What are the sales pipeline stages and why do they matter?
Updated 7 June 2023
Ensuring that your team completes most of its potential sales is a key part of business. Maximising consumer product interest and profit margins means that a company is financially healthy and takes a growth mindset. Understanding the sales pipeline stages is a key part of business development. In this article, we discuss what the sales pipeline is, the key stages in the sales pipeline and why understanding the sales pipeline is integral in the success of any modern business.
What are the sales pipeline stages?
The sales pipeline stages are the different points at which customers may buy a product. The sales pipeline is the route through which companies guide their customers from being an initial lead to making a first purchase, and even discussing aftercare and long-term customer retention. The sales pipeline is a key part of converting potentially interested customers into revenue consistently.
The pipeline stages are the different points in the seller's process or purchasing journey customers are on. This process has several stages and may require training, oversight or intervention from the company, guiding the customer towards a final purchase. The size, budget and system design of each company results in a variation in the stages of the pipeline from business to business, but much of the basic framework is identical. Below are some of the most common sales stages and their role in ensuring greater business revenue:
1. Create awareness
The first step a potential customer takes in the sales pipeline stages is the 'awareness' stage of the pipeline. In this stage, customers recognise not only the company brand but the product line or core offering. This occurs through widespread advertising campaigns, public relations stunts and any other promotional activities the company engages in. This is the customer's entry to the pipeline, the point at which the two parties develop an awareness of one another and the journey downstream towards a sale begins.
2. Offer a lead magnet
Once you establish whether someone has any interest in your product at all, make use of a lead magnet and further establish their interest in your product. This entails using a 'free gift', such as an e-book or PDF that reveals whether a potential customer wants to further their progress in the pipeline. If they download the document in exchange for an email address, it shows a further will to engage with the company. This additionally provides a lead for the company, with a follow-up email, the best route to keep customers engaged.
3. Meet with the client
Once you establish an interest with a lead magnet, following up with a meeting is a good way of taking a step towards a sale. This offers you an opportunity to present your product to the buyer, laying out the precise benefits of your specific problem and why you're an improvement over your competitor. Providing access to a demonstration of the software is a good way of showing off what you offer customers in a practical manner. This personal touch draws potential buyers to the company, demonstrating a significant level of care for your customers rather than exclusively emailing.
4. Propose and negotiate
Once you establish firm interest from a potential buyer, propose the terms of sale for the potential buyer. This is a key part of the process, setting out your pricing strategy and the exact terms of coverage for any future contract. Both parties understand the basic terms of a contract before entering the next stage, negotiation. Both parties discuss their ideal terms of a contract, such as coverage, duration and cost, before coming to an agreement at the end of the process. Successful negotiations end with an agreement in principle.
5. Close the purchase
Following the negotiation, customers purchase the product or service in question. This means closing the sale and providing the service in exchange for goods and services. The final opportunity for adjusting the terms is immediately prior to the purchase point. Then, the two parties set the agreement and may require both parties' written agreement or a legal negotiation if they wish to change the terms of the deal. Some consider this as the final stage of the sales pipeline, as this is the point at which the initial lead becomes tangible revenue for the company.
6. Provide aftercare
After the completion of a sale, aftercare becomes the key priority for the best companies. This entails contacting clients after the purchase and ensuring their satisfaction after their journey through the sales pipeline. There are two key benefits to this process. The first is that good aftercare leads to positive reviews, as customers recommend your service to their friends. Good aftercare means that customers are happy to return to the company at a later date, helping to generate return customers for the business.
Related: How to manage a sales pipeline (Plus factors to consider)
Why understanding the sales stages is important
As with any other process, understanding the pipeline stages of a company is an essential part of increasing the revenue levels of the organisation. The sales pipeline is key to not only customer acquisition but also long-term retention. Below are some reasons that understanding the stages of the pipeline is important, and how it facilitates better business practices:
Works with the customers' timescales
The pace at which businesses approach customers affects the entire tone of the transaction from the earliest stages. For example, discovering a customer's interest is a positive revelation, but chasing them up for purchase within a short time period rushes the transaction. Allow buyers to take their time and set a more relaxed tone, leaving potential purchasers at ease and improving the prospects of a successful pipeline.
Related: What is a sales pipeline? A guide on how to build one
Besides completing sales, the sales pipeline facilitates the monitoring of leads and prospective sales. For example, reviewing your list of prospective clients and seeing that only 10% purchase your products is a very partial view. Opening this perspective to include those at the lead magnet, meeting and negotiation stages provides a better idea of how far you get in the purchasing process. Use this insight as a tool to further tailor your process and increase your sales.
Benefits of using a sales pipeline
There are several benefits of implementing a sales pipeline in your organisation. Such a defined and specific route for customers provides a range of advantages, and taking advantage of these benefits ensures the company maximises its potential. Below are some of the most important benefits of implementing a sales pipeline in your organisation and why these benefits take place:
One benefit of implementing a sales pipeline is the structure of relationships with clients. This means there's a clear and present route through all of your interactions, regardless of the client. This is beneficial in cases featuring clients the staff are less fond of. The structure supports equal treatment for all clients, and individual biases play no role in securing clients for the long term.
Having such a structured manner of relationship with your clients not only improves your relationships with clients and interested parties, but increases your employees' capabilities in the role. If you have a new member of staff, early adaptation to the role is occasionally difficult. However, the sales pipeline introduces a clear structure for employees. Following the steps the company lays out means employees know the tasks they complete on a day-to-day basis, rather than improvising a response based on their feelings surrounding the situation. This introduces higher consistency and performance to the company.
Depending on the client, some companies invest more resources into certain leads as a method of guaranteeing their business. Following a sales pipeline offers significantly higher efficiency than this method because of the level of trust during the negotiation process. Companies buy a product rather than the experience of buying said product. Following the same pipeline for every customer removes the temptation towards over-investing in customers and keeps a consistent model for customer acquisition.
A sales pipeline plays a key role in revenue forecasting in many modern businesses. This is because companies see the sales they make before the sales reach completion. Companies better anticipate future investment strategies within affordable boundaries, rather than setting themselves up for spending that they can't afford. Good revenue forecasting is a key part of doing business, and the sales pipeline is a key indicator of future revenue and results.
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