Somewhat surprisingly, my post on Win Rates generated a lot of discussion. As one might expect, much pf that was tied closely to the concept of pipeline quality. Stated differently, any sales person can always hit whatever pipeline goals that are established, for example, my favorite really clueless goal is that you have to have 3X pipeline for it to be healthy (I hope I don’t have to explain why that is clueless.)
Give a sales person a pipeline goal and they can always hit it. The problem, is they usually fill it with garbage—which has an adverse impact on win rate. And when managers discover this, typically rather than addressing the quality issue, they set a new goal at 4X, then 5X and so on, creating a pipeline death spiral.
Before we can begin to apply win rate and drive improvements, we have to have a high quality pipeline.
But what does a “high quality pipeline mean?” The short answer is they are real deals properly positioned in the appropriate selling/buying process stage.
Drilling down into this, first it means we have “real” opportunities, not wishful thinking on the part of the sales person. Too often, we see sales people ecstatic, “I had a great meeting with the customer, they want to learn more……” That is immediately placed into the pipeline.
But there are challenges with this: Is it the right kind of customer, are they in our ICP? Just because they are having conversations, doesn’t mean they are the right customer. They may be confused about our capabilities/fit, so they want to learn more. Or, for some reason, they are curious, but have no intent to buy. Do they have a real problem (that we solve) and a commitment to change now?
They may be in our ICP, they may be curious and want to learn, but they have no immediate need. These are customers that need to be nurtured, perhaps we can build their sense of urgency, perhaps in future years they might have the problems we solve. We don’t want to lose contact, but they have no business in the qualified pipeline.
So they are in our ICP, they have a strong commitment to buy. By that, it’s not only recognition of a need to change, and a commitment to have a solution in place by a certain date, and they understand the consequences of missing that date. This is so critical in qualification. Too often, we qualify based on what we think about the opportunity with no customer confirmation the deal is something real to them. Stated differently, we have a customer qualified deal.
Within our qualified pipelines, we have a number of stages. For example discovery, proposal, closing. These are stages that should align with critical stages in the customer buying process. While the customer is not likely to be formalized into stages, there are activities we can group that they go through, and milestones they are trying to achieve. For example, aligning around the definition of the problem, the outcome and the expected results might be a stage (perhaps aligned with our qualifying stage). Identification of their requirements might align with our discovery stage.
There are several things critical to our understanding of these sales/buying process stages.
- While they are typically portrayed as sequential, suggesting we and the customer go through the process in a logical, step by step sequence. The reality couldn’t be more different. Customers skip around, move forward and backward, wander. As much as we can, we should help our customer establish a clear process/project, but we must recognize the inherent non linearity of the process.
- This non linearity is where we become “separated” from the customer process. We move a deal through our processes, from prospecting to qualifying, from qualifying to discovering, from discovering to proposing, from proposing to closing. Depending on which stage we have place the opportunity in, we focus on executing the activities in those stages. When we complete them, we move to the next, and the next. Meanwhile the customer is moving all over the place. They may have fully defined their requirements, start evaluating solutions, then things change. Priorities shift, the team may change. Where they had been evaluating solutions, they may have moved back to the qualifying stage. They may be redefining their goals for the project. So while the activities they focus on are re-deciding what they want to do, their goals, etc, we are still carrying them in the proposing stage of the pipeline, continuing to present our solutions. We become decoupled from where the customer is in their process, as a result, we are no longer creating the value they need.
- It’s important for us to recognize the pipeline and sales process stages are not a one way street. We may have to take an opportunity that had been in the proposing stage, moving it back to qualifying, so that we are aligned with where the customer is. Stated differently, deals do not move linearly through our pipelines, they can move backwards, even outside the qualified pipeline. We have to update the stage the opportunity is in, based on where the customer actually is in their buying process. Now you can begin to see the importance of sellers helping the customer define and navigate their buying journey. For both them and us achieving our goals, we want to help them navigate their process as much as we can. It helps make them much more effective in achieving their goals.
- We now know that opportunities can move forward or backwards in their stage in our selling process. To assess the quality of the pipeline, we have to make sure each opportunity is correctly positioned, based on where the customer is in their buying process!
- As we move from stage to stage, as we help the customer move from milestone to milestone, we establish specific objectives of exit criteria–these are customer commitments. Above, I outlined the criteria for moving something from qualifying to discovering (The customer has committed to the change, they’ve established specific goals they want to achieve, as well as a date when they want to have it in place, and they understand the consequences of missing that goal.) Moving from discovering to proposing to closing, exiting each stage means the customer has achieved specific goals and is ready to move to the next step.
A high quality pipeline has each opportunity correctly located in the stage the customer is in in their buying process. In moving from stage to stage, the customer has made commitments (primarily to themselves) on where they are in their process and their critical next steps.
A final element is “pipeline weighting.” This is one of the most meaningless concepts in pipeline management. What are we weighting? What are the criteria by which we are assessing the weight? Why do we think that every opportunity in a certain stage of the pipeline has the same weight?!?
CRM vendors are terrible in reinforcing this meaningless concept. The standard defaults set in the program show an increasing probability when we move from prospecting to qualifying to ….. For example, prospecting may have a weight of 10%, qualifying may jump to 40% and so on through closing, where most vendors assess the probability of every opportunity at 80%+. This is insanity. It has nothing to do with the customer propensity to buy, which can be independent of where the opportunity is in their buying process.
Here’s a different way to think of the critical flaw in pipeline weighting. Let’s imagine you are competing with 3 other suppliers. You are in the closing stage of the opportunity and your CRM system ranks it at 80%. The other 3 suppliers are using a similar CRM system, and they are each ranking it at 80%. We know that’s impossible, we know that it’s meaningless. Yet why do we persist in using this absolutely meaningless metric in pipeline management?
Summarizing pipeline integrity:
- Each opportunity is in our ICP. We aren’t pursuing random opportunities with our fingers crossed.
- Each opportunity is properly located in the correct stage of the pipeline (whether the prospecting or qualified pipeline). This is based on where the customer is in their buying process.
In the next couple of posts, I’ll expand the discussion to look at deal values and sales cycle/velocity.
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