Pipeline Management (part 2) Understand your sales cycle

Leading on from the previous article introducing the importance of Pipeline Management, this article explores the importance of understanding an organisations sales cycle.

The need to understand your sales cycle

Most sales people will be able to offer an opinion as to the likelihood of closing a particular opportunity.

“They really like our product”

“I reckon they’ll be running a trial next month”

“Their IT Director has accepted an invitation to play golf with our MD”

Such insights to the status of a deal can certainly be of value, but should any of these statements lead us to forecast the closure of an opportunity?

Most sales cycles will conform broadly to the following, or similar, structure:

  1. Unqualified Interest – Someone at a prospective customer has expressed interest in your products or services, but you do not know whether they have a need, or an ability to buy.
  2. Partially Qualified – The prospective customer recognises a need for a product or service like yours, but you do not know how, or if, they will pursue a purchase in this area.
  3. Qualified – An individual with authority to purchase a solution recognises a need for a product or service like yours, and is sponsoring a purchase.
  4. Contender – You have been specifically recognised as a potential vendor to address the customer’s need.
  5. Preferred – The customer believes that your offering fulfils their buying criteria more fully than the alternatives.
  6. Verbal Commitment – The individual with authority to purchase has informed you of their intent to order, possibly subject to discussions of a contractual nature.
  7. Closed / Won – You are in receipt of an order which conforms to your pre-set order acceptance criteria.

Of course there may be other states in which to categorise a deal, most obviously:

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.

We may want to capture other opportunity states, especially where a services component of an order creates contingency in a contract; limiting the ability to recognise revenue until services are delivered or acceptance criteria have been met. In this scenario, it might make sense to track stages such as:

In deployment

Deployed and accepted

Most businesses have activities which they commonly employ at certain stages of their sales engagement; but ‘demo’, ‘trial’, ‘meeting’, ‘reference call’, or ‘quotation’ are not meaningful stages in themselves. They are simply activities which we, or our customer, may drive in order to progress further through the customer’s buying cycle.

Why break the customer engagement into states and stages?

There are many benefits to mapping out the primary stages of the customer engagement, including:

  • 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 broken into clear, manageable steps, with defined milestones and suggested activities.
*For example, a demonstration might be a good way to establish interest, but presenting an outline business case to a senior decision maker may be the best way to qualify that interest. Allowing the customer to evaluate our technology may be desirable, but only once we have verbal commitment to proceed based on meeting certain success criteria.
*In this way, stages provide a structure around which we can manage the sale, following certain best practice defined by sales leadership.
  • By defining stages associated with clear levels of sales qualification, we can much more accurately and consistently represent our deals 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.

ProAptivity specialise in the deployment of CRM solutions into small and medium size businesses. They are the Northern Ireland solutions partner for Maximizer CRM which offers both on-premise and on demand solutions with full Mobile CRM capabilities. For more information contact 028 90735630

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