“What do we need to do to get sales forecasting more accurate?” This is one of the most common and urgent questions asked by senior sales leaders. In theory the answer is a rather simple, but in practice getting better forecasts has proven extremely challenging.
So what’s the underlying problem?
Answer – the dots aren’t connected. The most common reason why sales managers can’t get sales reps to forecast more accurately is because the company’s sales pipeline process is not integrated with the company’s sales process. Too often companies implement a sales pipeline (sales funnel) process into their organization without any regard to the fundamental and strategic activities which take place throughout the sales process.
What does it mean to align the sales process to the pipeline process? Most pipeline processes use terms such as Stage 1, Stage 2 and Stage 3 or Early Cycle, Mid-Cycle or Late Cycle. But there is not a common definition to what these terms mean. For one sales rep Stage 1 means identifying the ‘suspects’ in their territory, while for others it means developing prospect’s needs. This lack of common understanding often leads to poor sales forecasting and under-leveraged sales management support.
On the other hand some people are getting it right. Today, top companies establish a common definition of what each stage in the pipeline process means and then establish a set of fundamental criteria which define that stage of the pipeline. For example, one leading Fortune 1000 medical equipment company established a five stage sales process and then built the sales pipeline process around it. Their five stages are:
Stage 1 – Opportunity Qualification
Stage 2 – Need Development
Stage 3 – Solution Identification
Stage 4 – Implementation Resolution
Stage 5 – Contract Confirmation
Almost every sales organization has some form of these stages in their sales process. Some companies have more steps; others have fewer, but the overall process is strikingly similar.
Once the stages are established and labeled, the first step of integration is completed. However, the more difficult part of linking the sales process to the pipeline process comes next. It is critical to define each stage with clarity. And, a simple narrative sentence won’t due. It is necessary to establish the fundamental sales process criteria that operationally define each stage of the pipeline. For example, within Stage 1 (Opportunity Qualification) there are crucial steps in the sales process which much be accomplished before moving onto Stage 2 (Need Development). Such steps may include criteria such as: key players in the account are identified, customers buying process is clearly understood or revenue potential meets profiled standards.
Establishing the crucial criteria for each stage makes it easier for sales people and managers to communicate with clarity where they are in the pipeline process. The challenge comes from identifying the proper criteria (steps) for the each stage of the pipeline. What comes before what? What does a best practice sales process look like? For example, it has been well established that it’s key to understand who the key players are and their role in the decision process early in the sales process so an effective strategy can be developed to leverage those key players later is the sales process. After understanding the key players, a best practice next step is to understand the customer’s decision criteria and how the customer perceives your solution as compared to those decision criteria.
Integrating the sales process into the pipeline process has several distinct advantages. Here are just a few:
- The first advantage is that it creates absolute clarity as to where the opportunity is in the pipeline. If a sales rep tells their manager that the customer is in Stage 3 and yet the rep hasn’t met the criteria established in Stage 2, that’s a red flag. No question about it, the account opportunity is in Stage 2.
- The second advantage relates to providing a strategic coaching tool for sales managers. Sales manager can quickly identify where a sales reps might need help. Too often sales managers spend hours conducting ‘account reviews’ without any clear direction or outcomes from the dialog. Establishing clear criteria for each stage of the pipeline process allows the sales manager to quickly identify which accounts seem to be ‘stuck’ in the pipeline and can discuss the specific steps that the sales rep needs to take to move the account forward in the pipeline process. Without the criteria in each stage of the pipeline, managers merely conduct dialogs of good intent but can’t establish clear direction regarding what the rep is to do next to secure the business opportunity.
- The third advantage for establishing criteria in each stage of the pipeline process is that it allows for clear call objectives. A top sales rep is always clear about their call objective before the sales call begins. On the other hand, too often sales reps walk in and out of their customer’s office without doing anything strategic to drive the customer closer to a decision. With clear criteria in each stage of the pipeline process a rep can check to see what criteria have not been met for that stage and develop a call plan to achieve that objective. For example, if a sales rep has an opportunity in Stage 3 and one of the steps is to validate the customer’s decision criteria, then the call objective is clear. If a sales rep continues to visit a new account opportunity without completing the criteria established for that specific pipeline stage, the reps is diminishing their opportunity to secure that business and allowing the competition to gain deeper access and get smarter on the customer.
- Shortening the sales cycle is the fourth advantage. Top sales reps drive the customers buying process verses playing a reactive role. Establishing best practice criteria at each stage of the pipeline can both build the desire to get the customer to take action, as well as, help them through their decision in a more timely fashion.
- Finally, the fifth advantage to establishing clear criteria in each stage of the pipeline process is to create a set of forecast metrics which you can bank on every month. When each phase of the pipeline is managed with rigor, one can begin to measure the success rates of the business in stage.
The same medical equipment company referred to earlier established a rigorous process to forecast opportunities against the criteria in each stage of the pipeline. As a result they were able to realize that when opportunity entered Stage 3, there was a 78% chance in winning that business. When the account moved into Stage 4 the percentage jumped to 86%. Based upon these statistics, the company was able to be more effective in their sales forecasting and were able to manage product manufacturing more accurately hence reducing inventory and shipping costs.
Things change so quickly in the hyper-competitive market of sales. Providing your sales team with an effective pipeline process to manage the multitude of ever-changing criteria customer have is imperative to success.
Steve Gielda, is the principle/owner of Ignite Selling, Inc. He has customized and created training solutions for many different industries to support sales and sales management effectiveness. Steve has worked with a variety of companies ranging from Georgia Pacific, UPS, RR Donnelley, AOL Time Warner, Medtronic, J&J, Beckman Coulter, Kimberly Clark, MasterCard and Booz Allen. To discuss how your sales force might increase its effectiveness by better leveraging its sales pipeline; please contact Steve at 703-266-7667 or [email protected]