Sales pipeline management helps you track and manage leads throughout the customer journey. In this article, we will answer the question, “What is sales pipeline management?” and discuss its importance.
We will also offer some best practices to help you and your team achieve success with your sales pipeline.
- Sales pipeline management is the process of tracking and managing sales opportunities through every stage of the funnel.
- Effective management involves lead generation, lead qualification, sales opportunities, team collaboration, routine reviews, and accurate forecasting.
- A clearly defined sales process and effective collaboration are necessary for successful pipeline management.
- Important metrics to track include conversion rates, average deal size, and sales velocity.
- Pipeline management tools provide templates and visual representations as well as support assessment and review processes.
What Is Pipeline Management in Sales?
Sales pipeline management is the process of tracking and managing sales opportunities through every stage of the funnel. It involves identifying and engaging prospective customers, keeping track of their progress through the sales process, and analyzing data to continually refine your strategy.
This crucial practice ensures your sales team focuses on the most promising opportunities. By closely monitoring the flow of leads from initial contact to the successful closing of a deal, sales teams can stay organized and provide personalized experiences to each prospective customer. This process also helps prioritize leads, allowing sales reps to focus on high-value targets, increasing their chances of closing a sale.
Effective pipeline management comprises several essential components: lead generation, lead qualification, sales opportunities, and deal closure. Successful management also necessitates collaboration between sales and marketing teams, routine pipeline reviews, and accurate sales forecasting. By diligently attending to these key elements, businesses can optimize their sales strategies and achieve exceptional results.
Sales Pipeline vs. Sales Funnel
Let’s clarify the terms sales pipeline and sales funnel before we get into the nuts and bolts of pipeline management.
- Sales pipeline: A series of stages a potential customer goes through as they move towards making a purchase. Typically, a sales pipeline will include stages like lead generation, qualification, and closing. Each stage represents a different point of interaction between you and the potential customer. By understanding where a prospect is in the pipeline, you can tailor your sales strategy to their specific needs and increase your chances of closing the deal.
- Sales funnel: A visual representation of the sales pipeline, typically in the shape of a funnel (hence the name). Like the pipeline, the sales funnel is broken down into stages, but it also takes into account the number of potential customers that move through each stage. The funnel starts at the top with many potential customers, then narrows down as some drop out of the process or are disqualified. The goal is to push as many potential customers through the funnel as possible and ultimately end up with fewer qualified leads that convert into sales.
The biggest distinction between the two is that the sales pipeline focuses on your actions to move potential customers toward a purchase. Conversely, the sales funnel is focused on the customer’s journey and experience as they move toward a purchase.
The funnel considers that not every potential customer will make it through the sales process and provides a visual representation of the drop-off rates at each stage.
The 7 Stages of Pipeline Management
With the right strategies and tools, pipeline management can become a streamlined and effective process that drives revenue growth. The key is to follow the seven stages of pipeline management, which will help you identify prospects, nurture leads, and close deals.
1. Lead Generation and Prospecting
The initial stage of pipeline management involves generating leads through various marketing strategies and campaigns. These might be inbound strategies, such as content marketing, or outbound plays, such as cold calling.
Targeting your desired market segment is crucial to guarantee a consistent flow of high-quality leads during this stage. If you find potential deals will drop off at each stage of the pipeline, you want this first stage always to have a surplus of leads.
In some organizations, leads in this stage are considered marketing-qualified leads (MQLs) and need further nurturing from the marketing team before a warm handoff to sales reps. In other organizations, these leads are immediately handed over to the sales team and put into the sales pipeline.
Once leads have been qualified and meet certain criteria to become candidates for your product or service, they become sales-qualified leads (SQLs). Typical criteria for categorizing a prospect as an SQL include budget, need, and authority. The more requirements they satisfy, the more likely you can close the deal.
3. Meeting and Demo
At this stage, you’ve begun to filter out leads that aren’t going to follow through and can start to narrow down leads that might be ready to make a purchase. You’ll begin to compile a list of potential buyers and schedule meetings to introduce your product to these potential buyers.
Your business can now make an offer to potential buyers. Present your product’s price point, overall value, and unique competitive advantages. An excellent proposal is tailored to each potential buyer’s specific needs.
Once the product has been proposed to your potential customer, negotiations can begin. Prospective buyers may have questions and concerns about your proposal, and together, you can discuss the price point and other factors related to its sale. At the end, both buyer and seller should be happy with their decision.
6. Closing the Deal
Make it easy for your customer-to-be to sign the contract through an e-signature service that allows them to sign and send from anywhere at their convenience. Afterward, you can move the deal toward order fulfillment. If the buyer is not ready to buy, you can mark them as “nurture,” and continue communicating with them.
Although celebration is in order, the pipeline isn’t complete. Now, it’s time for your sales reps to further leverage their offerings to customers and provide consistent positive communication, so they’ll continue to buy from your business in the future.
The final stage of the sales pipeline involves closing deals or losing them. While closed-won deals represent revenue, analyzing closed-lost deals is important to see what you and your colleagues can learn. Iterate and improve your sales process to avoid missing out on potential opportunities.
The Sales Process and Pipeline Management
A clearly defined sales process is indispensable for managing your sales pipeline effectively. It offers a roadmap for your team to follow, ensuring a consistent approach and a higher likelihood of success.
Define Your Sales Cycle
Start by defining the typical timeline for a sale, also called a sales cycle. The sales cycle denotes the duration required to guide a lead through the sales process, from initial contact to deal closure, and you can calculate an average sales cycle based on the deals you’ve closed.
Most businesses favor a shorter sales cycle, enabling them to close more deals within a specific time frame. Assign timelines to each of the potential stages and to various sales activities.
Prospect, Present, and Negotiate
Prospecting, presenting, and negotiating are vital in managing your pipeline. Guarantee that your team consistently engages in these activities to maintain a robust sales pipeline and enhance the probability of closing deals.
Identify the Rate of Deals That Move to the Next Stage
For each stage of your pipeline, identify the percentage of deals that continue to the next stage. This will give you valuable data to help meet goals for both the team as a whole, and for each individual sales rep. You can also reverse engineer this data so that you know how many leads each rep will need in their pipeline to meet their eventual sales quota.
Provide Ongoing Training
Providing ongoing sales training to your team improves their skills and ensures they remain current with the latest sales strategies and best practices. This, in turn, can significantly impact the success of your sales pipeline. Coupling training with pipeline management means each team member understands how best to nurture and interact with prospects and leads at every point in the buying journey.
Responsibilities and Roles in Sales Pipeline Management
Successful pipeline management involves the collaborative efforts of sales managers, sales teams, sales reps, and sales leaders, each of whom plays a crucial role in the process.
A sales manager oversees the pipeline management process, ensuring their team remains focused on the most promising opportunities. They are responsible for setting targets, monitoring progress, and providing guidance and support as needed.
Sales reps are pivotal in pipeline management as they nurture leads and ultimately close deals. They must adopt a proactive approach, consistently engaging with potential customers and addressing their needs and concerns.
Leaders significantly influence the direction and strategy of pipeline management. Their active involvement in the process, offering guidance, support, and resources, empowers their teams to achieve success.
Sales and Marketing Teams
Effective pipeline management necessitates seamless collaboration between sales and marketing. Marketing teams generate leads, while sales teams qualify and convert these leads into customers. Marketing teams also need feedback from sales.
If your pipeline is full of unqualified leads, work with the marketing team to better qualify MQLs before they get passed on. If opportunities consistently cite the same pain point, ask marketing for content or sales collateral that addresses it. Coordinated efforts between the two teams facilitate smooth transitions between stages and increase the probability of success.
Key Metrics for Sales Pipeline Management
Consistently tracking and analyzing sales pipeline data is indispensable for proficient pipeline management. This data offers invaluable insights into your pipeline’s health, empowering you to pinpoint improvement areas and make informed, data-driven decisions.
Key sales pipeline metrics, such as conversion rate, average deal size, and sales velocity, enable you to assess your pipeline’s performance and detect emerging trends. These metrics facilitate well-informed decision-making and sales process optimization, leading to enhanced results.
The conversion rate, or close rate, represents the proportion of leads that eventually become customers. A higher conversion rate means that leads are well-qualified and likely to buy. High conversion rates also demonstrate product-market fit, as well as skill on the part of the sales team. If your conversion rate is low, consider better qualifying your leads, or spending more time nurturing each one through the funnel.
Average Deal Size
Average deal size helps track the relative value of each deal and better allocate sales resources. Just as you wouldn’t spend too much time on a deal that’s unlikely to close, you wouldn’t spend too much time on a deal that isn’t worth significant revenue. Large deals with dollar values well above your average deal size are worth additional effort.
Sales velocity, or time to close, denotes the rate at which leads progress through your sales pipeline. A higher sales velocity signifies a more streamlined sales process. When leads become customers more efficiently, sales teams can quickly move on to the next opportunity.
Be sure to take your industry and business model into account. Long-term contracts with government entities (like schools), often have very long sales cycles, and therefore low sales velocity. That means that each rep needs to have a robust pipeline and be working on many opportunities simultaneously.
Sales Pipeline Management Tools and Techniques
Pipeline management software can greatly enhance the efficiency and effectiveness of your management process. These tools enable you to track leads, monitor progress, and analyze data, offering valuable insights to optimize your sales process.
Templates and Visual Representations
Many of these tools include templates and visual representations of your sales pipeline. You can customize data fields and choose how you want your deals represented in the software. These tools help keep your team organized and focused on the most promising opportunities.
Assessment and Regular Reviews
Regular sales pipeline reviews are vital for sustaining a healthy sales pipeline. These assessments allow you to pinpoint potential bottlenecks, evaluate your sales team’s progress, and make necessary adjustments to your sales process.
Once you have access to a pipeline visualization, you can make accurate forecasts about future sales. You’ll understand conversion rates and know where your pipeline might be weak and where it is strong. Of course, you’ll also work to improve your conversion rate across various parts of the pipeline.
How to Develop a Sales Pipeline Management Plan
By managing the sales pipeline effectively, you can significantly increase your revenue and profitability. Here’s a look at how you can develop a solid sales pipeline plan.
Identify Your Sales Pipeline Stages and Metrics
Before you start actively managing your sales pipeline, you need to identify the stages a lead goes through, from initial contact to final sale. Once you have identified these stages, establish the key metrics that you will use to track performance at each stage. This could include metrics such as lead volume, lead quality, conversion rates, sales cycle length, and revenue.
Deploy a CRM System
A CRM system is an essential tool for the sales pipeline management process. It can help you to store all your customer data, track your sales pipeline stages, and automate your sales processes. When selecting a CRM system, ensure it aligns with your business needs and objectives. Factors to consider include cost, ease of use, integration with other tools, and the reporting and analytics capabilities.
Define Lead Qualification Criteria
Effective lead qualification can help you focus on the most promising leads, shorten your sales cycle, and improve your conversion rates. To do this, you need to define your lead qualification criteria. This could include demographic information, purchase intent, budget, and buying authority. Once you have defined these criteria, you can use them to prioritize leads and determine whether to move them to the next stage of your sales pipeline.
Establish Your Sales Process
Your sales process is the series of steps that your sales team takes to convert a lead into a customer. This process should be well-defined and consistent across your organization. Consider establishing a sales playbook, which outlines the key steps, tools, and tactics that your sales team should use at each stage of the sales process.
Continuously Monitor and Analyze Your Sales Metrics
To ensure your pipeline management plan is effective, you need to continuously monitor and analyze your sales metrics.
This will help you to identify areas for improvement, optimize your sales process, and make informed business decisions. Set up regular sales pipeline review meetings to discuss your performance against your metrics, identify bottlenecks in your sales process, and make data-driven changes to your approach.
Common Challenges in Sales Pipeline Management
Managing your sales pipeline isn’t easy, even for experienced leaders. It’s likely you’ll have to make some changes as you go, and don’t be surprised if you face some challenges.
Accounting for Changes in the Forecast
One common pitfall is accurately accounting for changes in the forecast. If one of your reps has leads who are lagging behind the typical sales cycle but are still moving through the pipeline, this needs to be reflected in their sales forecast. However, this can be tough to account for in your pipeline analytics, especially in industries with long sales cycles. Consider tracking velocity on a rep-by-rep basis for more visibility.
You may also find that seasonality plays a major role in your pipeline management. Public schools, for example, typically make large purchases over the summer (the fiscal year for many public school districts starts on July 1). That means that while your reps engage potential buyers all spring, there’s a massive uptick in closed-won deals in the summertime. Accounting for the seasonal nature of the business in your forecasts and pipeline management requires carefully tracking year-over-year data.
Keeping the Pipeline Full
Perhaps the most basic challenge is keeping the pipeline full. As part of your pipeline management plan, you tracked the sales activities for each stage of the sales process and figured out how deals and leads move through your pipeline. But you may not have ensured the pipeline had a steady stream of leads. This is where collaboration with marketing is essential.
In a fully inbound organization, marketing takes responsibility for these leads. If outbound campaigns from the sales team are part of your strategy, allocate sufficient time to prospecting and identifying potential leads. Account for that time when you manage your sales pipeline.
Examples of Successful Sales Pipeline Management
To understand better how sales pipelines can be effectively managed, let’s look at two successful companies and how they handle this task.
Okta is one example of a large B2B organization that improved its sales pipeline management. They used Clari, a well-known piece of sales software, to streamline their pipeline. Specifically, Okta better understood how to nurture leads to opportunities, generated more accurate forecasts by better tracking pipeline data, and found new ways to automate their sales messaging. Their reps saved time and closed more deals by carefully studying data about customer behavior.
Another example of proper sales pipeline management is ClassPass. They integrated their marketing automation in Hubspot with sales data so sales reps had everything they needed at their fingertips. Combining data from different systems can be tricky, so bringing all the pipeline data together in one place enabled the sales team to quickly identify better opportunities.
The Future of Sales Pipeline Management
With technology’s ongoing advancements, we can expect increasingly sophisticated tools and techniques for pipeline management. This includes AI-driven analytics, automation, and advanced CRM systems that aid in optimizing your sales process and driving revenue growth.
Sales teams capable of effectively leveraging these technologies will be better positioned to optimize their sales pipelines and generate increased revenue. Staying up-to-date with the latest sales trends is vital for maintaining a competitive edge in the market. As new trends surface, it is essential to adapt your management process accordingly to ensure sustained success.
What is sales pipeline management, and why is it so crucial? Sales pipeline management assists teams in prioritizing their strategies to ensure business success. Now that you know how to manage your sales pipeline, you can substantially boost your sales performance and propel revenue growth.
Remember, the key to success is continuous optimization and improvement. Monitor your sales metrics closely, analyze your results, and make data-driven changes to your approach as necessary. With a proper pipeline management plan, you will be well on your way to achieving your business objectives.
Bradley Wood is a seasoned sales executive who has run sales teams for businesses of all sizes. He strives to set high sales goals and works hard to surpass them with a thinking outside-the-box approach. Bradley is based in Miami, where he enjoys exploring the city’s vibrant music scene.