The Sales Funnel

The Sales Funnel is a unified approach to measure activities across marketing and sales, including both internal and external channels. A well-designed sales funnel or derivate model will help to reduce tensions between teams, discover and assign fair value to activities performed, and spotlight problem areas. Get it wrong, however, and it can be a disaster, as many expensive and ill-fated CRM systems can attest to.

Metrics: Sales Funnel or Sales Pipeline

The Question:

What are the sum total prospects the sales force are working on? At what stage of the process are they at?

Approach:

Track all prospects from initial contact to purchase decision

Commentary:

Vital for relationship selling. Track prospects at stages, typically: cold leads, warm leads, pre-purchase, prospect, purchase. May extend to post-purchase for repeat buying.

The Formula:

Sales Funnel/ Pipeline Value ($) = For all funnel stages
[Number of prospects (#)* Prospect Value($) * Closure Rate(%) ]

The Excel Spreadsheet Sales Funnel/ Pipeline

• Can be suitable for companies with less prospects and sales, and with more a focus on personal or consultative sales, for example Qais Consulting
• One sheet contains leads and contact details
• When a proposal is made with a dollar figure, the lead becomes a Prospect
• Each Prospect is given a % Win Likelihood
• Win Likelihood is either a fixed grading, a salespersons gut feeling, or a combination of both
• A fixed grading system might look something like this:
• 10% Verbal proposal
• 20% Written proposal
• 30% Formal presentation
• 40% Internal advocate provides feedback
• 50% Re-written proposal
• 60% Shortlisted
• 70% Price/ contract negotations entered
• 80% Verbal confirmation of win
• 90% Awaiting client signature
• When a Prospect contract is signed, they become a Client
• At any point you can calculate the valued of the Weighted Pipeline by summating the Prospect $ value * Win Likelihood

The Automated Approach: Salesforce.com

There was a time that Sales Force Automation (SFA) and Customer Relationship Management (CRM) systems were big IT systems built by Siebel, Oracle etcSalesforce.com revolutionized the market by building an online system that bills Per User/ Per Month

Metrics: Customer/ Prospect Database

The Question:

How many customers or prospects am I interacting with?

Approach:

Build a database to record and track transactions

Commentary:

Works well for web-based businesses where databases can be automatically tracked, or direct marketing operations such as mail order companies or customer call centers. Seek to understand the % of the database who have displayed activity during the period.

The Formula:

Customer Database (#) = Customers who have bought
Prospect Database (#) = Contacts who have not (yet) bought
Active Database (%) = Active Members (#)/ Total Database (#)

Metrics: Sales Force Effectiveness

The Question:

How well is my sales force performing?

Approach:

A set of ratios to analyze performance

Commentary:

These ratios help us to understand overall performance, and specific areas where a sales person needs to improve, such as call rate, closing rates and average order values.

The Formula:

Sales ($) / Contacts with Clients (Calls) (#)
Sales ($)/ Potential Accounts (#)
Sales ($)/ Active Accounts (#)
Sales ($)/ Buying Power ($)

Metrics: Workload

The Question:

What are current and potential workloads?

Approach:

Understand the time needed for both customers and prospects, as well as their potential spend

Commentary:

This analysis can be used to determine territories that sales forces can cover, and the potential sales that they can generate.

The Formula:

Workload (#) = [Current Accounts (#) * Avg Time to Serve(#)]    + [Prospects (#) * Avg Time to Convert (#)] Sales Potential ($) = Total Accounts Poss. (#) * Buying Power ($)