In the B2B world, sales don’t appear out of thin air. Instead, most deals are closed as a result of sales reps working through well-defined sales pipeline stages.
These sales pipeline stages are the process by which prospective customers are moved through the buyer’s journey and converted to paying customers.
Although the terms “sales pipeline” and “sales funnel” are often used interchangeably, these terms actually mean very different things.
Your sales pipeline is the specific sequence of actions your team takes to convert sales leads into closed sales. This includes every tactic used from sales outreach to negotiation.
Your sales funnel, on the other hand, is a visual representation of the proportion of leads that pass through each stage of the pipeline.
Together, these two concepts are used by all successful sales teams to optimize their lead conversion rates.
Take the guesswork out of your sales pipeline stages
Without a clearly-defined sales pipeline, you run the risk of missing opportunities to support valuable leads and convert them into long-term, repeat customers.
Luckily, CRM solutions like Method:CRM make it simple for sales reps to track opportunities in a standardized way.
By setting up your preferred sales pipeline stages in a CRM, reps can quickly update opportunities as they progress. They can also easily identify which deals are closest to closing so they can focus their time and effort accordingly.
By monitoring every sale from start to finish in a centralized system, you can measure your conversion rates at different stages and use this data to refine your sales strategy.
Of course, every company has a unique business model, so there are no “standard” sales pipeline stages that will suit every team’s needs. However, the sales pipeline stages outlined below are a good starting point for many businesses.
A more in-depth comparison of sales pipeline vs sales funnel
Still confused about the difference between sales pipelines and sales funnels? Before we take you through a typical sales pipeline, let’s discuss what a sales pipeline is and isn’t.
A sales pipeline is a sequence of stages that consumers pass through to become customers. Consumers can move on to each stage after completing the one before.
Meanwhile, a sales funnel is more customer-focused. It shows you the steps that a consumer goes through to go from a prospect to a customer.
While a sales pipeline tells the story of how sales reps win customers over from stage to stage, a sales funnel shows the rate at which prospects are converted through each stage of the pipeline.
A sales funnel typically has three major stages:
- Top of the funnel (TOFU), which comprises the awareness and discovery phases.
- Middle of the funnel (MOFU), which includes evaluation and intent.
- Bottom of the funnel (BOFU), which is where purchases finally happen.
A sales pipeline, on the other hand, looks like this:
1. Prospecting: Identify the interest level for your product or service
Your sales pipeline should always start with prospecting or identifying your lead’s level of interest in your products or services.
Chances are, you’ll observe the highest amount of interest among prospective customers who fit your marketing personas.
These personas act as representations of your target buyers and are based on the demographics and behavior of your existing customers. Individuals who fit in one of these personas will have presumably have a desire for what you sell and have the highest conversion rate when nurtured across every sales pipeline stage.
2. Qualification: Qualify your leads to determine value
Qualification of your sales leads is the next stage of the pipeline management process.
You will need to use certain criteria to identify which prospects are most likely to make a purchase and therefore should be pursued further. The lead’s interest level and marketing persona alignment (as determined in the previous sales pipeline stage) are important criteria. Other key items to look at include budget, need, and timeline for purchasing.
You can automate this qualification process with your CRM software or complete it by hand using a lead qualification template.
3. Needs analysis: Determine if your product or service solves pain points
At the needs analysis stage, sales reps need to take a step back and look at their products and services from the customer’s perspective. At this point, you should ask yourself: Where is the customer coming from and what problems are they trying to solve?
The goal here is to assess exactly how your company’s offerings can resolve certain pain points. And if the answer is that they can’t, that’s okay too. It’s better to realize this early on than to try to force a sale that won’t benefit the buyer.
4. Value proposition: Assess the value of your product or service
The fourth sales pipeline stage relates to your value proposition. This stage gives sales reps a chance to assess the value of their offerings in the scenario at hand.
Using the information gathered in your needs analysis, you must determine how valuable a customer would find your products or services, based on their pain points. This will improve your ability to promote your products or services in a way that speaks directly to the buyer, rather than simply stating the specs.
5. Identify decision-makers: Cultivate relationships with key contacts
In many B2B sales scenarios, the individual you sell to isn’t the person who ultimately has the power to pay you. At this sales pipeline stage, you need to identify and engage with key decision-makers.
Ask your current contact or do your research to find the person who makes the purchasing decisions at the company or organization in question. You must then reach out and cultivate a relationship with this individual in order to get closer to closing the sale.
6. Perception analysis: Weigh client perceptions against reality
In the sixth sales pipeline stage, you have to consider that the actual value of your products or services does not always match their perceived value.
The buyer’s impressions of your offerings and your company play a big role in your team’s ability to close the sale. Not surprisingly, leads who already hold positive or neutral perceptions at this stage offer the best outcomes for you.
However, you should also strive to develop strong sales practices that can overcome negative perceptions. Take the time to learn about your lead’s concerns and offer solutions to address them.
7. Proposal / price quote: Create a quote for review
If you reach this sales pipeline stage, things are going well as it’s now time to create an estimate or proposal for your prospective customer.
While it’s good to use standardized templates for all of your company’s quotes, each one should be personalized to match the customer’s specific needs. Make sure all pain points are addressed and all relevant terms and conditions are included.
To streamline this process, look for a CRM like Method that offers quoting functionality alongside lead management.
8. Negotiation / review: Finalize the details
At this sales pipeline stage, you should review the proposal with your customer and finalize the details. This is the time to make sure they understand the terms and conditions and answer any last-minute questions they may have.
You will need to keep a close eye on things at this stage, as letting something slip through the cracks could be a dealbreaker. Sales reps will also need to know their limitations when negotiating on behalf of their company to effectively close the sale.
When negotiating a deal, keep in mind the following stages:
Review your customer’s needs, values, and preferences. All of this should help you anticipate any potential objections they may have about pushing through with the deal. In doing so, you can come up with a more convincing argument in defense of your product or service.
This is where active listening skills come in. Active listening is a sales technique that helps reps build rapport with prospects and help them truly feel understood. In this stage, a rep should refrain from pushing a hard sell and instead collect evidence to build a case that’s tailor-made for each prospect.
Now that you know your customer’s wants and needs, you can facilitate the negotiations. The point of this stage is to find a middle ground that works for all parties involved.
9. Closed: Win or lose, close the sale
The last of the sales pipeline stages is all about closing the deal. Whether you win or lose the sale, it’s important to see it through to the end and get a final answer from the customer.
Upon determining the outcome of your sales efforts, document the details in your CRM to allow for ongoing data analysis. Over time, information on won and lost sales opportunities can help you refine your sales pipeline stages and improve your sales process.
The importance of sales pipeline analysis
Sales pipeline analysis helps you determine what influences successes and failures and helps you pinpoint areas in the pipeline that can be improved upon to drive sales up. By fine-tuning every little detail of your pipeline, you can improve the speed at which you acquire new customers and eventually reduce the costs involved in customer acquisition.
Some of the top metrics to track include:
- Average deal size: This is the average amount of money that a client spends on a product or service. It is computed by adding the total revenue from a set period and dividing it by the number of closed-won opportunities within the timeframe.
- Win rate: This represents the ratio of deals won to the total closed opportunities.
- Average length of sales cycle: This is the average time spent from the first contact with a prospect to closing.
- Sales velocity: This measures the speed at which sales move through your pipeline to generate revenue.
- Lead response time: This is the average time it takes for a sales rep or a business to follow up with a lead.
- Sales pipeline value: This is the value of all qualified opportunities that entered your pipeline.
- Probability to close: This is the likelihood that deals close in a stage of the sales cycle, measured in percentages.
Make the most of your sales pipeline stages
To get the most out of the sales opportunities that come your way, you must have clearly defined sales pipeline stages.
Use the examples described above as a starting point, but don’t be afraid to evaluate and refine them over time to develop the perfect sales process for your business. Ultimately, this pipeline will give your team the structure it needs to convert leads to lifelong customers.
See how Method:CRM can help you convert more of your sales pipeline.