Pipeline Management – How CRM Helps
This blog is designed to both challenge and educate as well as offer practical advice on Pipeline Management. It also explains how a CRM solution can support Pipeline Management best practice.
Previously, I have written a blog on sales qualification. In this article, I examine how to positively influence future sales performance – specifically exploring pipeline management in CRM
What is Pipeline Management and why is it important?
Most businesspeople understand that a pipeline is simply a view of all sales opportunities currently in play.
For clarity, the extent to which pipeline management is relevant in your business depends upon what you’re selling and to whom. In many B2C or low-transaction-value B2B environments, you may have little interaction with your customers before they buy. This makes it hard or impossible to log and track individual potential deals before they happen.
Businesses that are running high-value transactions, through a structured sales process lasting for a period of time need to focus on pipeline management. For these businesses an accurate sales pipeline of well qualified deals offers the best insight to the future performance of the sales team. Paying attention to this ‘leading indicator’ of your business can add value in a number of ways. These include
- If the opportunities in your pipeline are well qualified, with accurate data about their value and close date, a sales pipeline becomes the basis of the sales forecast. This helps to accurately predict what business will close in a given time frame.
- Depending upon the average length of your sales cycle, spotting weakness in your pipeline early enough may allow you to modify your sales and marketing plans in order to avoid future poor sales performance.
- By building a pipeline plan to deliver a particular volume and quality of leads in relation to your sales quota, you have the very best chance of consistently meeting sales goals.
- By analysing the pipeline, businesses can gain early insight to the effectiveness of particular marketing initiatives or promotions. It will also provide insight on the effectiveness of resourcing newly focused aspects of demand generation – for example, an external telemarketing agency.
Before any business can consistently gain benefit from its pipeline measurement it is imperative that opportunities are well qualified, with accurate data about their value and predicted close date.
Pipeline Management. Understanding an organisations sales cycle.
Most sales cycles will conform broadly to the following stages. I previously reviewed these sales pipeline stages in an earlier post. These stages are
- Unqualified Interest
- Partially Qualified
- Verbal Commitment
- Closed / Won.
There may be other states in which to categorise a deal. These include:
- Qualified Out/No Purchase Made – You disengage, are not able to justify continued investment based on your qualification criteria, or the project was cancelled. Typically, no budget was spent with competition.
- Closed Lost – The customer purchased a solution from a competitor.
Pipeline Management. Why break the customer engagement into stages?
There are many benefits to mapping out the primary stages of the customer engagement. These benefits include:
- Definition of common vocabulary regarding sales stages allows for more consistent description of the progress of a deal.
- As we seek to teach new employees or partners to sell on our behalf, we will be more effective if we can show them the sale is broken into clear, manageable steps, with defined milestones and suggested activities.
- By defining stages associated with clear levels of sales qualification, deals can be easily, more accurately and consistently represent within the sales pipeline
Only by accurately representing deals in our opportunity pipeline can we hope to accrue the benefits of pipeline management, including accurate forecasting.
Pipeline Management – Building a pipeline plan.
We have already recognised the pipeline as the best ‘leading indicator’ of future sales results and of the effectiveness of marketing activities. Let’s now assume you have clarity on your sales cycle. This includes clear stages identified, good qualification criteria in place and typical customer engagement activity defined for each. In this case, you now have a better-informed view of the current state of your sales funnel, from which deriving forecasts should now be more straightforward.
The next big step in taking control of your sales success is to build a pipeline plan.
A pipeline plan is a key vehicle to harmonise and align sales and marketing resources. It is predicated upon the definition of a relationship between the sales quotas and the targets upon which marketing resources should be measured – usually the delivery of qualified sales leads.
There are several key components to a Pipeline Plan:
- A pipeline target must be set.Usually this will be defined as a number or value of qualified or part-qualified leads. Often the pipeline target is simply a multiple of the sales quota. For example, a pipeline target of 4x sales quota assumes that one in four opportunities will ultimately close having first reached the ‘qualified’ opportunity stage.
- Marketing need not operationally own the whole pipeline target. It may be appropriate that you plan to generate qualified sales opportunities by working with partners or vendors and that salespeople are expected to generate their own leads by cold calling.
Either way, the pipeline plan will detail the programs and activitiesto be undertaken by sales and marketing, along with the expected contribution to qualified pipeline. As with any plan, its objectives must be realistic.
Insofar as resources in marketing and sales have a remit to deliver qualified leads, they must be held accountable for their contribution, and if possible, have some part of their remuneration tied to their pipeline generation performance.
In the best-run companies, opportunity pipeline is second only to sales as the key metric against which sales and marketing performance is measured. A rigorous review of the pipeline plays an intrinsic part of the sales forecasting process; management can create a cultural awareness of the importance of pipeline – and drive accountability for this as well as sales.
Pipeline Management –Avoiding Pipeline Shortfall
Of the many reasons why companies do not always implement a pipeline plan, high on the list is that it’s often simply hard to do. Aligning compensation and maintaining sales focus on the pipeline requires effort and often cultural change. But few low-cost initiatives have the same potential to impact the sales performance of your business over the short to medium term.
In the early days of building and executing a pipeline plan, you may well find that you have a pipeline shortfall – that is a lack of leads of the right quality to meet your plan.
If you are unable to address this pipeline shortfall, but you still make your sales quotas, it is possible that your conversion ratios from ‘qualified opportunity’ to ‘close’ are better than you have anticipated. Tracking the actual close rates over time will allow you to hone your model and set appropriate targets.
But if your plan is accurate, you should take a shortfall in qualified opportunities – also called a pipeline gap– seriously.
With appropriately aligned compensation, your team should already be concerned about a pipeline gap. They should have an understanding that it will impact their income either now, or later. As part of your business’ regular review cycle, it should be entirely reasonable to review the demand generation plan and insist on change if pipeline targets are not being met.
Pipeline Management – In Summary.
As your business scales, tracking individual sales opportunities in a way that allows you to truly understand and control your business becomes difficult without the right tools.
The implementation of the simple pipeline management best practice outlined will be almost impossible without a customer relationship management or CRM solution. Even if you could begin to calculate and track measurements like pipeline multiples against sales quotas, or weighted forecasts in a spread sheet, your sales team must access and update the data, ideally from wherever they’re based.
Pipeline Management is only one of the may benefits that a CRM solution can bring to your business. Have a read at our recent blog on the benefits of CRM.
ProAptivity are an independent CRM solutions provider with over 30 years experience in helping clients successfully onboard user-customisable CRM solutions. We focus on the implementation, training, and support of highly customised CRM software solutions. Our CRM software supported by our training provide customers with the tools needed to deliver successful business process management.
Fundamentally, we help organisations embed CRM best practice throughout their organisation. This helps organisations become more competitive, customer focused and ultimately more profitable.
If you need help in understanding why my business needs CRM, maybe some of our video’s or eBooks could help! Alternatively visit Maximizer CRM for more information. You can contact us today on 0330 223 6362 or via email at email@example.com. Contact us today for a free CRM consultation that will assess if your business is CRM ready.