exist in isolation. Backing up every stage is your company’s wider objectives and carefully defined key performance indicators (KPIs). Everyone working to complete a part of the sales pipeline needs a very clear idea of:
- How many deals need to be achieved per month, quarter, or year?
- Do warm-up conversations count toward compensation pay-outs as much as closing a deal?
- How long will it take to move through the pipeline stages?
The common truth, as we saw when concentrating on the sales funnel, is that not every prospect gets to the negotiation stage, and even those that do may be lost before a deal is closed.
This is where the right software can really shape and support your sales conversations and decision-making. Automated compensation calculations take the guesswork out of figuring out how much more you need to achieve to close, while quota management and territory management tools ensure everyone in the sales team has the amount of customer, product, and area that they can manage. These metrics reports are the key to having an informed, incentivized team that can refer to real-time information on easy-to-read dashboards. They are also what gives your sales pipeline shape and fluidity as your team progresses through the stages.
3. Know Your Sales Pipeline Stage Markers
Once you’ve built up some momentum beyond prospecting, what’s keeping those deals from derailment? Although there is an amount of organic movement, there should be a constant set of factors and variables that dictate if you’re good to move on. Some of the key elements are:
- Be certain you’re talking to the right people at the right time: Whether this is having a conversation with the person that controls the purchasing budget, a booked call or meeting post-proposal, or the official opening of negotiations, you can’t pop the champagne cork arbitrarily.
- Decide and agree on the event or activity that heralds the beginning of the next sales pipeline stage: Make sure that you have the analysis and metrics to back up this development.
- Offer an integrated information platform: If you’re navigating a whole team from stage to stage, this is where your field staff needs to be feeding their results into an integrated platform that’s available to all. They can then see where they are with the rest of the team and you have the evidence of progress or stalling for any performance management review situation.
4. Know your Process for Sales Success
As we’ve already recognized, no two sales pipeline journeys are quite the same. Also, there may be some back-peddling involved before you hit sales pay-dirt.
Sales success, even with automation, software, and dashboards, is often about the number of calls, emails, and scoping you do in the early stages (or sales funnel). It’s just as much about the amount of value-rich contact and follow-up you have with someone you’ve sold to before. Even with an established customer, you can’t ever take for granted that they will be an easy up-sell. The more diligent you are with the habitual stuff, the smoother the cool, edge-of-your-seat negotiations and deal-making will be.
For some sales professionals, that means setting aside a day a week purely for admin, calls, and research. For others, that routine ritual is monthly training or team check-ins. These are all the parts of the job that oil the wheels and ease the flow of the greater sales pipeline.
To keep a spirit of competitiveness alive and well during these routine stages, add in some custom fields to your supporting software that keeps track of the number of calls made or training modules completed. Good software means that you can show off the high achievers on a company-wide dashboard presentation.
5. Know your Intended Outcomes and Benefits
As you and your team reach the end of a sales pipeline cycle, this is the perfect time for some sales performance management review. This should be considered on an individual, team, and even campaign level. Of course, plucking out one example of data from many won’t provide as much material for analysis as looking at several metrics and reports. Utilizing all the tools, data, and dashboard information allows you to understand which leads resulted in pitches and which pitches went on to become a negotiation and deal.
Swapping sales tips over the water cooler is not a recipe for success. A good business practice that comes from establishing a trusted sales pipeline process is, though.
Studying the solid evidence and metrics provided across the sales pipeline via sales performance software leads to a more holistic picture of whether your current model is working, or in need of tweaking. Used effectively, it also displays whether it’s your sales team personnel that may not be working or may need tweaking.
Three Things That Can Support Your Sales Pipeline
1. Focus on and follow up the strong leads, nurture these customer relationships, and know when to let go. You no longer have to just rely on a phone call or meeting to check-in with customers. Ensure you are onboard with a retention and acquisition email strategy. Deliver alternative communication through engaging content and offers.
2. Utilize the data and metrics on your SPM software. There is no guesswork in sales. With current, live data on sales about to close and the number in your pipeline, you can act accordingly.
3. Keep on reviewing, and keep on updating your sales pipeline process. That inverted triangle has room to grow and plenty of opportunities for an interception.
For further information on the best software to support your sales, sales dashboard development tips, and how to hit the right sales metrics for your sales pipeline, book a demo with us and speak to one of of our knowledgeable team members.