Profit & Sales Pipeline Management

Market to Order Cycle

The B2B revenue cycle encompasses the entire journey from attracting potential customers to receiving payment for delivered goods or services. It can be broadly divided into two key processes:

• Market-to-Order Process: This covers the initial stages of the revenue cycle, starting with market analysis and customer segmentation, moving through lead generation and sales opportunity management within the sales pipeline, and culminating in confirmed customer orders.
• Order-to-Cash Process: This process takes over once an order is received, encompassing order fulfillment, delivery of goods or services, invoicing, and finally, receiving payment.

The Market-to-Order process is heavily reliant on effective sales pipeline management to ensure a consistent flow of new orders and the corresponding revenue.

Sales Opportunity

• Product Quantity Expectation: The anticipated volume of products or services the customer may order.
• Price Expectation: The expected selling price for the products or services.
• Monetary Value Expectation: The estimated overall revenue the opportunity could generate.
• Lead Time to Order Expectation: The estimated time required to convert the opportunity into a confirmed order.
• Success Probability: The likelihood of successfully closing the deal and securing the order.

These factors are inherently uncertain and can change throughout the sales process, requiring continuous monitoring and reassessment.

Sales Process

The sales process (SP) provides a structured framework for managing sales opportunities from initial contact to closing. A typical five-phase B2B sales process includes:

• SP.1 Identification: Identifying potential sales opportunities.
• SP.2 Qualification: Assessing the opportunity’s viability and potential.
• SP.3 Request for Quotation (RFQ): Receiving a formal request for proposal.
• SP.4 Quotation: Submitting a proposal with pricing and terms.
• SP.5 Closing: Finalizing the deal and securing the order.

Suspects are typically associated with the identification phase (SP.1), prospects with the qualification phase (SP.2), and leads can be used more broadly to encompass both suspects and prospects as they move through the early stages of the sales process.

Sales Pipeline

The sales pipeline (SPL) is a dynamic collection of ALL active sales opportunities under uncertainty at the stages of the sales process. It provides a real-time snapshot of potential future order intake, revenue and profit.

The sales pipeline can be categorized based on:

• Current vs. New Business: Existing versus new customer relationships.
• Recurring vs. Non-recurring Business: Repeat orders versus one-time sales.
• Certain vs. Uncertain Order Intake: The level of confidence in closing the deal.

Due to the inherent uncertainties in sales opportunities, managing the pipeline effectively is crucial for achieving order intake targets and revenue targets.

Sales Pipeline Forecasting

Sales pipeline forecasting involves predicting future revenue and order intake based on the characteristics of the opportunities in the pipeline. This requires analyzing factors like deal value, close probability, and expected close date. Accurate forecasting helps businesses anticipate order intake and revenue streams, and make informed management decisions.

Sales Pipeline Steering

Sales pipeline steering involves taking actions to influence and guide the sales pipeline toward desired outcomes. This includes prioritizing opportunities, triggering sales activities and advancing opportunities to generate order intake.

It is in the uncertain nature of sales opportunities that sales pipeline steering almost never meets sales targets.

Sales Pipeline Management

Sales pipeline management in contrast encompasses a closed loop management process of optimizing the sales pipeline’s health and effectiveness by using a controlled management approach.

It involves the ongoing process of setting targets, steering activities acc to plan, tracking SPL dynamics, key metrics and outcomes, detect present deviations and predict future deviations, derive corrective measures, trigger corrective controlling actions and manage for target achievement.

Effective sales pipeline management ensures that the sales pipeline will consistently meet order intake targets.

Profit and Sales Pipeline Management

Profit and sales pipeline management focuses on maximizing profitability alongside order intake generation. It involves strategically setting and negotiating prices throughout the sales process to balance profitability with sales volume and conversion rates. This requires careful consideration of factors like SPL fillings and flows, willingness to pay, prices, costs, customer value, and competitive pressures.

CRM – Benefits and Limitations

A CRM system (Customer Relationship Management system) is a tool that helps sales organizations manage their interactions with current and potential customers. It’s essentially a central place where a sales organization stores customer and prospect information, tracks customer interactions, and shares this data with colleagues. While the idea and the technology behind CRM is decades old, a CRM systems offer several benefits:

• Centralized customer data: Provides a single repository for customer information.
• Improved communication: Facilitates efficient communication and tracking.
• Sales force automation: Automates routine tasks and workflows.

However, mainstream CRM systems have severe limitations:

• Data quality issues: Insights are prone to errors and inconsistencies.
• Forecast errors: Faulty forecasts caused by data quality issues
• Limited analytical capabilities: Lack of advanced analytics and forecasting features.
• Lack of prescriptive guidance: Doesn’t provide real-time recommendations for action.
• Sales Pipeline Management: Effective SPLM can not be realized with all negative consequences for order intake etc.

These limitations again and again have been leading to missing the corporate order intake targets and profit targets.