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When the Sales Pipeline Management Report Reveals a Gap

Without fail, sooner or later every company struggles to meet a quarter’s financial targets –some companies more often than others.  Typically, the warning sign is when the sales pipeline management report reveals a gap between the sales forecast and plan.  Then, the cry—“let’s review the sales forecast”–is heard throughout the halls, Sales and Marketing “harmony” is about to be tested.

It’s true that Marketing should be aligned with revenue because it can impact deals at all stages of the sales cycle.  What is not true is that the lead generation engine can be turned on and off and still yield qualified opportunities that will close within a 90-day period.  Granted, some lead generation programs focus on developing qualified opportunities further down the funnel and those can impact sales pipeline management. However, those qualified opportunities in the sales funnel tend to be bluebirds and should not be depended upon for building a sustained sales pipeline.

A management team has to question a marketing leader who brings PowerPoint slides and Excel spreadsheets to the current quarter sales forecast review highlighting leads to be generated from the current quarter.  In the short-term, (and especially if the sales cycle is six months or longer), the marketing leader should be focused on converting every qualified opportunity residing in the sales funnel today. That requires Marketing to focus on sales tools and sales enablement to effectively impact sales pipeline management.  So, step one is for the organization to understand the relationship and time lag between leads and deals.

Sales Pipeline Management – Time Lag Between Leads and Deals

Unfortunately, many marketing discussions begin by equating the term “lead” with the origination of the sales process. There is frequently a false belief that it is best to leave out the terms “suspect” and “prospect” from the discussion because “those terms will only add time to the process and confuse the audience.”  In most organizations, “lead” refers to everything from a web visitor filling out a form to an individual that attended an online or physical event to someone who has spoken with a sales rep on the phone.  In short, the term “lead” is deceiving and has resulted in multiple variations to clarify such as:

  • A marketing qualified lead
  • A potentially qualified lead
  • A sales qualified lead
  • A totally qualified lead
  • A sales accepted lead

Sales Pipeline Management Report - Lead TimelineThe best objective and quantitative metric to use in an automated and systematic approach is delivered from the sales force automation (SFA) system through the weighted forecast.  In the corresponding graphic, the sales pipeline management report includes five sales funnel stages: Opportunity (10%), Differentiate (25%), Prove Value (50%), Contract (90%) and Won (100%) are used.  Note that even if a sales organization is not totally disciplined in the daily usage of the sales force automation system, the SFA is still a good way to normalize data for planning and analysis.

As shown by the graphic, “leads” initiate the B2B sales process of a six digit or more technology solution.  Best-in-class companies can determine whether a lead is a qualified opportunity with a 10% weighting (requiring a sales person to speak with the lead and make this determination based on established criteria) within 30 days or less—some in minutes.

From here:

  • Another month is allocated to move a Qualified Opportunity to Differentiation
  • Two months to move from Differentiation to Prove Value
  • Two more months to move from Prove Value to Contract
  • And, one month to have signed paper

The above sales pipeline management model does not include the time required to design, develop and execute a marketing program that will generate the lead. This time can span a day to months, depending upon the title targeted, the value of the offer and the demand generation vehicle employed.

So what does this mean?  Basically, when someone suggests marketing programs will drive the achievement of quota for a B2B direct sales force in the current or next quarter, the answer is yes if the programs have been executed and the leads from those programs have materialized in the sales pipeline to a point that is mathematically feasible.  On the other hand, the answer is no if the program has not been launched (unless the sales cycle is measured in days or weeks).

However, Marketing can help impact the current or next quarter by aligning resources to tightening conversion or increasing velocity in the sales funnel.  Marketing can also help support sales development, inside sales and direct sales reps by empowering the people in those areas.  For example, supporting cold and warm phone calls through intelligence and automation can have a positive and direct correlation to sales pipeline build.  Another tactic may be to deploy market surveys that connect with influencers and recommenders in order to uncover bluebird opportunities.  However, it’s not advised to build a lead generation plan based on mostly short-sighted marketing programs because it diverts attention from solving the fundamental problem–building a healthy and sustainable sales pipeline several quarters into the future.

Sales Pipeline Management – Not All Marketing Programs Are Created Equal

Sales Pipeline Management Report - Qualified Opportunity TimelineThere is wide variation within marketing programs as to when a lead will yield a qualified opportunity in the sales pipeline.  The crux of a qualified opportunity is when a sales person connects with a prospect to determine whether certain predefined criteria have been met.  As a direct result, the programs closest to determining whether or not criteria is met are most often associated with a live conversation—preferably conversations with direct rep.  While it is possible to uncover information online or through marketing resources, the final gate is a conversation with a sales person.  As such, marketing programs may yield qualified opportunities one, two, three or four quarters into the horizon—depending upon the demand creation vehicle.

There is no one magic set of numbers for when a marketing program will produce a qualified opportunity that all companies can adopt. This is because average deal size, average sales cycle, decision makers, procurement processes, etc. all vary by organization.  It is a good idea to start with a set of assumptions, document them and modify those assumptions as actual data becomes available.  Ideally, qualified opportunities are modeled out over a 12-month, or longer time horizon to ensure a consistent flow of leads and qualified opportunities. This provides the desired sales pipeline multiple—even flow versus hiccups.  Leveraging a model-based approach will quantify the pipeline impact of leads and assist in determining the right marketing mix of demand generation vehicles necessary to build a healthy sales pipeline.

Sales Pipeline Management – Forecast and Beyond

The most appropriate conversation to have about sales pipeline management in the current quarter and next quarter- for B2B direct sales teams—is really about what is currently in the sales force automation system and the corresponding weights.

Sales Pipeline Management ReportThe assumption here is that the sales force automation system is clean, current and the sales team has embraced the sales pipeline management system.  A quick litmus test to determine whether the sales force automation system will be useful in the forecast process is to ask whether all layers of the sales management team log into the sales force automation system to conduct weekly forecast reviews.

In a large organization (hundreds of closed deals per quarter or more) using a weighted sales forecast (or percentages) is appropriate, as the larger sample size usually accommodates for the aberrations—i.e. a deal with a small weight closed and one with a large weight did not.  If there are a small number of transactions per quarter, the weights are good for categorizing deals by sales stage, but each deal at each sales stage needs to be reviewed and a determination made as to whether it will or will not close. The absolute deal value is then either counted in the forecast or omitted.  Each deal in each sales stage must be reviewed and a determination about whether it will close or not must be made and the totals summarized or the sales pipeline management process will be ineffective or inefficient.

Next, there are a percentage of deals (larger companies) or a set of specific deals (smaller companies) that will slip to Closed Won in the next quarter or later.  Also, there are a percentage of deals (larger companies) or a set of specific deals (smaller companies) that will not be won and will be termed Closed Lost with no dollar impact on bookings in the sales pipeline management report.

In most B2B direct sales environments, the most accurate sales forecast will include an assessment of:

  • What will close from the current quarter by sales stage (either a weighting or a deal by deal review)
  • What will roll into the next quarter, or from the previous quarter

In summary, reviewing the sales forecast is a mandatory step for any organization.  Framing that discussion with the right people all possessing a mutual understanding of roles, responsibilities and expected outcomes will not only impact the success or failure of that review, but the financial performance of the company.  The short answer is that Marketing can help generate revenue and should  be active participant in sales pipeline management.  The longer more complicated answer is that leads are not the only outcome produced by Marketing.  Specifically, when it comes to building a sales pipeline of qualified opportunities, Marketing requires significant lead time to fulfill that business need and impact sales pipeline management.  If an organization tries to take shortcuts (i.e. desperate, reactionary or tactical measures) then resource allocation will be relatively inefficient and ineffective. In addition, building a managed, repeatable lead generation and demand management process to deliver a consistent and healthy sales pipeline will not be achieved.

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