It has been a while since the last post in this series. We’ve been really busy with the launch of the Dealmaker Index global sales benchmark study. The data that we’ve gathered from that study underlines the need for sales and marketing to be on the same page. In my post The Actual Cost of Sales and Marketing Misalignment, I draw from the Dealmaker Index data to show that there can be a difference in quota attainment of up to 25% between those organizations where sales and marketing are singing in harmony, versus those where these two interdependent functions are just singing their individual tunes.
You can find the earlier posts here:
- Blueprint for Sales and Marketing Alignment - Part 1
- Select the Customer: Blueprint for Sales and Marketing Alignment - Part 2
- The Buyer's Perspective: Blueprint for Sales and Marketing Alignment - Part 3
In the last post in this series, I focused on qualification of opportunities, to help both sales and marketing identify which deals you could win. By qualifying opportunities well, you know where to spend your time to meet your quota each month or quarter. But while many companies’ financial cycles force measurement in four financial quarters, it’s rare that a customer’s buying cycle will start and end every three months. Maintaining a strong pipeline, with enough qualified opportunities at each phase in the pipeline, is the only way to avoid the quarter-end crunch that often results in unnecessary discounting.
Pipeline Structure & Management
It is often difficult to decide how many stages you should have in your sales pipeline. At The TAS Group, we have seen different companies with their pipelines segmented into anything between three and 12 stages (we recommend no more than six) in the pipeline. Every week, or month, sales managers then ‘manage’ the sales force by working through each individual’s sales pipeline to determine how many opportunities are at each stage, and what probability to apply to each opportunity. More often than not, this is a fruitless exercise for two main reasons.
First, subjectivity plays a large part. In most cases, the interpretation of how to categorize the opportunity is left to the salesperson’s discretion. The buying cycle is often ignored, and there is usually little linkage between the key qualification questions used, and the stage of the process. Clear ‘customer-evidenced’ deliverables are linked to each stage of the sale, and overall productivity increases.
Second, it is futile to determine the value of a pipeline by multiplying the value of each opportunity by the probability of it closing. You either win the deal or you lose. Having 10 opportunities at 10% probability mathematically may be the equivalent of one full opportunity – but it is not the same as having a signed contract.
Keep the Funnel Full
You mightn’t want to do it, but sometimes, as a sales person, you’re going to have to generate your own leads. You can’t always rely on marketing. Getting appropriately-targeted customers into the top of your sales funnel is the source of your raw material. Without that raw material, you can’t build a pipeline. When there are gaps in your pipeline, pressure builds on the few opportunities you have. You’re tempted to try to progress a specific deal too aggressively.
The likelihood of finding a good opportunity is dependent on the type of activity you undertake. If you’ve got your act together, if you are truly a sales professional, you have a broad network of contacts who are potential customers. They respect you and the value you can bring to their business. Your existing customers can provide you with further business within their company, and referrals to their counterparts in similar companies. Strong relationships with industry consultants and analysts are a good source of recommendations for new business opportunities.
Your own market assessment and development activities will always provide the best quality of sales leads, but be sure that the folks in marketing aren’t working in a vacuum. Make sure they are in lock-step with your needs. Help them understand what’s exciting the customers. Together, you can craft effective seminar programs, social media activity, telesales, or emarketing campaigns for your territory. Marketing often bemoans the fact that they generate leads and the salesforce ignores them. Get them on your side, and help focus their activity by telling them what you need, and then by showing them how you are responding to the good work that they do.
Rocks and Stones and Pebbles
If you want to fill a barrel with rocks and maximize the capacity of the barrel, you have to fill the gaps between the rocks with stones or pebbles. It’s the same with your pipeline. Experienced sales professionals will understand that relying on a small number of big deals is risky, and they will balance their opportunity portfolio with smaller deals. While waiting for the big deal, no one is making any money and desperation levels increase if there isn’t a backup plan. Your negotiation position weakens, and that major opportunity turns into a minor profit deal. Rocks, stones and pebbles make for a full barrel.
The Pipeline Value Factor
There are four factors that determine the health of a sales pipeline:
- Integrity of data
- Deal value
- Number of deals
- Balance across pipeline stages.
The information in the pipeline system must be pristine, continually updated to reflect progress, wins and losses.
How long is your typical sales cycle? How much time passes during each phase of the buying cycle? To keep the pipeline balanced, and maintain a steady deal flow, you need to have an adequate number and value of opportunities at each stage in the pipeline. In Dealmaker we use the Pipeline Value Factor, or PVF, to help gauge the value.
To achieve 100% of, say, a quarterly target, consistently over consecutive quarters, PVF is the measure of what multiple of that target number you would need to have in each stage of the pipeline, at any point in time.
Determining what opportunity value you need to factor into each of the pipeline is best calculated by reference to historical data:
- On average, how long does it take for an opportunity to progress from initial engagement to closure?
- How many of the customers that you had identified this time last year have progressed to further stages of the pipeline?
- How many have closed?
- How many were lost?
An effective pipeline management system, consistently executed, provides clarity and visibility which, together, gives both sales and marketing greater control. A true pipeline provides an early warning system; it shows where you are strong and points to areas that need attention. Use our system or develop your own. Use it well and it will bring you an uncommon freedom to focus on what you have to do today in order to achieve your revenue targets consistently, without the interminable stress that accompanies uncertainty.