How to Manage a Sales Pipeline
Source: inc.com, guides/2010/10/how-to-manage-a-sales-pipeline.html
Building and managing a sales pipeline can be critical to a small business’s success.
Managing sales? What is that? A frightening number of CEOs are so accustomed to handling sales on their own that even when they do get around to hiring a sale team, they neglect to put in place a process for building and tracking a sales pipeline. A sure sign that a sales organization is suffering from what Jennifer Fremont Smith calls “no processitis”: “Sales people will make optimistic statements with no hard data.”
Fremont Smith had founded four companies and is now the Vice President of HighStart, a Boston-based consulting firm that helps bring new products to market. In each case, her first order of business was to build a sales pipeline.
Simply put, your sales pipeline is the amount of business you attempt to close in a given month, quarter, or year. It is usually presented as a spreadsheet that tracks all of the business your sales force has pursued in the form of requests for proposal. As time passes, you can begin to track what share of sales you close. If that share is consistent, you should be able to forecast sales with greater accuracy, which will give your sales team greater confidence and help operations staff plan accurately for future demand. You will also glean information on where your sales team falls short: For example, is your conversion rate low, or are you converting plenty of customers, but only getting a small share of their total business?
Fremont Smith and several other savvy CEOs are very keen on using sales pipeline data in order to maximize conversions—and minimize excuses. Here’s how they do it.
Managing a Sales Pipeline: Getting Started
Your first step is to identify an account’s total budget, the likely length of the sales cycle, and the key decision-makers. “If sales people are not trained and managed to establish these three critical pieces of information, they will continually be over-optimistic about their pipeline,” says Fremont Smith. “In a worst case they will spend all their time writing proposals for unqualified leads, the whole time being certain that the deals will close any day.”
Of course, it’s not always so easy to gather that information from prospects without sounding pushy. So Fremont- Smith spends a lot of time coaching salespeople on language. For instance, asking “Are you the decision maker?” will often alienate a prospect. Instead, she suggests a softer approach, such as “We find that with this kind of purchase, decisions are made by a lot of people on the executive team, and the process of really understanding your needs goes smoother if I can gather information from everyone.”
Similarly, a prospect reluctant to discuss budget may be coaxed into giving up a number when offered a range, such as “our accounts often fall between $10,000 and $30,000; where are you most comfortable?”
Managing a Sales Pipeline: Finding the Magic Metric
“We used to focus on sales numbers as the sole metric,” says Karen Ong, CEO of Language International, a Boston company that sells study abroad programs. “After talking to other entrepreneurs in the education space, we learned that the largest driver of lead-to-sale conversion is the time it takes to respond to a customer.”
Industry data indicated to Ong that leads receiving a call-back in two minutes or less were four times as likely to convert to sold as an average lead. So she knew she needed to start measuring response time at her company, and was shocked to find that the average response time to a lead was a “horrifying” 36 hours. “When we then interviewed our sales team members, we found out that they were always prioritizing follow-ups over new leads,” she says.
So the company started measuring and communicating the response metric in bi-weekly performance reviews of salespeople. Response time fell and sale numbers doubled. Now, Ong is devising a system to tie variable compensation to that key conversion metric.
Managing a Sales Pipeline: Dangling Carrots
At OfficeDrop, a Cambridge, Massachusetts company that offers document scanning and online digital filing, Healy Jones handles big sales leads the same way many Internet start-ups do — through a freemium model. A typical customer pays $20 a month for the service, but some pay as much as $7,500 for special projects.
“As customers enter our sales funnel we offer all sorts of free advice,” says Jones, the head of marketing. “For larger customers we have a white paper on how to pick a scanning provider, which mirrors what we offer $20 per month customers — tips and tricks for taking their business online.”
To get these large customers into the pipeline, the company typically will offer to scan a box of documents for free. “We know that, if a customer tries our service, they are already 50 percent to 75 percent of the way to a sale,” says Jones.
Managing a Sales Pipeline: Measuring Results
If you don’t consistently measure the factors that turn leads into sales, you’re shooting in the dark. For instance, Fremont Smith measures the cost vs. quality of leads. “You might have one source where a lead costs you $500, but closes at a higher rate than the ones that cost you $100,” she says. “You want to know that so that your salespeople spend more time with high-quality leads.”
She also measures the number of calls per day that reps make, and the number of “nurture points” — such as e-mails and follow-up calls — as leads turn into opportunities. Healy Jones tracks the conversion success rate of coupon offers and the subject lines in email (“people really seem to like the word exclusive.”)
Oddly enough, he also knows that when a customer using a free trial calls customer service, he or she is more likely to turn into a paying customer. “I know this seems crazy, but we offer really good customer service and we pretty regularly turn problems into converted customers when we promptly fix the issues,” he says.
Managing a Sales Pipeline: Overcoming Objections
Don’t take no for an answer. “No doesn’t mean no,” says Ross Croley, CEO of In10Sity Interactive, a Knoxville, Tennessee, digital marketing and website design firm. “It means not right now. In business, things change every day. People change, too. When we are told no by a prospect we continue to follow up and work this prospect forever.”
Croley claims he stops short of driving prospects nuts, but that he does continue to follow up at regular intervals. “We have had quite a few instances where we were first told no only to end up getting the same business 12 months later. One of our biggest deals we landed took us over a year and more than 100 phone calls to get to a contract. Most of those calls were not answered. If we had given up then it would not have converted into a lead.”
Managing a Sales Pipeline: Knowing What Buttons to Push
ChoiceShirts.com, a Pennsauken, New Jersey, company that lets customers design their own T-shirts, increased sales conversions from 10 percent to 20 percent when it customized its website for visitors in different locales, according to CEO Matt Cohen. Using technology from a Canadian company called Sitebrand, ChoiceShirts.com singled out international shoppers, who make up between 5 percent and 10 percent of the site’s Web traffic, and offered them free overseas shipping on large orders. The company followed that up by creating special local pages to serve visitors from several states and cities, so if people in Chicago visit ChoiceShirts.com, they will see a custom greeting next to a picture of Wrigley Field and an offer for free shipping to Chicago.
Managing a Sales Pipeline: Analyzing Wins
QuantumDigital, a direct-marketing agency based in Austin, built something called a win-loss analysis into its sales process and, says chief marketing officer Eric Cosway, “the company has changed its sales strategy in part because of the information gleaned.”
Sales reps report on their wins and losses at weekly pipeline meetings and, about once a month, they do a deeper analysis of a juicy deal that got away from them. The company sends a questionnaire to sales leads that did not close, and follows up with an interview. The data is analyzed and reported back through the sales organization. “When we lost, it was usually because we didn’t have a good enough appreciation of exactly what the client wanted,” says Cosway. So the company instituted a system for grading prospects on seven criteria, in order to identify “bad fits” as early in the process as possible