Pipeline or Pipe Dream? Winning Edge
Clarify’s CEO Claire Edmunds discusses how effective measurement is key to turning your sales dreams into reality in the January/February 2015 issue of Winning Edge magazine.
The article text reads:
Pipeline or Pipe Dream?
Effective measurement is key to turning your sales dreams into reality, argues Claire Edmunds
Studies repeatedly highlight organisations that proactively manage and measure their pipeline with a data-driven approach, show significant revenue growth compared to their peers. This may be stating the obvious, but if so why do so many companies fail to get the basics right and how do you meaningfully measure pipeline?
Here I’ll discuss a number of habitual errors relating to opportunity identification and pipeline and how to circumvent these issues to produce a healthier, more productive pipe as well as how to alleviate issues when the pipeline gets into difficulties.
By simple definition, a pipeline is a view of all your revenue opportunities – from newly identified prospects to deals which are ready to close. To measure pipeline value accurately and successfully, there needs to be a company-wide, unanimously agreed definition of what a sales opportunity looks like and, more importantly, ensure everyone who is inputting into the pipe is working to the same criteria. This is the theory, which is on the surface very black and white, but is a much greyer picture in practice.
Why? Let’s look at the subtle differences at play in pipeline content. Take BANT (budget, authority need and timeline) – the ‘Budget’ element for some will imply the customer will have budget for a solution; for others it means you need to know how the budget will be accessed. In some cases a budget won’t exist at all for a particular solution, especially one that is new.
The same challenges arise when it comes to need; for some prospects the definition is simple – it is a need to be compatible with an existing solution or come in at certain price point. Conversely it’s establishing whether a prospect has a particular need for your solution at all. Each has a very different place in the sales process and understanding.
When it comes to getting the basics right for pipeline measurement, companies frequently fall at the first hurdle. They are thwarted by the very fact that sales is expected to deliver quarterly against annual plans. This means only opportunities, that are forecast to close in this period are interrogated. As a result, opportunities that have stalled are neglected which can result in a ‘bumpy’ quarter. The same amount of time needs to be given over to opportunities that are progressing as to those which are not.
In addition a ‘one size fits all’ approach cannot be applied. It may seem obvious, but different propositions – for example, new name accounts or larger strategic deals – require different sales steps and metrics. And ironically, technology and systems that are designed to simplify the sales process don’t always deliver or give the real data in the correct format. Multiple routes of entry can cause confusion and duplication or conversely all relevant pipeline is not always recorded until the last possible minute.
Working with strategic business development can alleviate these issues. It encourages forward planning; identifying high margin, strategic opportunities and nurturing and diversifying both existing and prospective customers to ensure pipeline commitment is visible longer term to achieve corporate goals.
So what happens when the pipeline looks lean?
Typically panic drives a need for increased pipeline with sales and marketing under pressure to produce leads. This generally equates to more appointments to drive increased activity – but this presents its own set of problems. Under pressure, definitions go out of the window and the activity driven is often the wrong sort. Take appointments for example, there is a wide gulf between a telemarketing agent who has phoned a prospect and persuaded them to hold a meeting “because the account manager is in the area” (but with little or no understanding of the prospect’s situation), and a planned meeting where multiple stakeholders have been engaged in the run up, the prospect has clear expectations of its purpose and where the prospect’s business objectives and challenges have been well understood and documented back to them – and the prospect is aware of the steps that would follow from a successful meeting
The examples, both of which legitimately get labelled ‘appointment’, can have a dramatically different impact on the business and pipeline.
Rather than employing a scattergun approach hoping to hit target, (favoured by many sales organisations in a pressurised situation) in-depth profiling and understanding of a client’s business challenges, results in engagement at the right level and produces quality opportunities. In my experience, this can result in 80-95% of all accepted leads being converted into pipeline opportunities, with a conversion rate of 1:3 to secured business. This ‘less is more’ approach has been proven to reduce the overall cost of sales by up to 30%.
A strategic approach is key, but what other criteria is needed to meaningfully measure pipeline?
Selecting accounts for the right reasons is critical. Are they the best fit for your proposition and your business? Doing what is right for the pipeline is doing what is right for the business – even if this means saying no.
By building a predictive pipeline model which looks at conversions based on a set of assumptions, conversion ratios can be tracked both in terms of percentages and the time opportunities sit at different sales stages – and this information can be fed back into the pipeline. As a result, exceptions can be identified and a stalled pipeline can be reactivated.
The amount of time it takes for an opportunity to move through the pipe, at every stage is a critically important predictor of sales success. Equally, identifying winning habits, learning from best practices of top sales execs and replicating their methodology is important.
The behaviours of the sales team are highly influential on the health of the pipeline. Sales opportunity definitions need management scrutiny for the pipeline process to work effectively. Frequently rules in compensation plans include caveats designed to ensure a consistent approach taken to recording pipeline activity and failure to comply will hit salespeople where they feel it most – in their wallets. But this isn’t always successful in driving the right behaviours.
There are attempts at mandating opportunities so they meet particular criteria in order to be registered at differing phases in the CRM system and to get these definitions widely understood and acknowledged. Where this tends to fall down is in the rigour of application by sales managers. All too often they think telling the salespeople what the definitions are and investing time in explaining the benefits to them as individuals is enough – in most cases it isn’t. For the individual salesperson the benefits of recording and reporting their pipeline accurately are all-too-often outweighed by the level of ‘investigation and interference’ – how they may see it – that follows from showing that a deal is large and nearing a decision. As a result many revert to avoiding including potential deals in pipeline at all. One of the greatest challenges faced by sales managers is ensuring that these deals don’t get forgotten and under-developed while everyone is focusing on closing the deals further down the funnel.
To conclude, pipeline becomes much more predictable if you invest time and effort in a longer-term strategic view of pipeline planning.