Oct 21 2007
How To Get On Top Of Pipeline Management
Imagine a bath filled with water, almost instantly the water begins to evaporate or can slowly seep through the plughole.
Over a period of time the water level reduces and the temperature drops! The only way to keep the water level high and the water hot is to turn on the tap and continually refill it. Equally, you want to keep your prospects ‘on the boil’ by actions that continuously warm up and consolidate your relationship with them. You certainly don’t want all your efforts to go down the drain!
The moment you contact a qualified prospect you are committed to the time consuming process of ongoing discussions and you have created a real opportunity to convert potential business into actual sales. This is often referred to as ‘pipeline business’ because the more progress you make, the higher your probability for success.
Here is a very simple but effective, objective weighting system:
Sale (Delivered And Paid For) 100%
• Written Agreement 90%
• Verbal Agreement 80%
• Proposal/Negotiation 50%
• Offer/Proposal 25%
• Qualified Via A Rigorous Objective Process 15%
• Conducted A Formal Exploratory Meeting 10%
• Made Appointment 5%
• Prospect 0%
• Suspect
In this example you can see that each milestone in the sales process has a % probability rating. These milestones and percentages will vary from organisation to organisation, yet the principle that the more milestones you reach the higher the probability for success remains valid for everyone. These milestones form goals against which you can plan specific activities. These can then be translated into specific objectives that you can review and monitor at each stage.
The ability to leverage your probability for converting potential business in your pipeline is a vital part of the sales process and helps to focus your mind onto getting each prospect to the next milestone. Speed of follow-through is really important because it helps to create a momentum that consolidates your relationship with potential new customers.
The following suggestions can help you accelerate your prospects through your pipeline, and increase your probability for winning more deals:
- Agree the next steps with your prospect, and ensure that you are clear on the actions that will take you to the next milestone and closer to the sale.
- Before agreeing any actions with your prospect, ask yourself if these actions are leading you towards a sale. If you can’t see the tangible reason for doing an action then you could find yourself in a never-ending situation of fruitless discussions that dilute your results.
- Send an acknowledgement and confirmation of agreed actions to your prospect within 24 hours if possible. This conveys professionalism and provides another layer of reassurance for the prospect.
- At the end of every telephone call and meeting with your prospect, agree a specific time and date for your next contact. Lots of your valuable time can be wasted trying to get in touch with a busy buyer!
A well-managed pipeline helps to improve the consistency of results achieved and creates a platform for more accurate sales forecasting. If pipeline management is not an integral part of an organisation’s sales process, this can result in a number of problems including; longer sales cycles, reduced forecasting accuracy, inconsistent and unpredictable sales performance, declining win-rates and an inability to pinpoint reasons for decreased results.
You can’t manage what you can’t measure, and if you can’t measure your pipeline then you can’t improve your productivity. There are a number of Key Performance Indicators (KPI’s) that can be measured, monitored and managed to ensure achievement of sales targets:
KPI
• Pipeline Opportunities - These should be measured in value and the number of opportunities in the pipeline.
• Opportunities by Milestone - Once these milestones and their different probabilities of closing have been calculated, these figures ensure greater accuracy of forecasting
• Average Deal Size - This ensures better focus on larger deals and ideally will increase steadily each year
• Sales Cycle Time - Shortening this can have a huge impact because of the cumulative ‘saved time’ available for prospecting
• Profitability - Margins can be tracked to ensure that there is sufficient contribution to enable ongoing account handling
• Conversion Ratio - The number of opportunities won and the % of pipeline potential converted.
Today’s News: We managed to finish the sampler copy of “JF’s Blogging Good Year” over the weekend and it will be available for download tomorrow - I think you will like what we have done.
Over on the Blog Zone today, I am discussing the future of Leadership and whether you are a leader or a follower, I think you will find it interesting.
Tomorrow: On the JF Guest Author Spot, Paul McCord makes a very welcome return with a two part article which has been causing quite a stir: Paul has received a huge amount of really unpleasant messages after publishing the “Death Of Marketing” - see what you think. My personal view is that he hit some very raw nerves and most mature sales professionals will concur totally with his views.
The wheighted pipeline management system is an excellent concept. We advocate a similar system with an addition that really makes a difference.
The game theory of 7-Card Stud is an almost ideal way to deal with the statistical probability of each step of the sales process. Almost fifty years ago, at the age of 23, I quit a successful job in industrial sales and became a professional poker player. While I was playing poker, my monthly income was almost three times what I had been making in my sales job.
My poker career only lasted 15 months because it was incredibly boring and seedy. However, I had learned a lot about the practical application of statistics and game theory. In my next sales job, applying that game theory, I became the second leading salesperson for a large plastics company in my first year.
“Only bet the high probability hands” is the main mantra of poker pros. Their secondary mantra is “Fold if each successive draw to your hand does not improve you odds of winning the hand.” The latter translates to the sales concept of “always be in a disqualification mode.”
Thus, what you refer to as “Qualified via A Rigorous Objective Process” is performed during the appointment making step, and then several more times during the sales process. This eliminates most wasted time with low probability prospects; thus, shorter sales cycles andhigher closing rates.
Hi Jacques,
Thank you for that comprehensive response!
I personally advocate a thorough telephone qualification as a first step too (You call this “the appointment making step): Selling time is precious and therefore, we need to be reasonably convinced that there may be an opportunity that :
a) Is winnable
b) We can win
c) We want to win
The dichotomy with any “impersonal” communication i.e. that is not face-face, is that you have to rely on responses and intonation, you do not have the advantage of looking your suspect/prospect in the eyes and observing their body language - imagine having to play poker with a similiar disadvantage.
The first exploratory meeting is THE key event in the whole buying process, but I agree, qualification is not a single event, rather an ongoing process, throughout the sales cycle.
JF