This is a subject I’ve referred to before, but an excellent article by Don Mulhern has prompted me to promote a concept that deserves far more attention – and which is driving impressive success in the growing number of sales organisations that have embraced the idea.
Most CRM systems – and most sales methodologies – are based on the idea of the pipeline reflecting a series of sales stages which are assumed to be progressively completed over time. It is also assumed that the further we have progressed through these sales stages, the more likely an opportunity is to close.
Many systems go even further: applying the same default probability to every deal that has reached a certain stage. Even worse, many CRM implementations take the “out of the box” default percentages without ever giving any thought to their accuracy or relevance.
But complex B2B sales are – unsurprisingly – far more complicated than that, and it’s yet another example of how simplistic, statistically derived assumptions that can be made to work in straightforward transactional sales environments don’t apply anything like as effectively to complex buying decisions.
I’ve seen ludicrous examples in which the delivery of a proposal is automatically associated with a 50% probability – despite the fact that at least three vendors are bidding (probably making similar unrealistic assumptions about probability), and without regard to the very real possibility that the customer will decide to stay with their current situation or defer the decision.
Why your sums don’t add up
Even a child can see that the math doesn’t work – and that’s without taking into account the inevitable fact that the vendors and their associated bids are invariably not equal in the eyes of the prospect. It’s a recipe for catastrophically inaccurate sales forecasting.
So – what can we do about this? Well, at minimum, we need to break the link between sales stage and probability and replace it with a mechanism that reflects the specific characteristics of every individual opportunity. For example, we might choose to:
- Down-weight opportunities where we only discovered the project after we received an unexpected RFP – and up-weight opportunities where it is clear that we have engaged early and positively influenced the prospect’s requirements
- Down-weight opportunities where we are dependent on a single point of contact – and up-weight opportunities where we have identified and engaged every member of the decision group
- Down-weight opportunities where we have not completed a formal value assessment – and upweight opportunities where we have completed a formal value workshop with the active participation of key stakeholders
- Down-weight opportunities where projected close date is merely based on when the prospect hopes to act and up-weight opportunities where the prospect has a truly compelling event that will force their hand
Even if some of these specific examples do not have predictive value in your sales environment, it would be astonishing if there were not other factors that had a significant impact on your chances of winning.
But even that approach – relating deal probability to the completion of critical success factors rather than only to sales stage is still something of a kludge. And that’s why I claim that your pipeline doesn’t need (and shouldn’t use) sales stages.
A discredited metaphor
Sales stage thinking is a discredited metaphor. It assumes linearity, and it fails to recognise the complex and essentially unpredictable nature of our prospective customer’s buying process. Like Monty Python’s parrot, if its feet had not been nailed to the perch by the CRM vendors we would have recognised that it was dead long ago.
Our customer’s buying process is almost inevitably non-linear (and often not very well understood by our potential champion). At any point, our prospect can decide to move forwards, to revert to a previous phase, to say as they are, or to abandon the decision journey altogether and stick with the status quo.
It is critically important that we are aware of where they are in their decision-making journey, and that we use this information to guide our actions and assess our chances of winning.
Whilst the process is non-linear, at any particular point in time the centre of gravity of their decision process is almost always in one of these phases:
- STATUS QUO: whilst staying aware of what is going on in and around their company, they currently see no need to change what they are currently doing
- EXPLORING: something has changed – either internally or externally (a TRIGGER EVENT) – that causes them to recognise that perpetuating the status quo may no longer be the right strategy, and they start to both explore the issue and their potential options
- DEFINING: having concluded that they probably need to take action, their attention now turns to defining what they may need to change to, who needs to be involved, what decision criteria and process they should adopt and which options they should shortlist
- SELECTING: the decision group now assesses their various options, receives proposals from qualified vendors, and attempts to achieve a consensus about their preferred option or options
- VERIFYING: the decision group seeks to eliminate any remaining concerns or reservations, to negotiate the best possible deal, to finally discard any other options, and to emerge with mutually agreed terms
- CONFIRMING: but even then, we cannot rely on their order – because if it is regarded as a significant purchase, the project still needs final formal approval (and often ends up competing for resource with other potential investments)
It is normally possible to make an informed assessment of where our customer is in their journey. And instead of thinking only about our sales actions, we can usually identify a handful of things that we need to know or do at each stage to assess the likelihood they will act, to facilitate their buying decision, to positively position our approach against their other options, or to qualify them out because they are unlikely to do business with us.
A simple combination of an accurate assessment of their current buying stage plus a handful of key success factors along the lines outlined above can help us to make a much better informed judgement about whether they are likely to buy, whether we are likely to win, how much the deal could be worth, when a formal order can be expected, and whether all the effort required is likely to be worth it.
All of the available research – from CSO Insights and others – suggests that sales pipeline management and sales forecast accuracy remain at acceptably inaccurate levels. There are some obvious remedies – including the ones I have highlighted above. So – you have to wonder – why do so many sales organisations still base their pipeline around sales stages?