A sales pipeline is a digital tool which can improve team effectiveness and increase revenue. Here we cover all it's important details.
A favourite party trick of the famous polymath John Von Neumann was to ask his friends to randomly call out a page number from the telephone directory, after which he would proceed to recite from memory the names, addresses, and phone numbers of all the people on that page.
For those of us who are not quite as gifted as Von Neumann at remembering names and numbers, a sales pipeline is a great alternative to instantly visualise important customer information in a matter of minutes.
A sales pipeline is an important digital tool that helps sales managers get an instant overview of the performance of their team. By letting them visualize the number of prospects at every stage and make workflow adjustments accordingly, sales pipelines enhance sales team effectiveness and increase revenue.
In fact, a survey conducted by the Harvard Business Review found that companies with a strategy for sales pipeline management saw a 15% year-on-year increase in revenue as compared to companies without.
This article will discuss in further detail:
· What is a sales pipeline?
· The advantages of a sales pipeline
· Sales pipeline vs. sales funnel – what is the difference?
· Stages of a sales pipeline
· How to build an effective sales pipeline
· Best practices for maintaining a sales pipeline
A sales pipeline is simply a visualisation of your customers at different stages in the sales process. It can be displayed in many ways; for example, using bar charts, funnel diagrams, or flowcharts. The information in a sales pipeline indicates how many customers are in each stage of the purchase process at any given point of time, giving you an idea of your potential revenue.
Here is an example of what a sales pipeline looks like in action:
Using this information, sales managers can get information on:
· The volume of revenue and how much cash flow they can expect in a given period
· How resources have been allocated and whether there are any resource gaps
· The amount of time it takes to complete a typical sales process from prospecting to conversion
· Possible process bottlenecks and hindrances in the sales process
· Whether or not salespeople are meeting targets and how far they are from achieving them
Creating a sales pipeline is one thing but being able to effectively manage it is another. Without proactive management and regular updates to your sales pipeline, it will end up becoming quickly obsolete, and adding no value to your sales process. Some advantages of sales pipelines are:
1. Better sales forecasts: Sales pipeline data can help you forecast more accurately. For example, if you know how many prospects are in the pipeline, you may be able to estimate how many more deals you can close before the year-end.
2. Effective measurement of team progress: A sales pipeline also makes it easier to determine whether the sales team is meeting its quota. In addition to this, it is easier to set realistic target revenues, predict future slumps and identify opportunities for process optimisation.
3. Improved resource allocation: Another advantage of a sales pipeline is that it helps in determining whether your sales team members are being fully utilised. When used to inform workflow management, sales pipelines can help allocate your sales team resources more efficiently, allowing you to maximize their capacity.
4. Assessing average sales velocity: The sales velocity is the time taken for a prospect to become a paying customer. With a sales pipeline, managers can figure out how much time this process takes on average and schedule their sales and marketing activities accordingly.
5. Enhanced customer relationship management: Utilizing data from a sales pipeline can help with enhancing customer relationship management strategy. By understanding pain points and aligning with customer expectations, sales managers can build deeper engagement and personalize the user experience for their customers.
Although the terms sales pipeline and sales funnel are often used interchangeably, it is important to know that they are not the same.
A sales pipeline is a detailed visualization of the current position of prospects in the sales process. It offers data on the stage at which prospects are currently from the salesperson’s perspective – showing customers at the contact, qualification, proposal, or closing stage, as an example.
On the other hand, a sales funnel is the visualization of the customer journey that turns a prospect into a lead, viewed from the customer’s perspective. Some of the stages in this funnel are awareness, interest, evaluation, purchase, etc.
While a sales pipeline measures the effectiveness of your sales team by assessing how fast customers progress through the sales process, a sales funnel measures the impact of your lead generation and conversion efforts.
Both these visualizations are usually complementary, since marketing efforts result in more sales, and sales teams are responsible for utilising marketing materials to encourage conversion. However it is important to understand the distinction in order to make effective strategic decisions.
Every business operates differently, which means that the sales pipelines for each business will also differ. Generally, there are seven stages of a sales pipeline, which are:
This is the first stage of the pipeline in which you try and find potential buyers for your product through ads, digital marketing and other promotional activities. Marketing and sales teams play a key role in this phase.
2. Lead Qualifying
It is not always possible to follow up personally with every interested lead, which is why it is important to weed out the prospects that may not be suitable for your product. The fastest way to do this is through an automated qualifying process – similar to how banks run an instant credit check when applying for a credit card online. Automating this phase helps free up your resources and focus your efforts on prospects who are more likely to convert.
After the prospect has shown interest in your product or service, it is time to schedule an initial meeting or a demonstration to evaluate whether they would be interested in purchasing your product. It is extremely important to do your research on the prospect, to make an effective and personalised pitch. At this stage, you can pull in technical experts or industry experts who can help answer your prospect’s questions about the product.
If the meeting ends in success, the next stage is sending a proposal to the customer that tells them how your product can address their needs. Here is also where you state your unique selling proposition and competitive advantage to help in making your proposal stand out. It should also include the important information on pricing, scope of work, and other particulars that will help prospects make a quick decision.
Often, what follows is a negotiation on the scope of work, the expectations from each party, the pricing and terms, and any other important clauses of engagement. Negotiation has to be smooth and subtle to ensure that the customer does not back away at the last minute.
This is the crucial moment in which a sale is either won or lost. Should your proposal be successful, you can now commence your relationship with the new customer. In this phase, the sales team typically hands the reins to the account manager or relationship manager.
The final stage of the funnel is about providing good customer service and ensuring ongoing customer relationship management to increase long-term loyalty and the potential to upsell the client.
Data from Salesforce reveals that 81% of sales representatives believe that it is important to have an overall view of data across the entire customer journey. However, many businesses still employ manual methods of processing data and only 49% of companies have fully integrated sales CRM systems.
Some key tips to building a successful sales pipeline are:
Automate where possible
Trying to process leads manually can often hamper the way your team manages and interacts with prospects. Consider using digital solutions where possible to reduce the risk of lengthy sales cycles. Contractbook, for example, helps to speed up contract automation, especially in the later stages of the sales pipeline, ensuring that sales can be closed as quickly and effectively as possible.
Integrate your sales pipeline with a comprehensive CRM system
A sales pipeline on its own is not enough to increase sales and customer loyalty. You need to align the data and insights gained from a sales pipeline with other CRM solutions to get a more comprehensive view of your customer and sales teams which will give you a more holistic view of whether you are succeeding in your overall company objectives.
Adapt your sales process to align with pipeline data
The insights from your sales pipeline should inform your existing sales process or help to create a new one. Constantly test and optimise to identify a framework that your team can follow and be agile in shifting your sales process to align with the realities of what is happening in your sales pipeline.
The increasing popularity of digital customer relationship management (CRM) solutions such as sales pipelines has greatly eased the process managing sales teams in today’s era. However, sales pipelines are just the tip of the iceberg, and several other solutions can be used in cohesion with them to improve the efficiency of sales teams and enhance their effectiveness at converting leads.