A sales pipeline is a useful concept used by sales managers, individual sales people, and small business owners to quantify demand for their products and services. No matter what you’re selling, by effectively managing your sales portfolio, you can smooth customer demand and create a more stable sales cycle with more reliable results.
A sales funnel works by placing cohorts of leads or prospects at different stages of the sales process/sales cycle, and then measuring their progress through the funnel, from an unqualified lead to a satisfied repeat customer.
Unfortunately for you and me, the pipe tends to leak. Leads and prospects fall out of the pipeline along the way and fail to become the happy customers we know they could be.
At the gross level, sales flow management is nothing more than estimating incoming cash flow. We look at our leads and prospects, make some estimates of the likelihood that they will eventually purchase our products and services, and incorporate that information along with their expected spend into our projections to figure out how much revenue we expect to generate.
But the real power of pipeline management becomes apparent when we establish the right metrics and put processes in place to respond to changes in those metrics. To illustrate, consider the following story.
A retail customer of ours called us once to ask if we could help him improve his company’s sales. He explained that the sales revenue was not high enough and that his staff needed training in closing sales, in order to close more sales and therefore improve the sales revenue.
When we spent some time with his staff, it became clear that there was nothing wrong with his ability to close sales. Instead, we found that staff found it difficult to start or maintain a conversation with a customer. Most potential customers walked into stores and then walked out without really getting a chance to talk about the products they wanted to buy.
By looking at the sales channel and the particular points within the sales process where the most customers “dropped out” of the channel, we were able to determine that the biggest problem staff had was not closing sales, but rather opening a dialogue with customers.
Once we established that, we ran some training courses and created training aids designed to help staff open a sale and have a conversation.
Year over year, sales at each store increased by as much as 20%.
There are several benefits to managing your sales funnel effectively:
- By focusing on the entire pipeline rather than a short-term focus on closing deals, or winning a single high-value contract, demand for your services will be more fluid and your cash flow more reliable.
- Making incremental improvements of just 1-2% in your conversion rates can increase your sales much more.
- An in-depth analysis of when and why your leads and prospects leak out of the pipeline will identify specific areas for improvement and help you get much more value for your training investment.
- By keeping track of which leads are filtering out of your sales pipeline and which are not, you can build a profile of prospects who are more likely to buy and prospects who are less likely to buy. This knowledge will help you focus your marketing material and allow you to more accurately qualify your leads, leading to a faster, more efficient, and less expensive sales process.
- Once you’ve established an accurate sales pipeline, you can use it to plan new product launches. If you were to plug all the information about your new product into an existing sales channel, you’d quickly get a pretty good idea of how many leads you’ll need to generate to reach your new product sales goal. This, in turn, will help you decide how to launch the product and give you an idea of how much it will cost. If you’re going to need 500,000 leads to reach your sales goal, you’ll probably want to consider a mass market ad campaign.
In the information age, it always pays to be informed.
© Gear Factory 2008.