Creating Objective Sales Stages

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There is a widespread and pernicious affliction with almost every Customer Relationship Management or Sales Management (CRM) platform. This affliction wastes the Sales Person’s time, causes confusion, destroys the sales funnel statistics, misleads sales management on pipeline value, and generally wreaks havoc on peak performance of the team. This affliction: subjective pipeline stages.

Before exploring the problem, it is helpful to first describe what people are hoping to get out of the sales pipeline and CRM. There are multiple primary stakeholders of the CRM pipeline: the Sales Person, Sales Management, Executive Management, Marketing, and Operations. What each of them needs is related but distinct:

Sales Persons would like to know where all their deals stand and what they need to work on today, this week, and this month.
Sales Management would like to know the overall value of the pipeline in dollars and the probability of hitting their goal.
Executive Management would like to know if Sales Managers & Marketing are able to grow the pipeline itself, as well as what deals are closing soon.
Marketing would like to know who, what, where, and why leads are being lost so they can optimize spend.
Operations would like to know which deals are likely to close this month so that they can schedule delivery.

We can further categorize these stakeholder needs into three broad categories:

What has happened with the Pipeline (past tense)
What is the Sales Team doing now (present tense)
What will be coming down the line (future tense)

These are the bare minimum basic goals of any CRM, and if the CRM is not helping achieve them, then it is at best a project management tool, and at worst it is destroying the team performance.

The critical data

Within the CRM, there is one piece of critical data which, if utilized properly, can assist all of the above goals — but if utilized improperly, will befuddle the teams and even invert the outcomes. This piece of data is the Pipeline Stage.

The Pipeline stage is typically controlled by the Sales Person on each deal and represents where that person thinks the deal is at in the sales process. For example, here are the default Pipeline Stages for 7 different CRMs:

There is a lot of similarity here, which makes sense. Although each business is unique and has a different process, every customer starts as a Lead/Prospect and ends as a Won/Lost, with some intermediate steps such as Contracting or Qualifying. You may have different stages in between, but the gist is the same.

However, the problem with all 7 of these Pipelines (and hence with most Pipelines which are similar) is the combination of distinctly different needs: What has happened? vs What am I doing now? vs What am I doing next?

For example, “Prospecting” from the sample of CRMs above means “I am currently (present tense) prospecting.” — “Qualified” means “This customer has been (past tense) qualified” — “Identify Decision Makers” means “I need to (future tense) identify decision makers”.

As a deal moves through the Pipeline, changing the verb tense used to describe the current Stage causes huge problems..

Why mixing tense is a problem

The central problem with mixing has-been and will-be is that one is objective and the other is subjective. Has-been is objective — these are things that have actually happened. When the customer has met with you, they had a meeting. When a customer has signed a contract, they have objectively Closed/Won. In contrast, “I am Nurturing” and “I am Engaging” and “I am Qualifying” are each subjective opinions of the Sales Person, which may not be accurate. “I will Identify Decision Makers” is a claim that something is yet to come, which actually may not happen.

Some of the stakeholders need to know things that have happened, some need to know things that are happening now, and some need to know things that will happen . The combination of subjective Pipeline Stages and necessarily subjective Sales Persons makes it impossible for each stakeholder to get what they want out of the CRM.

CRM funnels are thus misleading

Analysis of the CRM data using the above pipelines therefore becomes misleading. The CRMs use the pipeline data to give you probabilities of advancing a lead to the next stage in the pipeline:

From Nutshell.com https://www.nutshell.com/blog/sales-pipeline-vs-funnel/

In this example Sales Funnel above, the blue bars are showing how many deals are in each stage, and below each blue bar is the probability of winning a given deal in that stage. Every CRM uses the Pipeline Stage field to make a report like that.

However, if the Sales Person subjectively updates the Stage to “Meeting” when they feel like they are meeting or they are going to be meeting, this is subjective and invalidates the statistical modelling used by the CRM. It is too easy for a Sales Person to wait until Sunday night to update all of their leads for the Monday sales call — moving items to the stages they subjectively think applies. When Sales Persons subjectively update the Pipeline Stage — or worse, update it arbitrarily in response to the manager’s behavior —the funnel statistically tells you less about your customers behavior and instead correlates with management or sales person bias.

What an objective pipeline looks like

To show what an objective Pipeline looks like, let’s convert the longest pipeline example from above, Method CRM. Their existing Pipeline Stages are:

Prospecting
Qualification
Needs Analysis
Value Proposition
Identify Decision Makers
Proposal/Quote
Negotiation
Closed Won/Lost

Making this Objective, each of these should be changed to:

Prospecting > Lead Created
Qualification > Qualified
Needs Analysis > Needs Analysis Completed
Value Proposition > Value Proposition Confirmed
Identify Decision Makers > Decision Makers Identified
Proposal/Quote > Quote Sent
Negotiation > Terms Negotiated
Closed Won/Lost

Each of the Stages are now objective, verifiable, and consistently usable and trainable. For example, the Sales Person now sets “Terms Negotiated” when they have actually completed negotiating rather than when they have begun “Negotiating.” The updated Pipeline enforces honesty, as you can objectively look at, for example, the final terms in your contracts system.

Of course your business pipeline will likely be different from the example above, but every business absolutely has objective stages that can be identified.

A pro-step: Go further and make these objective measures automatic and non-discretionary. For example, when the Sales Person sends a Quote from the system, automatically set the Pipeline Stage to Quote Sent. Or, when the billing team sends the first invoice to a new client, automatically update the lead to Closed Won. With objective stages, you can now automate much of the CRM, freeing up the Sales Person from often error-prone data entry.

What objectivity can do for you

When using a completely objective pipeline, what kinds of data analysis can be done? Why does this matter?

The statistical questions we want to answer are of the form:

“Of 100 deals that reached Qualified, what percentage did we eventually win?”
“Of 100 deals that reached Quote Sent, what percentage did we eventually win?”
“Of 100 deals that reached Terms Negotiated, what percentage did we eventually win?”

This allows us to learn the real probabilities:

“5% of deals that make it to Qualified, will be won”
“50% of deals that make it to Quote Sent, will be won”
“90% of deals that make it to Terms Negotiated, will be won”

Now a total Pipeline Value can be correctly assessed, along with probabilities useful to understanding the business:

“We have 90% chance of hitting our sales target this month”
“Our pipeline value is growing 5% per month”
“There is a 90% chance that we will need to onboard 3 new customers next month”
“On average, it takes 90 days to move 50% of deals from Quote Sent to Closed/Won”

Other benefits of objectivity

Objectivity in the Pipeline Stages bring additional benefits:

Executive team can get true sales pipeline forecasts 3, 6, or even 12 months out
Key performance indicators that suggest growing or shrinking the pipeline can be correctly identified
Sales managers can focus on real skill improvement, leave the objective data to the system, and stop having excruciating meetings evaluating the stage for every deal. It either made it to that stage or it didn’t
Sales Persons can be objectively and truthfully compared: “Susan’s pipeline is worth 80% of Jim’s but growing 10% per month the last 6 months, while Jim’s is shrinking 5% per month”

What about the subjective data

All of this talk about objectivity is not to throw out the subjective. Each Sales Person is still going to want to know: “What do I need to work on today?” — “What was my next task for this sale?” — “Who is really engaged and who is not?”

These data points are perfect justification for adding a new field in the CRM. Some useful ideas: a field called “Next Task” which allows the Sales Person to keep up to date with what they have to work on next. Or perhaps an “Engagement” field which allows the Sales Person to select from a list containing the options “Disinterested, Neutral, Luke-Warm, Really Engaged”. There are no limitations on the additional fields you can add to your CRM that help with organizing and categorizing the work of the Sales Person as long as you keep the Pipeline Stage objective.

How to get started

Follow these steps to make the sales pipeline objective:

Take a look at your existing Stages and categorize them into past tense, present tense, and future tense.
Convert all present-tense and future-tense to past-tense if possible. Each Stage should represent something objective that happens in your sales process. As a rule of thumb, 90% of sales that win should have touched every objective stage (rarely skipping any stages).
As for anything that cannot be made past-tense or now applies to less than 90% of deals, move it to a new field that captures that subjective quality — or just delete that Stage. Sometimes teams have too many stages to begin with. Each Stage should represent a significant advancement in the sale.

PredictableRevOps.org maintains the documentation of the PRO Framework and provides training certification for Partners and clients that wish to use PRO within their businesses.

PRO is sponsored by SalesInsights.io, a reporting and dashboard tool implementing the PRO Framework.

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