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Course 2. The Sales Funnel
A company's sales funnel is the source of the company's
revenue. The company as a whole has a sales funnel. It consists of
each sales person's personal sales funnel. If you add up all the
sales cycles in each person's sales funnel you end up with the company's sales
funnel.
In this course you'll
learn about:
1. Sales Funnel
Definition
2. Sales Funnel
Tracking
3. Sales Tracking
Software
4. The Tip of the
Iceberg
5. Cultivation
Strategies
Sales Funnel Definition
The sales funnel is a collection of sales cycles. A sales
person has a sales funnel consisting of all the individual sales cycles.
A company has a sales funnel consisting of all the sales people's sales
funnels.
It's called a sales funnel because of the progressive relationship
between the quantity and quality of sales cycles in a funnel - the higher the
quality the lower the quantity. There are more leads than qualified
prospects. There are more qualified prospects than customers.
A sales funnel can contain sales cycles from all four Market
Profiles. Customer acquisition cycles come from the Non-customer
market. Customer expansion cycles come from the First Time Buyer
market. Customer retention comes from the Customer market.
Dominance comes from the Loyal Customer market.
A sales funnel takes on its own unique characteristics because
it's relationship driven. Like a family has character traits, so does a
sales funnel. A large family that is very close knit will have
characteristics each of the family members can agree on. "We're a
large family that is very close. We do a lot of things together and we
watch out for each other." A sales funnel will have traits
also. The sales person building a sales funnel would say things like,
"My funnel is very fast paced. A typical sales cycle will run for no
longer than six months. I have several anchor customers that account for
a large percentage of the revenue from the funnel. My attrition in my
core group is very low."
Sales Funnel Tracking
A Sales Funnel contains quantities of sales cycles. We track
the numbers and types of sales cycles in the funnel so we can better manage
sales cycles.
| Here is a one-week sample of sales funnels tracking: |
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| You can see the funneling effect. About 45% of the sales
cycles are Leads. About 34% are Prequalified Prospects. About 11%
are Qualified Prospects. About 2% are Preparing Buyers. This
illustrates the quantity versus quality effect of a sales funnel. Learn
more about sales funnel tracking in the course Sales Tracking. |
Sales Tracking Software
Sales tracking software comes in three levels of
functionality. The Personal Contact Management (PCM) software is basic
contact manager software. Sales Force Automation (SFA) is more advanced
and Customer Relationship Management (CRM) is the most advanced.
1. Personal Contact
Management (PCM)
A Personal Contact
Management (PCM) system is an entry level software program used to manage basic
contact management tasks such as creating and deleting contact records,
tracking personal contact information, scheduling and task management. It
has few customizable features and virtually no reporting capabilities.
Products: Microsoft Outlook is the
most common Personal Contact Manager. It has an estimated 150 million
users. There are dozens of other PCM's on the market.
Users: Individuals, Micro
and Small Business
2. Sales Force
Automation (SFA)
Sales force automation
(SFA) is a type of program that automates business tasks such as inventory
control, sales processing, and tracking of customer interactions, as well as
analyzing sales forecasts and performance. Sales automation packages
typically include a Web-ready database, an e-mail package, and customizable
templates.
Products: Common SFA programs are
Act!, Goldmine and Maximizer.
Users: Individuals, Micro and
Small Business, Divisions of Mid-size Businesses
3. Customer Relationship
Management (CRM)
CRM (customer
relationship management) is an information industry term for methodologies,
software, and usually Internet capabilities that help an enterprise manage
customer relationships in an organized way. CRM helps an enterprise enable its
marketing departments to identify and target its best customers, manage
marketing campaigns with clear goals and objectives, and generate quality leads
for the sales team. It assists the organization to improve sales management and
streamline existing processes.
Products: Common CRM programs are
Siebel Systems, Microsoft CRM, Oracle CRM, SalesLogix and Salesforce.com.
Users: Small and Mid-size
Businesses, Major Corporations
PCM, SFA and CRM Software
Here's a few of the
software programs we can work with to improve performance:
Outlook by
Microsoft
http://www.microsoft.com
ACT! by Best
Software http://www.act.com
GoldMine by
Frontrange http://www.frontrange.com/goldmine/
Maximizer by
Multiactive
http://www.maximizer.com/
Upshot
http://www.upshot.com
Salesforce.com http://www.salesforce.com
Tour de Force by MRH
Technologies http://www.mrhtech.com
Avidian
Prophet http://www.avidian.com
The Tip of the Iceberg
A company wants to grow
a profitable sales funnel. Year after year the quantity of sales cycles
under management should increase as a company gets better at managing the
complexity of the funnel. Also, the length of sales cycles should
decrease and the average revenue per sales cycle should increase. These
are all objectives of growing a profitable sales funnel.
Here's an example of a sales funnel that's growing.
|
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| The company had 824
sales cycles in November of 2003 and seven months later in May of 2004 the
company had 2,597 sales cycles under management. The company's revenue
and profit increased because of its commitment to building a strong sales
funnel. |
How do you manage nearly
2,600 sales cycles? Large companies can have tens of thousands of sales
cycles under management. How is this possible?
Sales organizations are
taught to only manage the tip of the iceberg. A sales funnel is the whole
iceberg.
Hot Prospects are the
tip of the iceberg. In real life, most sales people only want to deal
with hot prospects. Sales is a numbers game right? Sales people try
to find the one sales cycle out of ten that is hot to buy now. Why waste
time on anyone else?
Sales people are taught
to always be qualifying. They try to close the sale five times.
They use the assumptive close and assume the sale is finished.
The reality about a
sales funnel is this. At any given time, somewhere between 1% and 5% of
the sales cycles in a funnel are ready or nearly ready to buy. The rest
of the sales cycles are potential sales.
Let's look at our
growing sales funnel example again. The company has contacted 1,993 leads
and is trying to get them interested in a product or service. An
additional 424 cycles are in the Prequalified Prospect or Qualified Prospect stage.
Only 180 of the 2,587 cycles are preparing to buy. Only 7% of the sales
cycles would receive much attention for sales people.
What typically happens
to the rest of the sales cycles? They go away. The companies aren't
contacted and no relationship is formed, they end up buying from someone
else.
A famous author once
said, "But the waiting time, my brothers, is the hardest time of
all."
The major competitive
advantage to managing a sales funnel is that you are managing the whole
iceberg, not just the tip. To manage the whole sales funnel, we cultivate
markets using a variety of methods. For the leads, these methods are
largely automated and don't consume a sales person's time.
Cultivation Strategies
Cultivating markets is a critical activity. The common rule
of thumb is that a prospect needs to receive 27 messages, on average, from a
company before responding. This describes the stages of change. The
market will move from denying there’s a problem we can solve to where they
recognize our benefit but choose not to engage us. In preparation they
learn more about us and in action they choose to engage us in a selling
cycle.
A Cultivation Strategy is a communication strategy to encourage
leads and prospects to continue the sales cycle relationship with
sellers. We use targeted communications at different stages of the
customer profile to encourage the prospects to respond to our
opportunities. Our Cultivation Strategy is designed to keep in contact
with the market at each and every step of the selling cycle.
Cultivating
the market means establishing a consistent communication strategy with each
prospect to help your prospects buy. Prospects need awareness, knowledge
and assistance to buy your products or services. Cultivating a sales
funnel requires the creation of compelling communication material and
events. You create ways to stay in front of your sales opportunities so,
when they’re ready to buy, they think of you.
Here
are the most common market cultivation strategies.
1. Personal Messages. Send emails, make telephone calls or send
letters. Your personal relationship with a prospect is the most important
aspect of a sales cycle.
2. New product releases. When you have a new service or
product make your prospects aware of it. People like things that are
new. It’s a good opportunity to make contact.
3. Newsletters. Newsletters are a good opportunity to
make contact and build a reputation with your product. Make the
newsletter informative and interesting. Send it out on a consistent
basis.
4. Press Releases. Create a press release for newsworthy
events. When you complete a large transaction it’s newsworthy.
Prospects respond well to seeing vendors in the newspaper for good things.
5. Invitations. Send invitations to events. Provide
your prospects with opportunities to attend fun events where you can build a
relationship.
6. Product Offers. Send new product offers to
prospects. Keep them informed about specials and discounts.
7. Industry Updates. It helps to have prospects interested and
informed about your industry. Create compelling information and send it
on a consistent basis.
8. Product Demonstrations. Invite your market to product
demonstrations to show your latest offerings.
9. Group Email Blasts. Send email blasts to your sales
funnel to inform them of new things. It could be price changes or product
updates. Make the emails informative and include an offer and a call to
action.
Summary
This course gives
definition and structure to the concept of the Sales Funnel. First, we
defined a sales funnel as a collection of sales cycles. A sales person
has a sales funnel consisting of all the individual sales cycles. A
company has a sales funnel consisting of all the sales people's sales funnels.
It's called a sales funnel because of the progressive relationship between the
quantity and quality of sales cycles in a funnel - the higher the quality the
lower the quantity. There are more leads than qualified prospects.
There are more qualified prospects than customers.
Next, we discussed Sales
Funnel Tracking. We showed a sample funnel to illustrate the quantity
versus quality inherent in a sales funnel. Next we discussed Sales
Tracking Software. We identified three categories of software: 1)
Personal Information Management (PIM) 2) Sales Force Automation (SFA) and 3)
Customer Relationship Management (CRM).
We described the sales
funnel as being the whole iceberg instead of just the tip. At any given
time, somewhere between 1% and 5% of the sales cycles in a funnel are ready or
nearly ready to buy. The rest of the sales cycles are potential
sales.
Lastly, we presented the
concept of Cultivation Strategies as the method to manage the whole sales
funnel. Cultivating the market means establishing a consistent
communication strategy with each prospect to help your prospects buy.
Prospects need awareness, knowledge and assistance to buy your products or
services. Cultivating a sales funnel requires the creation of compelling
communication material and events. You create ways to stay in front of
your sales opportunities so, when they’re ready to buy, they think of you.
We identified nine common cultivation tools:
1. Personal Messages.
2. New product releases.
3. Newsletters.
4. Press Releases.
5. Invitations.
6. Product Offers.
7. Industry Updates.
8. Product Demonstrations.
9. Group Email Blasts.
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