Operationalizing the Sales Pipeline

Learn more about an untapped, secret weapon in market intelligence: your sales force.

Learn more about an untapped, secret weapon in market intelligence: your sales force.

With shorter product cycles, high market volatility and intense competition, relying solely on historical data to generate future forecasts and plans will not suffice. In this environment, business planners are well advised to incorporate other sources of forward-looking market intelligence into their planning process. This article talks about perhaps the best source of short- and long-term market intelligence: the sales force and specifically the sales funnel.

No one is closer to the pulse of the marketplace and your customers than the sales force. They  better than others  understand the psychology of the marketplace and customer behavior. Progressive sales organizations track tangible, quantifiable information about their markets, such as whether or not customers are ready to buy, when budgets will be allocated and what customers will buy. Yet, harnessing the collective knowledge of the sales force is a daunting task for many reasons:

  • Salespeople tend to think in deal terms, not operational planning terms; (i.e. number of systems by customer or total dollars a customer will spend by product line).

  • Salespeople tend to not want to share information with the planning organizations for fear it will affect their personal bottom line.

  • Each sales rep has a unique style and way of doing business, which leads to different reporting styles, often difficult to interpret.

  • Their primary focus is selling, not developing forecasts or supporting demand planning.

  • Salespeople typically think in terms of today's deal, not the long-term impact on revenue or demand that a new deal may have over time.

  • Pipeline gaming and personal sales styles lead to hard to understand and inconsistent opportunity information.
In recent years, sales force automation (SFA) products have been widely deployed to support the sales process, contacts and opportunities. However, while supporting the sales process, the translation of sales funnel information from the SFA solutions into meaningful demand planning data is largely missing. However, next generation, proven technologies are now being deployed to create accurate sales forecasts out of the sales funnel.

The Art of Bridging the Sales Funnel to the Demand Plan

Sales opportunities are typically associated with a date, deal size and a customer, but often do not have a product or product line associated with them. When you look at deals on their own, they do not give you a clear picture of demand or provide information that can be directly used to see product planning trends. But, if you consolidate the opportunities, and "bridge" them into the demand planning process  it becomes easy to see the bigger picture. The missing link is typically the products or product line information. The following example illustrates this challenge:



In the above example, demand planners know two out of three elements (Geography and Customer)  but they do not what is most important to them, such as what products this opportunity will drive. The key is in the translation.

A next-generation demand forecasting system can provide the translation based on historical customer or regional buying patterns and trends, as well as sophisticated hierarchy models to take high-level product line or platform information and translate down to products based on historical mix and attach rates.

The result is a tangible advantage over pure historical-based planning tools. Planners can now have access to the whole picture  historical trends and statistical models overlaid with actual pipeline trends projecting the business forward.

Factoring Sales Input Provides Insight, Accuracy

Salespeople are notorious for playing games with the sales funnel; sales reps are focused on selling and making their numbers and unless motivated (via tracked incentives) they traditionally do not want to participate in the forecasting process. Salespeople tend to fall into two categories: those that over promise and those that over deliver  leading to heavily biased sales funnel data. As a result, historically, the information that a planner would get from a sales funnel would be near useless or, even worse, misleading. Using next-generation demand forecasting provides a weighted forecast of the funnel, based on a sales person's history of close rates. Armed with this information, demand planners can more confidently take the pipeline into account in the planning cycle.

Understand Why You Win (and Lose) Deals

Understanding the reason companies win and lose deals is critical to the planning process. If sales and planning organizations are able to understand why deals are won and, more importantly, lost, they are able to more accurately forecast the likelihood of closing deals. Next-generation sales forecasting systems generate analytics that provide continuous visibility into deal changes and the reasons behind them. This allows the organization to assess the trends in how and why deals are won or lost over time and leverages that information to develop a better demand forecast.

Real-time Exceptions in the Planning Process: Proactive vs. Reactive

As initially stated, the market is in a constant state of flux, and  again  the sales force is in the front-line. When important sales opportunities change, demand planners need to know, and fast. A next-generation demand forecasting solution addresses this by enabling exception management through alerts and business rules. Such systems automatically send various stakeholders e-mail notifications about important changes in the sales funnel, based on a threshold previously defined. Within minutes, the plan can be updated to reflect the new market conditions.

Conclusions

The sales pipeline, if leveraged correctly, can be a vital part of the demand forecasting and planning process. Next-generation demand forecasting solutions enable the sales funnel to become an integral part of this process by:

  • Translating vaguely defined sales opportunities into meaningful demand planning data.

  • Identifying and leveraging trends in the sales funnel to predict accurate close rates.

  • Gaining real-time visibility into why deals are won and lost  enabling the organization to proactively increase close rates and close any trends or gaps in the process.

  • Providing exception alerts to enable right-time planning updates when important changes take place.
About the Author: Timothy Campbell is president and CEO of Steelwedge Software Inc. (www.steelwedge.com). Located in Pleasanton, Calif., Steelwedge is a provider of enterprise planning and performance management software.
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