A guide to the sales pipeline — benefits, stages, and more
A sales pipeline is a powerful tool that brands use to visualize the journey a potential customer takes from prospect to sale. Understanding the relationship between your client pipeline, sales volume, and the conversion funnel is critical to maximizing revenue and optimizing team productivity.
Without a functional understanding of the sales pipeline, reps will struggle to track their progress toward set quotas. From the team perspective, leaders will have no standardized way of measuring how close the sales department is to meeting its goals.
Mastering the use of sales pipelines will enable sales managers and reps to pinpoint areas of opportunity within their workflow. They can identify potential roadblocks reducing conversion rates, make adjustments to facilitate better forecasting, and close more deals.
While the conversion funnel provides a glimpse of the sales journey from the customer’s perspective, the sales pipeline provides team members with a means to track prospects internally as they transform into clients.
This post will examine the many aspects of the sales pipeline, including:
- What a sales pipeline is
- Benefits of a sales pipeline
- The difference between a sales pipeline and other sales tools
- Stages of a sales pipeline
- What you’ll need before you start building your own sales pipeline
- Steps to build a sales pipeline
- How to evaluate a sales pipeline
- Common sales pipeline mistakes
What is a sales pipeline?
A sales pipeline is a tool for visualizing the prospect journey as it progresses from lead to customer. Pipelines provide sales representatives with an overview of prospects and their position in the purchasing process. Organizational leaders use sales pipelines to track how close each rep is to meeting their quota. They can also use pipelines to determine whether the team will likely meet its cumulative sales goals.
Benefits of a sales pipeline
Incorporating a sales pipeline into your organization’s sales strategy will enable you to reap the following benefits:
Gain insight into deals
A well-constructed sales pipeline provides reps with actionable insights into deals so they can determine which prospects are most likely to convert into customers. They can use these insights to avoid wasted effort and prioritize high-value, high-percentage sales opportunities. In turn, this will help sales reps hit individual and team quotas on a consistent basis.
Measure team performance
As a business leader, a sales pipeline provides unmatched visibility into team performance. You can also use the sales pipeline to access granular data about each salesperson’s productivity. You can put this data to use to identify and recognize top performers, offer coaching and upskilling support to underperformers, and unlock your team’s full potential.
In addition to helping you track performance and deal progress, a sales pipeline also functions as a forecasting tool. A robust pipeline will indicate the potential value of deals should you close them. You can use this data to determine which deals are most likely to convert and predict month-to-month revenue with exceptional accuracy.
The difference between a sales pipeline and other sales tools
The sales pipeline can potentially be confused with similar concepts and tools, such as the sales funnel, sales flywheel, and sales forecast. Although these tools share certain traits, they aren’t one and the same.
A sales funnel visualizes the customer journey using a funnel-shaped graphic. This chart is based on the premise that the majority of leads will never become customers. Instead, a portion of leads will exit the funnel during each stage of the journey. Conversely, the sales pipeline is more linear and is based on the premise that most prospects will fall off at the qualification stage, but many remaining leads will become clients.
The sales flywheel is the most dissimilar of the customer journey visualization tools. Instead of describing the buyer journey as an attrition-centric process, the sales flywheel puts prospects at the core of the affair. Generally, the iterative flywheel approach includes three steps — marketing, sales, and service.
Lastly is the sales forecast. This tool allows sales leaders to estimate the number of opportunities that are likely to close within a specific time frame, such as a month or quarter. A sales forecast reveals how close your team is to reaching their quotas.
Sales pipelines can assist with forecasting, but these broader tools also include every other opportunity a sales rep handles — including new leads and prospects that are unlikely to convert.
Stages of a sales pipeline
Every sales pipeline marketing workflow needs to include the following key stages:
Alternatively referred to as lead generation, prospecting involves gathering new potential customers and funneling them into the sales pipeline. After a list of prospects has been identified, reps will begin proactively reaching out to them to qualify or vet them.
To assist with prospecting, you and your team should create customer profiles that identify your ideal lead’s specific parameters and attributes. Typically, a brand will create several different customer profiles, each of which addresses a specific segment of its target audience.
Next, you’ll need to qualify your leads. In the digital marketing world, prospects that have been vetted or qualified are referred to as “marketing-qualified leads.” These leads are more likely to become customers, so your reps should devote marketing resources to trying to win them over.
Leads are qualified using a scoring process, which should consider factors such as your marketing budget, the individual’s needs, and their likelihood of converting to customers. The lead-scoring methodology is flexible, allowing you to tailor your scoring strategy to align with the unique needs of your business. The key to effective lead scoring is to create a standardized process.
After your reps identify qualified leads, they’ll need to begin engaging with or contacting top prospects. During this feeling-out process, reps can determine whether there’s an opportunity to build a meaningful relationship with the prospect.
There are many ways reps can reach out to qualified leads, including sending emails, cold calling, or targeting individuals with social media content. The specific engagement strategies your business uses will vary based on several factors, including whether you operate in the business-to-business (B2B) or business-to-consumer (B2C) space. A B2B entity will likely use webinars, sales networks, and other high-level strategies. Conversely, a B2C sales team will probably rely more on cold calls and social media-based strategies.
Relationship building, or lead nurturing, is the process of familiarizing yourself with a lead, learning their needs and pain points, and building trust. There are many ways to build relationships with a lead — you can use in-person meetings, host a service or product demo, provide a custom quote, or schedule a Zoom call.
At this stage of the sales pipeline, your top prospects become sales-qualified leads, meaning they’re ready to be converted into customers by your reps. Now is the time to target your best prospects with all your marketing and sales resources.
This stage is also referred to as the proposal step, at which point your sales reps present a formal proposal to the customer. Sales-qualified leads may be on the cusp of making a purchase, but in order to seal the deal, your sales reps will have to engage in some negotiating. However, depending on your business model, your sales reps may be unable to offer price concessions to win the customer over. But they can still use savvy negotiating techniques to address concerns, answer last-minute questions, and demonstrate why your product or service is a good match for the client.
If you give your reps some leeway in terms of pricing, make sure you establish a clear process for approving discounts. For instance, you may require that sales reps have any pricing discounts approved by the team manager or department head. Implementing a standardized process will help reps become better negotiators while ensuring that they don’t inadvertently cut into your profit margins.
At the end of the sales pipeline, reps will either complete their deal, put it on hold, or lose the prospect. Putting a deal on hold is necessary if the prospect has high purchasing intent but isn’t prepared to commit just yet.
In these instances, it’s vital for the rep to maintain a relationship with the client. Failing to nurture these relationships can cause the prospect’s purchasing intent to wane and lead to missed opportunities.
Generally, closing the deal is viewed as the end of the sales pipeline. While this is mostly true, reps need to follow up with new customers in the weeks following their purchase.
Following up with clients fosters feelings of loyalty toward the brand and demonstrates that the rep prioritizes their satisfaction. Staying in touch with clients after the deal is closed can also improve retention rates and reduce churn.
What you’ll need before you start building your own sales pipeline
To create an effective sales pipeline, you’ll need extensive data about your target audience, existing customers, target market, pricing, product, sales team, company, and mission. Without this data, it’s impossible to construct a focused, purposeful, results-oriented pipeline.
Before you can build and manage a sales pipeline, you’ll need information about the following:
First, you need a detailed list of prospective customers that align with your customer profile and target audience. Your prospects should have a clear need for the service or product you’re offering and the budget necessary to purchase it.
Prospect lists should be extremely detailed and include information such as:
- Contact information
- Company and industry
- Size of the company
- Position of the target
- Whether they’re a decision-maker
- How you initiated contact with them (e.g., cold call, contact form)
- Pain points
If you’re already in communication with the prospect, identify which stage of the sales pipeline they’re in. You can easily adjust the stages later if necessary, so don’t spend too much time on this task.
Once you have a list of prospects, you need a clear, repeatable, structured sales process. This step-by-step formula should tell your reps what activities they must complete to make sales. A great sales process helps your reps maximize their productivity by providing a proven, easy-to-follow process for winning deals.
If you already have a good sales process in place, you also have a foundation for your sales pipeline. If not, you can begin defining the various stages of your sales process as you build your pipeline.
Physical pipelines like those used in the oil and gas industry have a destination or delivery point. Likewise, your sales pipeline needs a clearly defined “destination” in the form of revenue targets.
Setting weekly, monthly, quarterly, and annual revenue targets will help you answer other important questions, such as “How many marketing-qualified leads convert?” or “How many deals do we need in the pipeline to meet our profit objectives?”
Your sales pipeline will have both teamwide and individual impacts. As such, you should include your sales reps in the process of building your pipeline.
Ask their opinions, share your ideas, gather feedback, and keep them in the loop from day one. A collaborative approach will yield a more effective sales pipeline and help your entire team thrive.
Steps to build a sales pipeline
Before you can use this effective tool to close more deals, you must first build your pipeline. The steps to building an effective sales pipeline are as follows:
- Identify prospective buyers. Before you build your pipeline, take stock of prospective buyers that you believe would be interested in purchasing your product or paying for your services. If you have a long list of prospects, you’ll need a customer relationship management (CRM) platform to help you manage them.
- Define the sales pipeline stages. After you sort out your list of prospects, define your sales pipeline stages. The typical sales pipeline includes stages like “connect,” “set appointment,” “complete meeting,” “offer quote,” and “send proposal.” If your customer journey is more complex, add other stages to your pipeline to reflect this.
- Identify how many opportunities typically continue through each stage. You’ll need to know how long prospects spend at each stage and how many leads advance to the next stage. For instance, you may find that leads are 50% likely to convert at the demo stage and 85% likely to convert at negotiation. Knowing these metrics will help you determine how many deals you need in the pipeline to reach revenue goals.
- Assign sales activities for each stage. Each stage of your pipeline should include clearly defined sales activities, such as booking a meeting or scheduling a demo.
- Track pipeline metrics and performance. To optimize and maintain the efficacy of your pipeline, you must continuously track key performance indicators (KPIs) and metrics.
- Refine your stages as you go along. Once you’ve implemented your pipeline, you’ll likely identify trends between prospects and reps. If these trends aren’t assigned a dedicated stage in your pipeline, you may need to add or refine existing stages to align with the typical prospect’s purchasing journey.
- Keep your pipeline up to date. Treat your sales pipeline stages like a to-do list. Make sure your team adds contacts to the pipeline and moves prospects from stage to stage as they get closer to making a purchase.
Once you establish your sales pipeline, you’ll need to adopt some established best practices to manage and maintain it. First, establish a process for following up with leads. You’ll also want to implement a standardized, repeatable sales process that emphasizes short sales cycles.
Make it a point to conduct regular sales pipeline review meetings with each rep and actively encourage team members to collaborate to get deals done. Create regular sales pipeline reports to provide reps with insights into their performance. Also, avoid manual tasks and empower your reps to do the same by investing in powerful workflow automation solutions.
Perhaps most importantly, you’ll want to customize sales pipelines to align with the goals and objectives of each team or department. It’s also important to periodically clean your pipeline to eliminate old prospects, bad data, or other impediments that might impact productivity.
Finally, use leading technology and tools to assist with prospecting, scoring, and qualifying potential buyers. Investing in these solutions can give your sales team an edge and help them sprint toward organizational sales goals.
How to evaluate a sales pipeline
To optimize your pipeline, you’ll need to conduct recurring reviews to verify that it’s delivering measurable benefits for your organization.
During your evaluation process, you must critically examine your pipeline to ensure that it has a high sales velocity, short sales cycle length, and high conversion rate. You need access to accurate data on prospects, sales processes, leads, and conversions to measure these performance metrics.
Here’s how you can get the right data and run an effective sales pipeline review:
- Use your CRM to analyze how your team and reps are performing. Your CRM platform should include robust reporting tools that you can use to gauge team performance and take a more granular look at how each rep is doing. This data will set the tone for the review and help you identify key issues that need to be addressed.
- Ask reps to summarize each of their deals. With your CRM data in hand, meet with each of your reps individually. During the meeting, ask your rep to quickly summarize each deal, provide some positive feedback, and ask questions to help them identify ways to streamline the pipeline.
- Develop an action plan for pending deals and review the next steps with reps. When working with your reps, lay out an action plan that they can apply to sales-qualified leads. Even if they’ve just closed a deal, your reps should already know who they’re targeting next and have several steps in place to nurture that new lead.
Use these steps to successfully oversee pipeline reviews and facilitate the maturation of your sales reps.
Common sales pipeline mistakes
As you prepare to create your own sales pipeline, it’s essential that you avoid some common mistakes, including:
- Letting the pipeline go dry. You can never have enough deals in the pipeline, especially considering that many prospects won’t convert immediately — if they make a purchase at all. To keep your pipeline from running dry, encourage your reps to have several backup deals in the queue. For instance, if their target is five deals per quarter, make sure they have eight to 10 deals in the pipeline.
- Having a long sales cycle. Lengthy sales cycles add unnecessary friction to the purchasing journey and can negatively impact conversion rates. Shortening your sales cycle will help reps close more deals, achieve their sales goals, and generate higher revenue for the business. Make it easy for prospects to buy and ensure that they don’t have to navigate an excessive number of steps to get a deal done.
- Lacking coordination. As prospects progress through the sales pipeline, they’ll be handed off to different teams or departments. Poor communication can lead to lost deals. To guarantee a smooth transition for the client, it’s imperative for teams to coordinate with one another, communicate the prospect’s needs and expectations, and prevent friction during the sales journey.
- Misunderstanding customers. Quota-centric reps are sometimes tempted to force deals through the sales pipeline. As a result, they may misinterpret a customer’s level of interest or product knowledge, which means the prospect won’t receive the level of nurturing necessary to close a deal. Consequently, reps must obtain a deep understanding of prospects’ needs and pain points before moving them to the next stage of the pipeline.
- Lacking deal insights. When a rep’s pipeline becomes inundated with leads, they won’t be able to effectively prioritize each prospect. Marketing- or sales-qualified leads can slip past sales reps, and unqualified prospects will remain in the pipeline for too long. To ensure that reps have the insights they need to effectively qualify and prioritize leads, your organization must invest in a robust CRM solution that provides actionable deal insights.
- Focusing only on one stage. Getting fixated on a single stage of the sales pipeline leads to missed opportunities and lost leads. Instead, reps must view the sales pipeline holistically and allocate adequate resources to qualified leads.
Being aware of these common stumbling blocks will help you avoid them and maintain a highly effective sales pipeline.
Improve your sales pipeline with standardized processes and tools
A good understanding of a healthy sales pipeline means increased opportunities to improve forecasting and close more deals. If you’re ready to put sales pipelines to work for your organization and cultivate prospects at scale, you need to implement the right technology and tools, such as Adobe Marketo Engage.
When combined with other products, Marketo Engage can help your team develop and qualify potential buyers well before they’re passed to sales with relevant, uniquely personalized nurturing campaigns and robust scoring capabilities.