Defining the Stages of your Sales Pipeline

A sales pipeline is only useful when it is possible to allocate leads and prospects to individual stages within the pipeline. To ensure the pipeline concept provides us with actionable information, one of the most important initial activities is to define the stages that comprise the buyer or seller’s journey through it.

So how does one go about defining the stages of the pipeline?

Irrespective of whether you prefer to view the journey from the buyer or the seller’s perspective, the key element required to progress toward a sale is a decision on behalf of a buyer. It is highly unlikely that a seller will make the decision on which alternative to purchase, or when to buy. Sellers may provide information that buyers may take into account, but it is the buyer who makes the final decisions.

Let’s take a look at a couple of examples, one in a retail sales context, and another in a business-to-business context.

Alison is a single mum renting a house in Melbourne’s western suburbs. While her house is fine during summer, during winter it gets cold, so she’s looking for two portable heaters, one for her bedroom, and one for the main living room of the house.

Richard is a business unit manager in the IT industry. His business unit is performing well and has turned consistent profits over the last three years, but his manager has just tasked him with achieving a 20% increase in sales over the next twelve months. He knows the fundamentals of his business plan are fine, so he is looking for a firm that can provide his sales staff with additional skills that will help them achieve the incremental sales they need.

Perhaps you didn’t notice, but both Alison and Richard have already made their first decision. They have decided that they need to seek a product or service. Alison wants two portable heaters and Richard wants a firm to provide him with an upskilling solution. What if Alison had decided she couldn’t afford the heaters, or Richard had decided he would do his best to provide the skills to his staff without outside help? They would have leaked from the pipeline at the first decision point.

The first decision any potential buyer makes is the decision to seek a product or service that will solve the problem or issue they are experiencing. Some potential buyers will not recognise there is a problem in the first place, but those never enter the pipeline, as distinct from those who realise there is a problem but who decide not to pursue a product or service as a solution.

So, having recognised a problem exists and having decided to pursue a product or service to solve their problem, what do Richard and Alison do next?

The majority of the time, a potential buyer will begin by conducting their own research on the topic. Both Richard and Alison will likely turn to two major sources of information: people they know and trust, and the internet. Without internet access, Alison might also go into a store to ask questions of a salesperson. Both Richard and Alison are seeking information on potential solutions. Richard and Alison will then need to narrow down the potential solutions generated to a manageable number. The decision they make at this point is to develop a consideration set: a group of alternatives from which they will eventually choose.

Having developed a consideration set, both Alison and Richard will have to then choose a single solution. Alison will probably go into one or more stores and talk to sales staff to find out which product suits her specific needs best. Richard will either seek formal responses to a tender or speak directly to a shortlist of providers to receive less formal responses. In this way, they will gather more information about their consideration set and be in a position to choose one particular solution.

Having chosen their preferred solution, both Alison and Richard will go through one last decision: to buy or not to buy? In Alison’s case she will make her final decision in a store. In Richard’s case he will make his final decision by reviewing tender documents and checking that his preferred solution is within his allocated budget.

Having completed the buying process, Alison will be the proud owner of a couple of new heaters, and Richard will hopefully be able to give his staff the skills they need to achieve his sales target.

Both Alison and Richard then will make the following decisions throughout their buying process:

  1. Realise they have a problem that needs solving.
  2. Decide to seek a product or service to solve their problem.
  3. Seek information on options and develop a consideration set.
  4. Choose a preferred solution.
  5. Choose to buy.

However, not all business to business customers work in the environment that Richard works in. Other customers for other products may other steps in their process including:

Also not all customers are like Alison. They may be:

In a retail sales environment you need to think about segments, not just individual customers. Dependent on the size of your business to business customers you may need to think of them in terms of a segment as well. Surveys are a good way of finding out how individuals and segments buy in terms of their own buying process.

Think about your own business, how it works, and research the decisions your customers or preferred segments make as they choose whether or not to buy your products or services. Build your own sales pipeline and you can work out how to improve your sales.

© Change Factory 2008.

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