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Performance Management Friday — Funnel Churn

by David Brock on September 22nd, 2011

Have you ever looked at your funnel, or that of one of your people (if you are a manager)–on the surface, it looks healthy.  You have the right number of opportunities and it’s balanced.  But you aren’t producing business.  Deals aren’t stalled, in fact there’s a lot going on.

You may be facing a problem of Funnel Churn.  It’s actually more common then you might expect.  Let me give a quick illustration.  A few years ago, I was working with a sales person.  The first time I looked at his funnel, everything looked right.  There were a good number of opportunities spread through all stages of the pipeline.  Nothing appeared to be stalled, everything looked reasonably positive.  When I talked to the sales person, he seemed to be knowledgeable of what was going on and was executing his sales process.

A month later, we had another review.  On the surface–just looking at the numbers, things looked good, roughly the right number of deals, average age was about right, but something looked funny.  The number of closed deals hadn’t increased!  It was the same as the previous month–on the surface, all the numbers were right, but nothing had closed!

Perplexed I dove into the funnel more deeply–I compared the previous and current month reports.  I discovered the number of deals was roughly the same, but about 50% of the deals had changed completely.  That is, 50% of the deals that had been in the funnel the previous month, were no longer in the funnel–they had been replaced by new deals. 

I went back several months in this person’s funnel reports, finding this had been going on for some time.  The number of deals was always roughly the same, but at least 50% of the deals were different from month to month.  About 50% of the deals were being abandoned every month.

This is funnel churn.  On the surface, it appears you are going after the right number of deals, there’s lots of activity, but too few are being closed–the sales person works on a deal for a period of time, then abandons it, pulling it out of the funnel, replacing it with another.

Sometimes our sales reporting systems don’t recognize this–they provide us summary reports with numbers of deals at each stage, total value at each stage, average age.  Month to month, things look roughly right, but we aren’t seeing the closes, wins or losses.

We fool ourselves, thinking the numbers look right, we know the activity levels are high, but we’re just running in place.

In my experience, Funnel Churn, is usually caused by bad qualification.  We “qualify” a deal, start work on discovery, even taking some to proposal, then things stop (for a whole variety of good and bad reasons).  We abandon the deal, “qualify” another and the pattern keeps repeating.

Often, we’re under pressure from managers to add more deals to the funnel, so we relax our qualification criteria and let junk into the pipeline.

With Funnel Churn, we’re not only deceiving ourselves, but we’re also wasting a lot of time.  We’re doing a lot of work that produces nothing.  We want to move deals through the pipeline–in the end, we want to win or lose–fair and square.  We can’t stand deals getting stalled.  But worse is wasting time churning through lots of opportunities, but making no progress.  It’s better having a lean funnel–knowing that you have to invest time in finding good, high quality opportunities.  Never ever sacrifice pipeline quality to “make the numbers.”

Our CRM and Sales Automation systems both hurt and help us in understanding funnel churn.  Too often, they provide these great summaries–colored charts, cool pipelines, great meters.  They are providing the summaries of the numbers.  Numbers can fool us–often we need to drill down to see what’s really happening.  CRM systems allow us to track abandoned opportunities–but often we don’t set those up, and more often, we never look at those reports.  Opportunities can only come out of the funnel for three reasons:  Won, Lost, Abandoned (with reasons why the opportunity was abandoned.).  We have tend to gloss over the abandoned deals–but we need to understand them–are we chasing the wrong deals, are we doing a bad job qualifying, are we seeing fundamental shifts in customer behavior–for example significant increases in “No Decision Made?”

When on the surface, everything looks right, but you aren’t getting the right number of wins or losses, look for Funnel Churn.  That may be a problem.  If it is, drill down to understand what’s driving it.

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