In the previous article, we reviewed the basic requirements for successful sales funnel management. Now we’ll be taking a deeper dive into some of the challenges an organization’s leadership team might face in its funnel management efforts and what to do about these potential issues.
The most frequently recurring issues are the lack of momentum in some or all stages of the funnel, and an overinflated or hyper-conservative funnel. Depending on the industry an organization operates in, a deal can “sit” in a certain stage for a few days up to several weeks, or even months or years: when selling a laptop computer, the cycle will likely take a few days, whereas the evaluation process and buying decision for a unique piece of production equipment will probably take much longer. Yet the sales cycles are the same: there is an initial interest, which turns into a lead (this can happen prior or at the time of the deal qualification, as mentioned last time, all depending on the definitions & criteria the organization links to the various stages), which leads to a proposal, negotiations and ultimately the contracting and closing stage. Again, some companies will have less, or more, stages, and will use a different naming, but the typical process flow will be the same for most organizations. But any organization should be able to determine the typical velocity or “days-in-stage” number for every stage.
In many cases, lead generation and deal qualification go well, and the deals move relatively quickly through these stages, but later in the funnel, all progress stops: deals no longer flow through and the funnel shows a lot of deals in progress in the middle stages, but no results coming out at the bottom.. There could be many causes for this, but some of the more frequently occurring ones are:
Poor deal qualification early on
The benefits of the proposed solution are not aligned with the needs or are inferior to an alternative offering
In larger sales cycles involving more buyers, the lack of relevant contacts can come into play also (see the article “Hanging the Picture - diligence in sales processes” for more on this topic)
Fear of “officially” losing the sale (although in reality it is already lost, the salesperson still has it in the funnel)
This then typically leads to an over-inflated sales funnel, in which deals are still represented that are no longer in existence. Consequently, management forecasting and budgeting exercises are rendered inaccurate and far less valuable, resulting in deep disappointment when expected results are not achieved. This over-inflation effect can even get bigger when the sales expectations related to the deals are estimated in an overly optimistic way, further inflating the funnel. Deal size realism is a key component of proper sales funnel management.
Whenever funnels are used, in sales generating or in fundraising projects, leadership needs to be aware of these potential challenges, and continue to monitor the sales funnel closely. It will need to research where the bottlenecks are, and what is causing them, and then address these as soon as possible. For example, if only a low percentage of deals enter the negotiation stage, it is possible the company’s product offering is inferior to it competitors, so maybe a different market positioning or market segment is more appropriate.
Management will also need to ensure that the sales teams are applying the necessary diligence in qualifying and working the deals, and attribute values to the deals in line with reality, not influenced by wishful thinking or, worse, management’s desire to see success. It is of the utmost importance that management puts a culture in place that encourages this discipline of timely, correct and realistic deal management, whereby prospective sales are valued at their real worth and immobilized deals are swiftly removed from the funnel. And yes, every manager will occasionally get the “I-told-you-this-deal-was-still-in-play” comment from the salesperson, but many years of funnel management have taught me that these are the few exceptions that confirm the rule: “if a sale sits into a certain stage for longer than what is the standard for the organization, it is no longer an opportunity & should be removed from the funnel”.
A healthy funnel has a healthy loss rate, there is no shame in that. In the contrary, it proves that the sales organization is doing its job, in detecting new leads, properly qualifying these and quickly throwing out the “lost causes”, leaving the sales teams the much-needed time to focus on searching for fresh leads and closing those opportunities that are truly of value to the company. Ultimately the organization will win on many fronts, with higher lead generation and more & better deals closed, more accurate forecasting & budgeting, higher staff engagement & motivation, and ultimately much improved overall results due to a higher sales volume, a reduced cost of acquisition and a more productive workforce. It just needs to keep the momentum in the funnel...
I2ACT Canada has extensive knowledge in sales funnel management and offers sales management services to support organizations in their lead generation and sales efforts. We will actively assist your organization in effectively managing your sales funnel & driving sales results. If you want to learn more about the sales management services I2ACT Canada can offer and the solutions & skills it can bring to your organization, visit the website or contact Dirk Baerts.