The Perfect Pipeline: When Less Is More
If it’s true that the Great Recession is over or at least ending, it seems appropriate to begin to look back on the dark economic days from Spring 2008 until midyear 2010 to see what we learned during this downturn that we can apply the next time the economic cycle goes bad. Which of the strategies you deployed helped and which ones failed? One strategy that appeared logical at the time actually proved to be a drag on sales performance. A number of organizations challenged sales to increase their pipeline ratio (total pipeline revenue value to quota). The belief was that what sales needed was more opportunities to work on because the bad economy was going to reduce the total number of decisions made. Marketing teams cranked up the demand generation efforts and lowered the criteria for what qualified as a lead and pushed them to sales. Sales managers inspected factored pipelines, requesting that reps go from 3:1 to 4:1, 5:1 or even 6:1 ratio of revenue to goal under the belief that more was the answer. Salespeople responded by increasing the amount of deals they tracked and inflating the revenue value of early stage deals to satisfy their manager’s requests.
What our research is proved is that the performance of sales reps who managed to a 4X or greater pipeline was lower in several key categories when compared to salespeople working with 3X or less pipeline requirement. The 3X and below group had higher pipeline conversion rates and a much higher percent of these sales reps achieved plan. What this suggests is that sales reps that focused on fewer, more winnable deals tend to do better. Flooding the rep with low quality/high quantity leads only increases their inefficiencies, forcing them to spend more time qualifying or carrying low percentage deals along to satisfy the 4X ratio requirement. It appears that the 3X group’s qualification and deal selection process gave them a better chance of success by eliminating the “loser” deals before they consume time and polluted the pipeline. The organizations that have deeper analytical insight and discipline into their pipelines made better business decisions as to which deals to pursue
We recently introduced the concept of the pursuit of perfect pipeline. The perfect pipeline promotes the concept that reps should only work on winnable deals. They are winning more by pursuing less, taking the time spent chasing unwinnable opportunities and applying that time to higher quality deals.