This document discusses keys for an efficient sales pipeline management. It begins by arguing that sales should be thought of as a process rather than an art, in order to better measure, replicate, and improve performance. It then discusses choosing an appropriate pipeline structure based on the customer's buying process, with stages reflecting their problem recognition, solution exploration, evaluation, and risk minimization. The document recommends structuring the pipeline with 4-7 stages of roughly equal duration. It also discusses controlling opportunity flow through the pipeline using validation messages at each stage, monitoring the pipeline shape for bottlenecks, regularly updating opportunities, and analyzing opportunity win/loss factors.

1. White Paper
The 7 keys of the sales director
for an efficient pipeline management
Introduction
Managing a sales pipeline is an intimidating task. It involves controlling
and motivating sales people, following live opportunities, updating sales
collaterals, reaching sales quotas, reporting to the CEO, preparing reliable
sales forecasts…
The risk for the sales director is to find these obligations pressing to
the point of losing her strategic outlook, thus her long-term impact on the
performance of the sales team.
We wanted, in this white paper, to go back to basics: seven keys that,
when used daily, will durably improve the management of your
sales pipeline.
Jean-Marc Bellot Table of contents
Consultant specialized in
designing sales processes
1. Thinking of sales as a process ........................................................ p 2
jbellot@customercentric.com
http://jmbellot.blogs.com/pro
2. Choosing the right pipeline structure ............................................... p 3
3. Controlling the flow of opportunities in the pipeline .......................... p 6
4. Taking care of the pipeline day after day.......................................... p 7
Thomas Oriol 5. Analyzing the pipeline and its changes ............................................ p 9
Director of Nimble Apps
Limited, the publisher of 6. Using the pipeline to develop sales competencies ........................... p 11
SalesClic
t.oriol@nimble-apps.com
7. Moving from analysis to forecasting with the pipeline ...................... p 13
www.salesclic.com
The 7 keys of the sales director
for an efficient pipeline management
© J.-M. Bellot and Nimble Apps Limited 2010
All rights reserved
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2. 1 Thinking of sales as a process
We all know this: sales is an art and sales people are artists. They are brilliant,
mercurial, focused on performance (as in “the process of carrying out an
« Despite all the lip service action”, but also “a person’s rendering of a dramatic role” 1), quite reluctant
that has been paid to it, sales to being managed…
is the one area of business
activity that has benefited
As always, there is an element of truth in these clichés.
the least from the applica-
tion of process and process
reengineering. » Selling does require “artistic” qualities: audacity, reactivity, psychology…
Bill Stinnett
As in the theatre, the sale is a repeated presentation of the same
in Think Like Your Customer
play, by the same actors, for the same public – but with infinite
variations in the details.
Let’s admit it: some sales people are divas!
However, it has become difficult for a company to achieve lasting
commercial success based on the “artistic” approach to sales alone.
The economic environment is tough and competition is intense: in
all areas, companies must consolidate what works and correct what
doesn’t. Improvisation is no longer enough.
Production cycles are shorter: companies must control all schedules,
including commercial ones.
Recruiting is a high-stakes challenge: how can companies select
the right sales reps if they have no finer definition of the required
competencies than “a professional appearance” or “talent”?
For all these reasons, companies must stop thinking of sales as an art,
and start managing it as a process.
A process is “a series of actions or steps taken in order to achieve a particular
end” 2. Thinking of sales as a process thus yields two immediate, positive
effects.
The time dimension of sales is naturally taken into account:
all processes have a beginning, an end and intermediary stages 3.
Hence the traditional metaphors for the sales process – the pipeline
or funnel.
Processes can be measured. They are thus easier to replicate and
improve than artistic performances.
1
Source :Oxford American Dictionary.
The 7 keys of the sales director 2
for an efficient pipeline management
Source : Oxford American Dictionary.
3
© J.-M. Bellot and Nimble Apps Limited 2010 When these stages are appropriate, they each become autonomous and fascinating objects of enquiry…
All rights reserved We discuss this topic in the “Analyzing the pipeline and its changes” section of this white paper.
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3. The following section in this white paper will explain how to structure your sales
pipeline in order to maximize its operational and managerial effectiveness. You
should, however, keep two points in mind before starting this interesting
exercise.
A single pipeline consolidating widely different sales processes
won’t work. For example, managing sales to new clients and to
repeat customers in a single pipeline will be difficult.
Do prospects enter the pipeline once they are identified or qualified?
In other words, should the pipeline include both leads and
opportunities 4, or opportunities only? Opinions differ, especially
since this topic has potential organizational implications 5.Our (practical)
point of view is: it doesn’t really matter as long as the qualification
of leads is as carefully managed as the progression of opportunities
in the pipeline. By the way, lead qualification is often a multi-stage
process, which implies the management of a lead pipeline… It
makes sense, therefore, to connect this marketing pipeline to the
sales pipeline.
2 Choosing the right pipeline structure
Once a broad coherence between your sales process and your sales pipeline
is established, which stages should you choose for the latter?
There is one golden rule to answer this question: you should look at your
« It’s not what we do in our sales process with the eyes of your prospects. What would their
sales process, but what the ideal buying experience be? What are the main phases in their buying
customer does in his buying process?
process, that really matters. »
Unfortunately, this rule is often ignored. Most companies structure their pipeline
Bill Stinnett from the seller’s perspective. They are (unknowingly) pushed in this direction
in Think Like Your Customer by traditional SFA or CRM software, which focus heavily on internal tasks.
Their pipeline stages thus correspond to seller activities (e.g. “Presentation of
the company”, “Demonstration of the product”, “Negotiation of the proposal”)
and ignore how such activities affect the buyer’s decision process.
The 7 keys of the sales director
for an efficient pipeline management 4
© J.-M. Bellot and Nimble Apps Limited 2010 An opportunity is traditionally defined as a qualified lead.
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All rights reserved Leads are marketing turf and opportunities sales turf.
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4. The four steps of a buying process
There are four main phases in a buying experience, reflecting the
evolution of the psychology of the prospect:
The prospect acknowledges the existence of an objective (or
problem), whose completion (or resolution) requires that external
resources be used.
The prospect then starts thinking of potential solutions, and
produces detailed specifications, provisional budgets, ROI estimates…
Assessing potential solutions based on this preparatory work is then
delegated to support functions (e.g. IT, Finance, Legal). RFPs are
often released during this phase.
The third phase of the prospect’s buying experience is a probation
phase, during which the mandated experts (internal or external)
examine short-listed vendors. Demonstrations, prototypes,
benchmarks… multiply.
Vendors often misunderstand the fourth phase, which starts once
the prospect has collected the required probationary elements. It
is a phase of risk minimization, during which the prospect seeks
universal validation: payment conditions, installation schedule,
mutual responsibilities, comprehensive business case… The prospect
will not buy without such assurances.
Pipeline stages must be organized around these four phases.
Don’t create too many stages
At a minimum, the pipeline should reflect the four phases in the prospect’s
buying experience. The addition of other stages is the occasion of a classical
choice between precision and efficiency. Adapting to the potentially long
and complicated buying process of the prospect is important, but so are:
Minimizing your own management costs (sophisticated processes
require more maintenance).
Preserving the informative value of the statistics derived from your
pipeline 6.
Giving a little leeway to the divas in your sales people 7!
The 7 keys of the sales director 6
for an efficient pipeline management
For example, 20 conversion rates lose their meaning.
7
© J.-M. Bellot and Nimble Apps Limited 2010 In this respect, we recommend reading an interesting Harvard Business Review paper: When Should a
All rights reserved Process be Art, not Science? (March 2009).
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5. We suggest the following four questions to help you make that choice:
What is the qualitative leap accomplished by the prospect between
stages n and n + 1 of the pipeline – would the prospect realize by
themselves that they progressed from the one to the other?
What is the managerial interest of the potential new stage – what
does it help you accomplish?
Are the competencies required of your sales people in stages n and
n + 1 fundamentally different?
Are the stages MECE 8 ?
Make sure pipeline stages have approximately the same length
In Jules Verne’s Around the World in 80 Days, the trip is divided in eight
great stages of equivalent length. The cities (Suez, Bombay, Calcutta, Hong
Kong, Yokohama, San Francisco, New York, London) are spread evenly on
the globe – neither too close nor too distant from one another. As a result,
Phileas Fogg can assess his chances of eventual success lucidly each time he
completes a stage. He knows whether he is early or late and can make the
appropriate transportation arrangements for the following stages.
Now imagine that instead of the novel’s 8 stages and cities, Phileas Fogg had
chosen 7 stages for the first 7 days of the trip to Suez, then 1 single stage
for the following 73 day-trip to London. Would he have assessed his chances
of success as lucidly? Of course not! Similarly, uneven stage durations
complicate the management of a sales pipeline significantly.
In addition, most sales teams are used to funnel-shaped pipelines,
reflecting the progressive attrition of prospects as they progress inside the
pipeline. Too long a stage in the middle of the pipeline compared to the
preceding and following stages would yield a barrel-shaped pipeline, which
would be harder to assess visually.
The 7 keys of the sales director
for an efficient pipeline management
© J.-M. Bellot and Nimble Apps Limited 2010
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All rights reserved Mutually Exclusive, Collectively Exhaustive.
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6. 3 Controlling the flow of opportunities
in the pipeline
For the management of a sales pipeline as for the management of any
process, it is important to think carefully of the criteria validating
stage transitions.
In an industrial context, quality control measurements are frequently
used between stages of the manufacturing process. Their goal is to detect
potentially flawed parts. Parts that respect their specifications move on. For
parts that do not respect their specifications, management must choose
between three options :
Sending the part back through the stage preceding the failed
measurement (“confirmation”).
Applying a specific corrective action to the faulty part (“curative
action”).
At worst, throwing the faulty part away.
Stage transitions in a sales pipeline should be managed in the same way. Since
the sales process should reflect the buying experience of the prospect, it is
with the eye of the prospect that control measurement should be designed.
Practically, we recommend that at the end of each stage in the sales
process, a sales person send to the prospect a message summing
up the key conclusions of that stage.
Such a message has three virtues :
It enables the prospect to check that their issues have been
understood.
It allows the sales person to check the progress of the prospect
towards the acquisition of the corresponding goods/services.
The message thus contributes to validating the quality of the sales
opportunity.
It enables the sales manager to check with specific and objective
criteria if the sales person has positioned the opportunity
correctly in the sales process, and if the opportunity is solid
enough to feed the company’s sales forecast.
Validation messages are therefore the basis for management’s inspection
of the sales pipeline. They allow the sales manager to move beyond the
cold analysis of sales data and form a qualitative view of the company’s sales
process.
Since validation messages are so important, they must be available for review
at any time. It is thus convenient to manage message templates and the
messages sent with the same tool used to manage the sales pipeline itself.
Modern CRM software usually includes document template management and
The 7 keys of the sales director
messaging functionalities, which reduces the administrative workload of the
for an efficient pipeline management sales person.
© J.-M. Bellot and Nimble Apps Limited 2010
All rights reserved
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7. 4 Taking care of the pipeline day after day
Taking care of the pipeline is important! Here are three daily tasks to
ensure that your pipeline stays in good health.
Monitoring the shape of the pipeline
Do you remember the age pyramids of our childhood – those piles of
horizontal bars representing the age groups of a given population? We can
use a similar representation for the sales pipeline:
One horizontal bar per pipeline stage, from the earliest (top bar) to
the latest (bottom bar).
Bar length proportional to the total amount of the opportunities in
the corresponding stage
A “standard” pipeline, whose opportunities flow regularly from one stage to the next
Building that graphical representation of the pipeline, and monitoring
its evolution through time, lets you spot potential bottlenecks in the
pipeline: they will appear as “inflated” stages.
There can be two immediate causes of such inflation:
The conversion rate of opportunities from the inflated stage to the
next is too low (the “dam” effect).
Opportunities are moving too slowly in the inflated stage (the “lazy
river” effect) 9.
The 7 keys of the sales director
for an efficient pipeline management
9
© J.-M. Bellot and Nimble Apps Limited 2010 This can be visualized with a refined graphical representation of the pipeline where the height of each
All rights reserved bar is proportional to the average duration of the corresponding stage.
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8. Potential causes for the problem: “Lookinf for a solution” too fast, or conversion rate between “Exploring solutions”
and “Demonstrating value” too high?
Thinking of sales as a process and representing this process as a pipeline
have two additional, positive consequences:
Helping you move from immediate to deeper causes when faced with
stagnating opportunities.
Showing you these causes are often located in earlier phases of the
sales process.
For example, if stage 3 of your pipeline (“Demonstrating value”) starts inflating,
it is probably because sales reps are facing new issues in stage 2 (“Looking for
a solution”)…
Cleaning the pipeline
Cleaning the pipeline has two main significations:
Recycling stagnating opportunities. Sales reps have a tendency
to keep stagnating opportunities in their pipeline beyond reason. But
a stagnating opportunity means a loss of time and money for the
rep and the company. It is important to understand that recycling
a stagnating opportunity doesn’t mean losing it, but giving it
a new chance by sending it back to an earlier and more appropriate
(i.e. more in line with the maturity of the corresponding prospect)
stage of the pipeline.
Updating opportunities frequently. Weekly updates before the
Monday morning sales call are not enough. For the analytics based
on the pipeline to yield interesting results, same-day updates are
necessary 10. The trick is to find an SFA tool minimizing the time
spent on updates.
The 7 keys of the sales director
for an efficient pipeline management
© J.-M. Bellot and Nimble Apps Limited 2010
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All rights reserved Daily updates enable the calculation of incredibly rich statistics.
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9. Monitoring opportunity win and loss factors
At the end of the sales process, opportunities are either won or lost. Noting
the reason for each win or loss enables the following useful actions:
Monitoring how these reasons vary through time (e.g. “This year, we
won great contracts thanks to our maintenance program. We should
mention the program more prominently in our sales collaterals”).
Establishing correlations between win/loss factors and the flow of
opportunities in the pipeline (e.g. “When we spend too little time
in the stage “Demonstrating value”, we often lose the deal for price
reasons”).
5 Analyzing the pipeline and its changes
You can’t manage what you can’t measure. It is not a question of
“policing”: the main advantage of solid sales analytics is to help reps to
sell more! By identifying priority opportunities, pitfalls in the sales process,
undeveloped competencies…
As mentioned in the previous section of this white paper, taking care of the
« Problematically, companies pipeline (notably by updating live opportunities frequently) transforms it into
and individuals end up using a powerful sales analysis tool. So what should you measure and why?
CRM systems to measure the Here are a few suggestions.
quantity of sales activity
rather than the quality, re- Measure progressions, not tasks
quiring salespeople to spend
countless hours logging the
This is a crucial but quite subtle distinction. We hope the following table will
quantitative data. »
clarify it.
Jeff & Chad Koser
in Selling To Zebras
Examples of matching “tasks” and “progressions”
The 7 keys of the sales director
for an efficient pipeline management
© J.-M. Bellot and Nimble Apps Limited 2010
All rights reserved
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10. The first indicators (on the left) are clearly less useful than the second
indicators (on the right). The goal is not to spend the day on the phone, but
to convert leads into prospects; not to meet prospects, but to convince them
that our offering answers their needs…
Identifying the most significant indicators of “progressions” (in the
pipeline!) is thus the absolute priority of sales analysis. Such indicators have
two advantages:
They reflect sales performance, not sales activity.
They are forward looking, not backward looking.
Favour dynamic, not static performance indicators
Many companies use volume indicators when analyzing their sales pipeline –
the most common being the coverage ratio:
amount of live opportunities in the pipeline / sales quota for the period
Opportunity volume is of course important, but it is clear that performance
indicators focusing on volumes do not give a precise idea on a rep’s progress.
Here are a few dynamic indicators you should favor.
Conversion rates. The conversion rate of opportunities from stage
n to stage n + 1 of a pipeline during a given period is:
number of opportunities going from stage n to stage n + 1 / number of
opportunities that spent time in stage n
Length of stay. The time an opportunity spent in a pipeline stage 11
is measured very simply by comparing entry and exit dates 12.
The goal is not to go as fast as possible: for a given pipeline stage, a
short length of stay coupled with a high conversion rate could signal
too superficial a work by the sales rep, leading to inflated pipeline
stages downstream…
Velocity. The velocity of an opportunity in a pipeline stage is a
variation on its length of stay in the same stage:
Length of the company’s reporting period / length of stay of the
opportunity in the stage
Applied to the entire pipeline 13, this ratio is particularly useful:
it indicates how many times the pipeline “rotates” during the
reporting period.
11
Or many pipeline stages, or the entire pipeline.
12
We can see why frequent pipeline updates are important: for a sales cycle of three to six months,
The 7 keys of the sales director
a one-week delay between a sales event taking place and being recorded, happening two or three times
for an efficient pipeline management
© J.-M. Bellot and Nimble Apps Limited 2010 during each opportunity’s lifetime, can wreck sales analysis completely.
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All rights reserved Every opportunity and stage transition.
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11. Preserve the historical variations of your performance indicators
Calculating the right indicators is good, but monitoring the variations of
these indicators through time is even better. This is where a good sales
analysis and forecasting solution is key, since the dynamic indicators we
recommend are difficult to track in Excel or with traditional CRM software for
an entire team…
6 Using the pipeline to develop sales
competencies
Few companies realize that the sales pipeline is a fantastic tool for
developing the competencies of the sales team. The following charts
explain the link between pipeline management and sales rep competency
development.
Here is what happens at the level of the sales rep:
Sales rep activities
Three cases are possible when the manager enquires about the opportunity.
Everything OK:
The 7 keys of the sales director
for an efficient pipeline management
© J.-M. Bellot and Nimble Apps Limited 2010
All rights reserved
Pipeline and team in regular mode
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12. One-off issue:
Let us suppose that analyzing the deliverables corresponding to the
opportunity’s status reveals an issue. If this is a one-off issue, the
following sequence of activities will take place:
One-off issue addressed by the sales manager
Recurring problem:
Addressing the recurring problem by developing the corresponding
competency of the sales rep yields significant time and cash
savings, by preventing management-led “rescue operations” on
every troubled opportunity.
Structural problem addressed by the sales manager
The 7 keys of the sales director
for an efficient pipeline management
© J.-M. Bellot and Nimble Apps Limited 2010
All rights reserved
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13. 7 Moving from analysis to forecasting with
the pipeline
We have suggested a few ideas to transform your sales pipeline from a
mere sales administration aid into a powerful sales analysis and competency
development tool. Next comes using the pipeline to progress from sales
analysis to sales forecasting. With that in mind, let us start with the
discussion of a controversial issue.
Using closing probabilities properly
Most companies attribute closing probabilities to the opportunities in
their sales pipeline 14, and then base their sales forecast for a given period
on the expected value of the opportunities with a closing date in that period:
forecast = total amount of the relevant opportunities x their closing probability
Unfortunately, this calculation is not reliable, for a simple reason: at the
end of the sales process, an opportunity is never 60% won and 40% lost (for
example) – it is won or lost entirely.
That being said, we do not think closing probabilities should be
banned from sales analysis and forecasting.
Comparing the “judgmental” probabilities of the sales rep and the
“real”, historical probabilities for each stage of the pipeline 15 yields
fascinating insights into the psychology of the sales rep 16.
Closing probabilities can prove useful in the context of forecast-
oriented sales simulations 17.
Back to our population pyramid…
One simple way to derive reliable sales forecasts from the sales
pipeline is to start from the graphical representation of the pipeline described
above, and “back-pedal” based on historical conversion rates and durations.
For example:
I know by experience that to close 100 at the end of the period, I
need 350 in stage 1, 280 in stage 2, etc. x days before 18.
Today, I have 320 in stage 1, 250 in stage 2… and can thus expect
sales of 90.
Performing these calculations means building your “ideal pipeline” – the
pipeline that, given your historical conversion rates and durations, would
allow you to reach your sales target for the period.
14
Either a separate probability for each opportunity or a default probability for each pipeline stage.
15
Including, potentially, for different categories of opportunities: smaller/larger amounts, closer/
farther closing date…
16
Behavioral economics and decision theory have made significant progress during the past 30 years.
Some of the models developed by scholars in these fields can be applied to sales forecasting.
The 7 keys of the sales director 17
for an efficient pipeline management
Such as Monte Carlo simulations.
18
© J.-M. Bellot and Nimble Apps Limited 2010 In this example, x is the number of days between the date the forecast is made and the end of the
All rights reserved corresponding period.
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14. The ideal and real pipelines compared
Keeping an eye on actual and ideal pipelines is an excellent way to
combine sales analysis and forecasting. It also favors a better match
between sales activity and sales targets.
Advice for more reliable forecasts
Sales forecasting theory has evolved significantly during the past 10 years.
During the 1980s and 1990s, the recommendation of scholars to professional
forecasters was to exclude the “human factor” at all costs and to produce
as “quantitative” forecasts as possible. Today, scholars acknowledge that
neglecting the judgment of front-line people is not productive. That
judgment may be biased 19, but it still contains valuable insights on
a company’s prospects, products, markets…
The 7 keys of the sales director
for an efficient pipeline management
© J.-M. Bellot and Nimble Apps Limited 2010
19
All rights reserved Ex. Optimism, risk aversion, selective memory…
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15. The goal is thus to combine the judgmental forecasts of sales reps
and a rigorous analysis of historical data. There are numerous ways to
do that, and not enough room in this white paper to describe them. Instead,
we would like to add a few comments on forecasting methodology to the
preceding paragraphs.
Always measure the quality of your forecasts ex post. For that,
you must choose an appropriate measure of the forecasting error
(actual - forecast) and apply it to every dimension of the forecast,
opportunity by opportunity: amount, closing date, etc.
Look for correlations between pipeline events, product lines, team
members… With a bit of luck, you will identify “leading indicators” for
potential forecasting errors.
Be weary of potential links between quotas, incentives and
judgmental sales forecasts. Undeniably, these three elements
interact. Such interactions do not prevent effective sales forecasting,
but they must be factored in.
Conclusion
Managing your sales pipeline with the 7 keys described in this white paper
can increase the performance of your sales team significantly. Of course,
you should consider the specificities of your company (e.g. sales process,
information systems) when applying them. Do not hesitate to contact us for
a neutral point of view on your endeavours!
About the authors
Jean-Marc Bellot is a consultant focusing on sales process design. He is a
business partner of CustomerCentric Selling® and leads numerous seminars
focused on increasing sales productivity.
Jean-Marc’s blog
Thomas Oriol is a Director at Nimble Apps Limited, which publishes SalesClic,
an innovative sales pipeline visualization, analysis and forecasting solution.
www.salesclic.com
The 7 keys of the sales director The information in this white paper is not intended to amount to specific advice on which reliance should be placed. While every
for an efficient pipeline management effort is made to ensure the accuracy of the information, we cannot be liable for inaccuracies, errors, omissions or misleading
© J.-M. Bellot and Nimble Apps Limited 2010 information contained in this white paper. We disclaim all liability and responsibility arising from any reliance placed on the
All rights reserved information in this white paper by any reader, or by anyone who may be informed of any of its contents.
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