What is Sales Pipeline? All Phases and Management Guide

What is a sales pipeline? A definition of a term

A sales pipeline or sales pipeline is a methodically prepared sales process flow. All snapshots of this process are recorded in the sales pipeline. The sales pipeline offers excellent support for an overview of your sales and what needs to be done to achieve the defined goals. With these statements, the company gets a precise and systematically ordered overview of the sales situation, with the possibility of optimizing future sales strategies.

The sales pipeline applies not only to record the sale of products but can also be used to sell services. It can be used to analyze how many sales or contracts in the service sector the sales team will likely realize in the next month or the current year.

Once a company has recognized the importance of its sales, it must start building a sales pipeline - adapted to its own needs. This setup is usually done in six phases.

The six phases of a sales pipeline

How do you build a sales pipeline? To define a transparent sales process for everyone involved, the company management must first coordinate with the sales team. The sales pipeline phases are to be defined within this coordination process.

1. Lead generation

A lead is a qualified contact with a consumer interested in their company's product or service and who agrees to give the company their data (leads) for further contact. By providing the data, the consumer becomes a potential customer.

Lead generation is about making the first contact. Consumers must first be made aware of what the company has to offer. They should be aware of the products or services and show interest in them. Lead generation can be done through classic advertising or online marketing. Proven measures from the second category are the content of your website combined with blog articles, online events, or Google AdSense. Newsletters are also a popular means of lead generation. The provisions of the GDPR must be observed.

2. Lead Qualification

After the initial contact, the marketing task is to provide the interested party with further information about the company's products or services. If the consumer shows interest in this information, he becomes a Marketing Qualified Lead (MLQ). The data record (lead) is enriched with further facts. At this point, the decision must be made as to whether the prospect has the potential to become a Sales Qualified Lead (SQL). SQL is high-quality leads for sales that signal genuine interest in the company's products or services. Proven measures for lead qualification are e-mail marketing, social media, online events, or the classic telephone call if the consumer has consented.

3. Determination of needs

This is where the greatest attention is required in the sales process. Studies have shown that around two-thirds of all sales fail at this point. Inadequate needs assessment is always a large waste of time and money. So, the task of the third stage of the sales pipeline is to determine exactly whether the prospect's needs align with the company's portfolio. If this is not the case, sales should part with the lead at this point.

4. Making the Offer

After the needs have been determined and matched with the company's product portfolio, the offer is submitted. In principle, every offer must be understandable, contain product information and have a clear price structure. The advantages of working together should be emphasized, and decision-making made easier. When submitting an offer, a deadline must be set for decision-making. It is possible to inquire about this deadline before submitting the offer.

5. Contract Negotiation

In the best case, this phase is omitted if the customer accepts the offer in the form presented. Often that will happen later. Negotiations must lead to a mutual convergence of interests. It is important to respond to the potential buyer's concerns or objections, to signal a willingness to conclude the purchase agreement, and to find a consensus.

6. Conclusion of contract

The last phase of the sales pipeline has only been reached once the contract has been signed or the purchase has been secured in writing. Only then is the customer win. Complete the contract with the negotiation results of phase 5 immediately. Possible delays allow the customer to change their mind at the last moment or to switch to a competitor.

Sales Pipeline Management - Tips for managing the sales pipeline

After answering the question "what is a sales pipeline," it is equally important to clarify how to manage it effectively.

1. Only good leads are effective.

Most sales take about the same amount of time. Focusing sales activities on promising contacts is much more effective than preparing information for all leads in the database. Sorting by sales activities and successes qualifies the leads.

2. Worthless leads should be abandoned.

Weeding out the ineffective ones is just as important as identifying promising leads. Even if the decision to part with interested parties is difficult when a lot of time has already been invested. A lead is worthless if the contact shows a clear disinterest, and this contact cannot be transferred to the next phase of the sales pipeline.

3. Sales pipeline metrics need to be monitored.

A sales pipeline is a dynamic project that is subject to constant change. Therefore, the sales figures must be monitored. This primarily affects the number of potential deals, the average expected turnover of these deals, the actual closing rate for the sales, and the average duration of the entire sales process. Monitoring the key figures mentioned provides an overview of your company's sales pipeline status.

4. The sales pipeline processes are dynamic and adaptable.

Sales techniques must be constantly questioned and adjusted. With the introduction of the GDPR, the telephone acquisition of earlier times is no longer possible in this form. New technologies and media must be integrated into the pipeline. Just think of social media channels such as Instagram, Twitter, or Tik Tok, which played no role just a few years ago.

5. Sales processes must be standardized to keep the sales cycle short.

While every customer is unique, they do not require an individual sales strategy. Because the needs and motivation to buy are usually similar, a fact that makes it possible to standardize processes in the sales pipeline. Shorter sales cycles can be achieved with standardized processes.

A CRM makes it easier to manage the sales pipeline.

It all depends on the right sales pipeline software. Efficient management of the sales pipeline is only conceivable today with dedicated CRM sales software. Customer relationship management has become an integral part of sales and is valued by successful companies as one of the most important tools.

With the CRM, several processes can be tracked at the same time, and important key figures. Managing a large number of leads allows the team to access all important information immediately.

Many CRM in which the analysis tools for evaluating the sales pipeline are already integrated. Sales Intelligence provides statistics on the efficiency of marketing activities. For the statistical evaluation, only the advertising channels to be evaluated have to be entered.

At the same time, the evaluation of the return on investment (ROI), one of the most important financial indicators in the company, enables how profitable the marketing measures used to generate leads were. CRM sales software allows practically the entire sales process analysis from the first contact (lead generation) to the sale.

But the system can do even more. Sales Intelligence also finds an answer to how effective the sales force is. By analyzing the marketing activities and the statistical evaluation, conclusions can be drawn as to which sources have achieved the highest deal conversion rate.