We’re all familiar with the basic sales funnel – marketing passes leads on to sales, sales accepts them, converts leads to opportunities and then (hopefully!) wins the deal.
But there’s more to it than this. The opportunities stage is critical to the success or failure of a deal, but it’s often overlooked by sales teams.
An opportunity is an opportunity right? Well, not really.
The opportunities stage is where you find out the detail about your prospect and gather insights to find out exactly what you need to do to close the deal.
In order to gain as much information from the opportunities stage, it should be segmented further into three phases: value proposition, demonstration, and negotiation.
In this blog post, I’ll examine the sales funnel and delve deeper into the three phases opportunities should go through. At each stage I’ll show what metrics to measure and how you can improve conversion rates.
The expanded sales funnel
Below is a standard sales funnel, including the segmented opportunities phases:
The first two stages of the funnel
The sales funnel begins once leads are passed on to the sales team from the marketing team. The first two stages require the sales team to contact and qualify those raw leads in order to filter out those that are not worth pursuing.
The first two stages are:
Marketing Qualified Leads (MQLs)
This is ‘raw’ data that is passed on to your sales individuals for processing.
MQLs could be outbound calling databases or inbound leads gathered through your website, either through trial requests or registrations to access content such as webinars or whitepapers.
At this point in the sales cycle (depending on the quality of the lead set or leads) you will see different conversion rates. A majority of the data rejected here is either due to duplicity or incorrect contact information like invalid phone numbers or email addresses.
If you are experiencing a high drop rate here it could also be because of basic hygiene not being observed by your team. In a nutshell, your team is probably too quick to dismiss MQLs.
The good news is this is easy to spot by randomly checking a few disqualified MQLs.
Sales Accepted Leads (SALs)
As the name suggests, SALs are leads that are accepted by your sales team for further action. These leads are contacted, qualified and converted to opportunities.
There are industry standards that define how many leads should move from the SAL status to opportunity status but the conversion ratio varies greatly.
However, a high non-conversion rate at this stage could be down to a variety of reasons from lack of skill to region specific issues. Fixing this is a time consuming process for a leader.
You might have to listen to calls, read emails or even hand hold struggling staff/teams only to discover that the region you are reaching out to is not keen to talk because of a language barrier!
The three opportunities phases
Here’s where it gets interesting. The opportunities phases are where you can get really granular in your filtering, and enables you to gather deeper insights into these prospects.
Here is how you can split this stage and what each of the three phases can help you to understand:
Opportunities in the value proposition phase
Post qualification of a lead, the role of any sales individual is to understand the value proposition that needs to be made to a prospect. This phase can also be classed as the advanced discovery stage of the sale.
While basic qualification questions have been answered before this stage, in the value proposition stage a sales individual digs deeper into the prospect’s requirements.
Common information that is gathered in this phase includes:
- Advanced product related requirements
- Possible blockers and must haves
- Establishing an evaluation roadmap
It is not uncommon for opportunities to be lost in the value proposition phase. Some of the common reasons why this happens here are:
- Not all requirements are met by the product
- New blockers or ‘must haves’ been discovered
- There is no immediate requirement and the opportunity can possibly be re-opened at a later time
- Poor qualification was done and the opportunity was not genuine
A high drop rate usually means that poorly qualified prospects are being passed on for further action.
This means that you might need to improve the quality of the qualification questions that are being asked before they are moved on to the opportunity stage. This is especially important if the majority of the drops are happening due to requirements not being met or blockers being discovered.
While there are contrasting views on whether the value proposition phase should be a part of the opportunity stage, this stage allows you to better understand if your current qualification criteria need to be updated and also about any opportunity drop trends.
For example, let’s say a lot of opportunities are being dropped due to lack of social integration. This is feedback that needs to be passed on to your product team and also something that can be made part of the initial qualification criteria when the lead is in the SAL stage.
Opportunities in the demonstration phase
The demonstration phase is reserved for fully qualified opportunities. As the name suggests, this is an opportunity for a sales individual to showcase the product to the prospect and demonstrate a proof of concept.
Opportunity drops in this stage could indicate the following:
- Advanced qualification of the prospect was poorly done
- The demonstration failed to exhibit sufficient value to the prospect
- The prospect found the product inappropriate
- The prospect was evaluating multiple products and went with your competition
If you are experiencing a high drop rate in this phase, warning bells should be ringing.
By the demonstration phase a considerable amount of time has already been invested by a sales individual. If you are experiencing drops for reasons like blockers and must haves, this clearly points out that due diligence was not done in the value proposition phase.
On the other hand, if prospects are suddenly going silent post the demonstration then it is equally possible that insufficient value was demonstrated to them or they found the product inappropriate for their needs. It is therefore vital that feedback is collected on their reason for not choosing the product.
If they feel the product is not the right fit, the question to ask is why did the sales individual demonstrate the product to them in the first place?
More importantly, if they were the right people to pitch to, what went wrong?
At this point, as a sales leader or coach you might need to invest time in understanding the business case and going through the demonstration that was given to the prospect.
If your prospect went to the competition after your demonstration. First ask the prospect why the switched to the competition. If they switched for a feature your product also has, then it is time to go back to the drawing board and re-examine the demonstration that was given to the prospect.
Opportunities in the negotiation phase
Once a prospect has seen the product and is convinced of its capabilities, the prospect requests a formal quote or talks payment terms. Hardly any opportunities should fall at this stage.
Opportunities can drop in this stage for the following reasons:
- Budgetary/pricing concerns
- Change in plans/direction
If the opportunity has dropped due to budget/pricing, then the initial qualification was not done well. In terms of pricing nothing should be left to the last moment. As a sales individual it is pointless to invest time on an opportunity only to find the prospect does not have money to buy your product.
Having said this, in certain parts of the world it is customary to talk pricing only after the prospect is convinced your product is right for them.
When the prospect tells you they have decided to put plans on hold or not buy your product in the negotiation phase this might indicate a lack of urgency.
For example, the prospect was merely evaluating a product and will purchase it when they are ready. The sales individual should have established intent and purchase timelines in the early half or the conversation.
It could also mean that post-demonstration the prospect was not convinced of the value of the product and the sales individual moved into negotiations too early.
Both problems are easy to diagnose but are bitter pills to swallow.
The advantages of splitting your opportunities into phases
So I’ve explained how you can split your opportunities stage into three phases, and how this can help you to better qualify your prospects and nurture them down the sales funnel more effectively.
But there are more benefits to be seen beyond improving the sales funnel for each individual sale. In fact, splitting this stage allows you to gain insights into your sales team’s process as a whole.
Analysis and diagnostics
Splitting your opportunities into phases allows you to analyse the progress of your sales team and individual members.
It also helps point to trends and identify problem areas. Leaders and coaches can easily diagnose problems depending on the stage the opportunity is in after understanding the reason(s) for the drop.
Depending on the phase an opportunity is in, you can forecast which opportunity is nearing closure. By keeping the opportunity in phases you can also establish which opportunity needs to be concentrated on and which opportunity is under threat.
For example, if a lot of opportunities are in the negotiation stage for longer than usual. You might need to try and close them sooner or you might have already lost them and not know about it!
Highlight staff trends and plan effective coaching
So who is your sales rock star? The individual with the most sales or the one that closes sales the quickest?
The only way you can really measure effectiveness is by analysing how long it takes for the average opportunity to close. In addition, knowing which sales individual is struggling to move opportunities along or is struggling to close helps you plan out coaching for your sales team.
By delving deeper into sales activities around prospects at the opportunities stage, you can improve your sales process as a whole.
Splitting this vital stage of the sales funnel into three phases helps you to gain a better insight into what your sales team and your sales process is doing right, to nurture leads down the funnel, and what you could be doing better, to prevent drop-off of valid opportunities.