Article

Why a sales pipeline is key to sales success

A healthy sales pipeline is critical to boosting sales and building strong customer relationships. Dive into the sales pipeline and how to use it effectively.

By Stella Inabo, Contributing Writer

Published March 30, 2020
Last updated July 29, 2021

Prospecting. Qualifying leads. Negotiating. Closing deals. As a sales agent, you know how hard it is to juggle all those steps. It’s tempting to throw your hands up in the air and focus on just one aspect of the sales process—closing.

But doing so means neglecting other parts of the process, which in turn makes your leads dry up. How can you avoid this outcome? By building and growing a sales pipeline.

A sales pipeline helps you keep track of all opportunities so that you maintain a healthy number of leads and are reminded to nurture existing customer relationships. Read on to learn everything you need to know about sales pipelines, including:

What is a sales pipeline?

A sales pipeline is a visual illustration of how customers move through the sales process stages—from finding your product or service to making a purchase. It provides valuable insights into each deal, allowing your agents to track their progress, identify any gaps in their process, and form strategies to hit their sales targets.

Not all sales teams create a pipeline that visualizes their opportunities. This often leads to a number of issues:

  • Sales teams have no idea if their processes are working.
  • Sales teams struggle to understand how many leads they need to hit their sales goals.
  • Sales managers are unable to track performance and determine internal bottlenecks in the pipeline.

The best way to gain full visibility into your sales pipeline is to get a customer relationship management (CRM) system. A CRM helps you track interactions with your customers so you can better understand where leads are in the pipeline, what’s working, and how to prioritize ongoing communication.

If you can’t afford a CRM or have a small sales operation, a robust sales pipeline template may hold down the fort until you’re ready to purchase a CRM.

Sales pipeline vs. sales funnel

Sales pipelines are commonly mistaken for sales funnels. Although these terms seem similar, they are different concepts and have different functions.

A sales pipeline refers to the visual representation of the specific steps a prospect takes as they progress from a lead to a customer. It illustrates exactly where potential customers are in the sales process—whether they’re at the qualification stage or the closing stage. Pipelines help teams track sales activities and boost conversion rates.

A sales funnel takes a more customer-focused approach and shows every step of the customer journey. It generally includes a top-of-funnel phase (known as the “Awareness” stage) and then narrows down as you get to the bottom of the funnel (called the “Purchase” stage). Sales funnels allow sales agents to develop a better understanding of their leads and provide insights into how to continue moving them through the customer journey.

What are the sales pipeline stages?

The stages within your sales pipeline are like stops on the road as you make your way toward your final destination. Clearly defined stages help your sales reps know the exact steps they need to take to close a deal. Each of the sales stages requires maintenance and a customer-centric strategy.

The exact stages of a sales pipeline may differ from business to business, but in general, a standard sales pipeline follows the steps outlined below.

  1. Prospecting

    Prospecting is when sales agents use methods such as cold calling, emailing, and sending mail to contact potential customers and introduce them to a brand, product, or service.

    Once you collect prospects, you’ll want to identify which ones match your buyer personas with lead qualification.

  2. Qualified

    At the next stage in the sales pipeline, agents evaluate prospects to determine whether they’re likely to become paying customers. Filtering out prospects who aren’t a good fit for your product or service reduces the total number of potential customers, yes. But removing unqualified prospects also empowers agents to focus on the right leads.

    High-value leads worth pursuing are termed Sales Qualified Leads (SQLs); they have shown interest in your product or service and are ready to speak with a sales agent. Sales teams identify SQLs using lead scoring—the process of assigning point values to prospects based on various factors (such as the industry they work in or their level of interest) that indicate the likelihood they’ll make a purchase.

    In the qualification stage, it’s helpful to target decision-makers who can sign off on deals and people who have problems that your product or service can solve.

  3. Quote

    After meeting with the prospect and winning them over with a great sales pitch, agents discuss the terms and price of the deal with the potential customer. This stage in the pipeline brings the prospect one step closer to converting and should be handled with care.

    Find out what the prospect wants and customize your offering to suit their unique needs. Use the prospect’s insights to create a killer proposal—call out specific things they mentioned and address the top concerns they noted in previous conversations.

  4. Closure

    The close is a make-or-break moment in the sales pipeline, so it’s important to employ the best sales closing techniques to seal the deal.

    One effective tactic is to create a sense of urgency by making the potential customer an offer that lasts for a short period of time. For instance, you might offer a 20-percent discount if they make a purchase within a week. This limited-time deal could motivate them to take the plunge.

    When closing, make sure to focus on helping the customer over making the sale so you don’t appear pushy and scare them off. Practice active listening, ask relevant questions, and follow up as needed. Tutorials and product demos can also be helpful.

  5. Won/lost

    Not all prospects who make it to the closure stage will buy your product or service. Whatever the result may be, it’s important to use the last stage of the sales pipeline to evaluate what made you win or lose the deal. Holding a sales postmortem—a meeting to discuss and evaluate what went well (or what didn’t)—can help your team avoid future mistakes.

    Note that not all sales pipelines look the same. The customer journey, the sales process, and many other elements will determine how yours is shaped. Think of the stages we outlined as a framework you can use to build your own sales pipeline and not as a rigid structure.

Think of a sales pipeline as moving prospects right down a pipe—the ultimate goal being to get them to the end of the pipe and converted into customers.

How to manage the sales pipeline

Maintaining your pipeline is essential to both the sales department and the company as a whole. A well-managed sales pipeline gives you insights into deals, helps you measure performance, and provides an estimate of the number of deals you can expect to close each quarter.

  • Feed your pipeline regularly

    Sales agents often make the mistake of prioritizing closing over prospecting. But if you neglect to fill your pipeline, you’ll likely be short of prospects—forcing you to scramble to find new leads and reach sales goals.

    Keep your pipeline full of leads by consistently prospecting. Make time to actively contact potential customers through emails or sales calls. You can also ask for referrals from existing customers and leverage your business’ brand advocates to reach more people.

  • Always follow up

    The follow-up call (or email) is a critical part of sales pipeline management. It lets potential customers know that you care about providing them with a solution, and it keeps your business top of mind.

    In the words of Selling Simplified author Michelle Moore, “Not following up with your prospects is the same as filling up your bathtub without first putting the stopper in the drain.” It’s an exercise in futility that’s a waste of your time and theirs.

    Always set a purpose before contacting your prospects—whether it’s to thank them for their time, gauge their interest in continuing down the pipeline, or ask a question that will help you qualify them.

    After connecting with them, make sure to log the conversation in your CRM and note any next steps so you don’t lose out on a promising prospect. Creating a record of the conversation also ensures that your prospects aren’t approached for redundant interactions or accidentally ghosted.

  • Clean out your pipeline consistently

    Just like all pipes, your sales pipeline can get clogged—you don’t want yours jammed with bad leads. These are leads that: you can’t convince to get on a call, haven’t expressed interest in the product or service, or haven’t moved down the pipeline.

    They might bolster your numbers, but they water down the quality of your lead pool. Good sales pipeline management means always picking quality over quantity. Leads that won’t move through the pipeline only block its flow and need to be removed.

    Identify leads who have spent more than the average amount of time in the sales cycle. This timeframe can vary from business to business, but generally, you don’t want leads sitting without movement for too long. Try to nudge them along with follow-ups based on your internal process. If this doesn’t work, remove them from your prospect list.

  • Conduct ongoing reviews

    Pipeline reviews are ongoing meetings between sales agents and managers to determine how well a sales pipeline is functioning. A regular review of your pipeline will help you identify the areas to improve and the successful sales activities you should continue.

    You can talk through existing deals in the pipeline, struggles, challenges, and other issues. Based on data from your CRM software, you can also discuss which stages your deals tend to get stuck in and ways to sharpen your tactics.

What are the best sales pipeline tools?

To maintain your pipeline, you need robust CRM software that automatically runs reports, tracks customer conversations, and organizes all your customer data.

Zendesk Sell

Zendesk Sell is a powerful sales CRM designed to help agents streamline their sales process. It has a clean interface that allows teams to build and manage a sales pipeline that fits their business model. With just a few clicks, you can send emails, schedule meetings, and segment leads—all from one convenient place. Zendesk also integrates with other popular sales tools, like Mailchimp and Pandadoc, so you can transfer information from platform to platform and keep things running smoothly.

With Zendesk, you can increase your productivity and monitor your prospects as they move through each stage of the pipeline. Every interaction is tracked and accessible in easy-to-use reports and dashboards.

Mailchimp

Mailchimp is an email marketing program that provides an all-in-one integration. The tool empowers brands to tailor messages based on where prospects are in the sales pipeline.

Sales agents can use Mailchimp’s segmentation feature to group prospects based on their demographic and behavioral information and to send targeted email campaigns. Mailchimp also allows users to automate email communication. Instead of manually sending emails to thousands of prospects one by one, you can send numerous well-designed, personalized emails with a single click.

Front

Front is a shared inbox tool that makes customer communication easier, quicker, and more productive. The shared inbox feature eliminates communication silos and information gaps so your sales agents have all the details they need to get work done fast.

Although Front is an email platform, you can do more than send and receive messages. The tool upgrades customer communication by letting you set up workflows, sort leads, collaborate with team members, and prioritize outreach. You can also automate the follow-up process for swift and efficient responses. Plus, you can connect other channels and have access to SMS, emails, and social media messages in one place.

All in all, Front helps make it easy to connect with potential customers, no matter where they fall in the pipeline.

Clari

Clari is a predictive sales analytics tool that provides visibility into the sales pipeline. You can use the software to automate the pipeline review process and reduce time spent on sales forecasting.

With Clari, you can see the number of leads you have and how many more you’ll need to hit your revenue goals. The tool provides real-time updates so you can know which deals are moving, stuck, or at risk. It helps you pinpoint the deals to prioritize based on data, too.

Revenue Grid

Revenue Grid is an AI-guided selling platform that gives B2B sales teams step-by-step instructions on how to push deals in the right direction.

The tool shows your sales activities and helps you spot opportunities. The guided selling feature suggests the best action to take with every prospect, helping you move deals through the pipeline and save at-risk prospects.

Dropbox

No one wants a clunky tool that makes it difficult to access, edit, and approve documents—Dropbox provides a seamless experience for your potential customers.

Dropbox is a file-hosting service that offers cloud storage and makes document sharing seamless. It’s a great tool for sharing pitch decks and marketing materials and finalizing contracts with prospects.

The platform integrates with other tools like DocuSign and Adobe Document Cloud. It also supports offline access to files so you can close a deal at any time, no matter where you are.

7 sales pipeline metrics you should track

Most sales teams have the data needed to determine whether or not their sales pipeline is healthy, but they lack a strategy for analyzing and measuring success. You should use specific sales pipeline metrics to determine how effective your sales process is at every stage, and then improve where necessary.

1. Number of qualified leads

Qualified leads are those who have expressed interest in your product or service and appear to have a high probability of making a purchase. Typically, they’re closely aligned with your ideal buyer, as outlined by your sales and marketing teams.

Having enough qualified leads means you have a higher chance of attaining your sales quota. Conversely, a low number spells trouble, as you might run out of prospects to pursue. Carefully and consistently track your total inbound and outbound leads to ensure you have a big enough pool to generate the revenue needed.

Using a lead scoring tool can help you evaluate the quality of your leads and prioritize your sales and marketing efforts efficiently.

2. MQL to SQL conversion rate

The MQL to SQL conversion rate shows how many Marketing Qualified Leads are being converted to Sales Qualified Leads. This indicates the effectiveness of your lead scoring method.

You can find this important metric in your CRM or lead scoring tool. Or, you can calculate it manually by dividing the number of SQLs by the number of MQLs.

3. Win rate

win rate formula

The win rate is the percentage of qualified leads that turn into customers.

A low win rate indicates a need to improve sales training, tools, and processes because most qualified leads aren’t making a purchase after interacting with your sales team. If you have a high rate, but your total sales aren’t where you want them to be, then it might be time to ramp up your marketing efforts.

You can calculate your win rate by dividing the number of won deals by the number of total deals created, then multiplying that result by 100.

4. Average deal size

average deal size formula

This metric shows the average value generated from closed deals. Knowing your average deal size helps you strategize on how to maintain or increase revenue.

You can calculate this metric by dividing the sum of the value of won deals by the number of won deals.

5. Customer acquisition cost

customer acquisition cost formula

Customer acquisition cost (CAC) measures how much it costs to get a new customer. You want this number to be as low as possible.

A high CAC is a signal that your business spends too much on filling your sales pipeline, indicating that you need to reevaluate the process of obtaining new customers.

Determine your CAC by dividing the total marketing and sales expenses within a specified time period by the number of new customers gained within that same time period.

6. Customer lifetime value

customer lifetime value formula

Customer lifetime value (LTV) is a measure of how much profit the average customer contributes to a business over their entire lifecycle.

This is an especially important metric for companies that rely on repeat purchases from customers to remain profitable. You build trust and an ongoing connection with those repeat customers, which leads to upsells and higher-value purchases over time. LTV also helps you determine whether your company needs to invest more in marketing campaigns to acquire new customers or in a retention strategy to keep the customers you’ve got.

You can measure your LVT by subtracting the average associated costs per customer from the average total revenue generated over the customer lifetime.

7. Average sales cycle

This measures the length of time it takes to close a deal. Knowing your average sales cycle length allows you to better forecast sales and growth. It also helps you identify deals that are stagnating in your pipeline, so you can evaluate what went wrong and strategize on how you can fix the issue.

To determine your average sales cycle, divide the total number of days it takes to close deals by the total number of closed deals.

Build a sales pipeline that fits your sales process

Don’t rush into building your sales pipeline right away. It’s important to first understand what works for your business. A sales pipeline that is perfectly suited for other companies might not work for you, so avoid the temptation to simply replicate.

Before you start, carefully take a look at your sales process. What steps does your sales team take to move potential customers from the first step to the last? Use this information to build out a sales pipeline that reflects and supports your sales process.

Once you’re ready to begin, create and customize your sales pipeline with a CRM like Zendesk Sell. If you run a large organization and have different customers with unique sales processes, you can build multiple pipelines to suit each one.

Regardless of which tools you use, remember that strategy is key. Your sales pipeline is only as effective as the strategy you’ve developed for it, and it depends on all team members working together to fulfill that strategy.

Know the exact number of deals you have, the value of each one, and the best way to close each deal with a healthy sales pipeline. Use it, too, to gain a clear picture of your sales agents’ performance and pinpoint skills they should improve. Increasing your company’s revenue depends on it.

Optimize your sales CRM to improve customer service