Working Smarter : Sales Funnel Chart

In Bad Times, We Need to Get Back to Basics

Rich — Thu, 19 Mar 2009 04:46:00 GMT

Managers these days have to reevaluate everything – processes, projects, team organization among many others. What was working for your team two years ago, one year ago and even only a couple of months ago is not necessarily working now. The volatility of the market has drastically changed the way business is conducted for many organizations, so what has your team done to adapt?

As a manager, part of your responsibility is to recognize when it is necessary to modify your team’s behavior and to determine how to best modify it. Otherwise, the results for your organization could be disastrous. Costs will be too high, goals won’t be achieved, and spirits will be low.

For example, let’s say you are a manager of a sales team, and you are provided a report (like the one below) from the accounting department which indicates that sales are flattening and expenses are gradually rising. Instinctively you know that some of this is due to the economic downturn, but you also recognize that there is a direct impact from the behaviors of your team too.

You have five sales people on the team, including yourself. Although sales for every team member across the board is down, you discover that the slump is hitting three team members harder than yourself and one other. The other productive person on year team consistently leads the team in sales volume and also follows the formula and protocol designed and proven to keep sales performance high.

The other three people had performed fairly well in terms of volume and sales revenue until recent months. Why is that? As the manager, you believe that it’s the fact that these other three people have not been following the standard, proven sales processes. When sales were up it wasn’t an issue, but now that sales are falling you want everyone to return to basics and become more efficient.

After looking into it you verify that your conclusion is correct: your lower performing sales team members haven’t stuck to the standard process and that has negatively impacted their performance. You decide that it’s time to get those sales team members to adapt and change their behavior by conforming to the standard, more productive sales process.

So you create a visual like the one below which depicts your organization’s sales funnel.

In a meeting with your team you discuss the report given to you by accounting and the sales funnel. Although the sales funnel is a simple rendering of the typical approach in moving prospects through the sales cycle, the point is to have the team remaining focused by exhibiting and illustrating the behaviors and functions of what has proven to be a successful formula for the organization.

It is important that the team understand that the way they conducted themselves previously is no longer working, so they need to return to the basics of sales and sales process – the “blocking and tackling.” You as the manager cannot change what is happening around you in the marketplace, but you can alter the behaviors of you and your team to adapt to those changes which will have an impact on the processes and projects they are responsible to carry out. Have you and your team adapted?

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What's Wrong with Your Sales Process?

Aaron Stannard — Fri, 27 Jun 2008 15:00:00 GMT

A sale is an arduous, grueling process; you begin with a large number of leads, determine which ones are interested in your product, determine which ones have the authority and resources to actually make the purchase, and finally, at some point in time, complete the sale.

This sales process often leads to what is referred to as a sales funnel – you start with a wide base of leads and funnel your way down to a number of completed sales.

In my opinion, most sales teams are so focused on getting those sales that they don’t take the time to inspect their sales processes and determine where they might be losing a disproportionately large number of leads. Our most recent Working Smarter article, "Working Smarter with Sales Funnel Charts," addresses this issue and explains how your sales team can convert more leads by refining their sales process using Sales Funnel Charts.

Why Sales Funnel Charts?

Sales funnel charts are very intuitive; the top of the inverted pyramid is the widest because you have the most leads at that point of the sales process – as you qualify your leads based on interest, authority and ability to buy, you move to narrower and narrower sections of the pyramid. The last section of the pyramid, the narrowest section, represents all of your final sales at the end of the sales process.

Sales processes are large and complex – if you wanted to optimize and refine your sales process right off the bat, the task would be impossible due to the complexity of your sales process. There are simply too many steps, too many leads, and too much information to try and optimize your entire sales process at once.

The value of the sales funnel chart comes from being able to break down your sales process into sequential steps. By breaking down your sales process into a funnel, you can accomplish the following objectives:

Sales Funnel Charts Simplify the Entire Sales Process

Breaking down your sales process into individual steps makes it much easier to appreciate how the entire process works. So what does this do for your business?

Well, for one thing, it makes it infinitely easier to communicate your sales process to new employees, to investors, and to your superiors in the company!

Sales Funnel Charts Quantify the Sales Process

It’s the year 2008; if you can’t measure the efficiency of your sales process in quantifiable terms, you’re doing something wrong—period. Using historical data, you can use your sales funnel to determine:

How many leads result in sales
And how much money it costs you to convert a single lead into a sale.

Take this example, for instance:

You distribute emails to 20,000 prospects;
500 prospects request additional information;
The telemarketer qualifies only 20 prospects as having the authority to buy;
And 10 prospects agree to purchase the product at the given quotes.

Notice that I followed the steps laid out by my sales funnel in my analysis – what does this data tell you? Without the sales funnel, you would have known that you converted only 10 of your original 20,000 prospects—a conversion rate of 0.05%.

However, with the sales funnel you learn some additional facts about your sales process – for instance, most of the prospects who were interested in your product do not have the authority to buy. You're losing a disproportionately large number of leads at the qualification phase! This means that your initial email campaign is targeting the wrong people!

Breaking down your sales funnel data using a sales funnel chart as a guideline can help lead to additional insight like the kind I demonstrated using this simple example.

In addition, a sales funnel chart also enables you to understand just how much work goes into converting each lead into a sale – based on the example sales funnel chart that I’ve included in this blog entry, you can tell that your sales team has to contact the lead five times before a sale is completed:

Once to simply email the prospect;
Once to send information to an interested lead;
Once to qualify the lead’s authority to buy;
Once to deliver a price quote to the lead;
And once to close the sale.

Using that information, you can determine how much money it costs you in terms of the sales team’s time to close a single sale. It would be much harder to make this determination without breaking down each sale into a process of sequential, measurable steps.

In conclusion, it’s a good idea to use a sales funnel chart to communicate your sales process easily and, more importantly, to help measure the efficiency of your process.

Learn More about Optimizing Your Sales Process

If you'd like to see how to draw and use a sales funnel chart, please view our screencast "Refine Your Sales Process with SmartDraw."

Also, if you'd like to try SmartDraw, you can download a free trial of SmartDraw.

SmartDraw 2008 Owners: To get the templates discussed in this document, download and run this file: http://www.smartdraw.com/downloads/sd2008/sd2008_Marketing.exe

Screencast: Refine Your Sales Process with SmartDraw

Paul — Mon, 23 Jun 2008 19:00:00 GMT

In this screencast I show you how to refine your sales process using a Sales Funnel Chart, a chart designed to help you map out your sales process and discover where you might be losing a disproportionately large number of potential sales.

This SmartDraw screencast requires Adobe Flash Player 9.

Download a free trial of SmartDraw here.

Learn More

If you'd like to learn more about this topic then be sure to read our companion PDF - Working Smarter with Sales Funnel Charts.