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Can you imagine that companies lose at least $1 trillion annually because of poor sales cycle management? This can be avoided or at least reduced with a clearly defined sales cycle, which should be analyzed and optimized regularly.
Not only does it help companies generate more high-quality leads. It also ensures that they advance through the stages of the sales process at the right time, increasing the probability of closing deals.
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What is a sales cycle?
A sales cycle is a series of steps a business needs to take to turn prospects into customers. It starts from attracting visitors by your marketing team, warming them up, all the way to closing a sale.
The exact steps in a well-defined sales cycle differ depending on the company's target market and the type of product they sell. Overall, the pricier the product or service, the longer the sales cycle.
Sales cycle stages
Lead generation
To make sure your sales reps sell your product or service, you must first find a group of potential buyers. This first stage, also known as “sales prospecting,”' is about finding out where your potential clients hang out and how you can spark their interest in your offer. This should be a well-thought-out, proactive process – a simple “here's my leaflet, call me maybe” approach won't do!
Depending on your business, you could identify potential buyers on Instagram, Quora, or – if you're targeting a B2B audience – LinkedIn.
Before you begin your lead generation, make sure that you have a good idea of your buyer persona, such as your target clients' requirements, challenges, and goals. If you don't know what customers needs are, you'll just be shooting in the dark.
Connecting
Managed to find a group of potential clients? Now it's time for your sales reps to make the first move and get in touch. How you go about it depends on your business and target audience.
If you find a thread on Reddit where someone shares a problem you can solve, you can engage in conversation. That being said, refrain from any heavy pitching just yet. Instead, focus on making a good first impression by being helpful and earning trust. The best way to do it is by sharing your insights and knowledge. For example, your sales team can send your potential leads an article packed with unique advice to help them reach their goals.
By prioritizing adding value over pitching at this stage, you might prove that you're better and more reliable than your competitors. Especially those who get too impatient and decide to present their offer too soon in the sales cycle.
Lead qualification
This stage is about spotting leads who have positively responded to your initial contact and who might be interested in learning more about what you could do for them. Your sales reps can run a survey or suggest a discovery call. It's a short conversation where you ask your leads about their goals and problems to check if your service or product can genuinely serve them.
At this sales cycle stage, you might realize that you're not suitable for some of the people you are speaking to. And that's perfectly fine, as you don't want to sell a product or service that will disillusion clients and skyrocket your churn rate.
However, you will spot prospects with a genuine reason and budget to become customers. They're the ones you'll be confident pitching your offer to, turning them from qualified leads to actual prospects!
Pitching
Here's where sales teams can roll up their sleeves and get down to business. The goal is to demonstrate how your service or product will help each prospect. This means you should refer to the goals and needs you've found out about and circle your sales presentation around benefits and problem-solving (not features themselves).
The medium you use depends on the type of service/product you're offering. For instance, if you sell SaaS software, your go-to channel would be a 1:1 call or live online demo. Other industries might find a real-life meeting more suitable.
Here are a few points I recommend crossing off your list as you present your offer:
- A short overview of your business.
- Discussing the problems/goals of your prospective buyer.
- Presenting your service as a solution.
- Demonstrating social-proof – data, like numbers and/or client testimonials.
- Organizing a Q&A session at the end to answer all queries.
Bear in mind that this last point might extend beyond the presentation itself, leading us to the next point of the sales cycle.
Resolving objections
Winning the sale on the live demo call/meeting does happen, but it's not a rule. Don't think of it as “game over” if it doesn't take place. Some objections might come up after the sales pitch has ended, which is why you should follow up with the potential client. Learn what it is that's keeping them from the purchase.
Regardless of what you're selling, some of the most common worries will include pricing, lack of certain product/service features, or a conflict of interest (for example, your client is still bound by a contract to a competitor).
Write down all of these reasons, and create a knowledge base that you'll use to keep ideas for how you can remove any blockers and improve sales cycle management.
For example, if your prospect has a contract with a competitor for another three months, you could seek to close the sale by offering them a significant discount for the time they'll have an overlap of both services.
Closing
This is the stage where you seek to finalize the sale. Here's where you ask potential customers (whose common objections were all answered) whether they're ready to buy. There are three common methods to go along with.
- The first tactic is known as the urgency method – as the name indicates, you create a sense of a limited-time offer (for example, a 25% discount if they purchase today).
- The second type is the suggestive close, which works well if your prospect can't decide between two options, such as two subscription types. You can lead them towards making the purchase by telling them which of the two options will work better for their needs.
- And, finally, there's the assumptive close, which is also the most risky of all, as you assume that the sale is done even before the prospect speaks up. Make sure that the closing type you choose aligns with your company vision and communication guidelines.
If the client's answer is a “yes” and they buy from your sales rep, then congratulations – you've successfully gone through the sales cycle properly!
However, if it's a “no,” don't treat it as a farewell. Perhaps, it's a “not yet” and you might need to return to one of the previous sales cycle steps.
Continue nurturing your “no” prospects. Check in with them in the future, or go back in the customer journey to the objection-resolving phase if they bring up another worry or question.
For effective sales cycle management, you should continue nurturing even those who have become your clients – just differently. I'll mention this in the final step below.
Nurturing
The fact that your prospect has hit the “buy” button is no reason to rest on your laurels. It's now time for your sales representatives to nurture your newly established customer relationships and ensure that your product or service becomes a part of their daily lives.
If you're thinking, “Isn't that the role of Customer Success departments?” you're not in the wrong. However, remember that happy customers are great sources of referrals and make perfect candidates for upselling/cross-selling offers!
Sales cycle vs. sales funnel
Some of us use the terms sales cycle and sales funnel interchangeably, which isn't quite right, so let's take a look at how they differ.
You already know that a sales cycle is a process, or a set of events, that a prospect must complete to become a customer; it's repetitive. Each new prospect follows the same path.
Imagine you run a travel agency. A couple, Maddy and Tom, want to go on holiday so they start searching for potential travel destinations. They look online and read articles about the best places to visit in July. Eventually, they decide on Tenerife.
Since they're not interested in organizing their vacation on their own, they also seek the best travel agencies to go on a tour with. Maddy reads the reviews and compares prices. After finding a suitable travel agency, they decide to book the tour online instead of calling an agent to make a reservation for them. This is an example of a sales cycle; it focuses on customer behavior. If you analyze it properly, you can optimize your sales process.
A sales funnel, on the other hand, revolves around numbers. It tells you how many leads move from one particular stage to another and how fast. For example, how many prospects who visit your website book a tour online. You can look at your sales funnel to check how efficient your sales process and your sales team are. It can also help with estimating your monthly sales and setting sales targets.
Why do you need a sales cycle?
Spotting areas for improvement
If you closely analyze your sales cycle, you'll quickly identify areas that need a bit more work. You might discover that while you rock at lead generation, turning them into paying customers doesn't come as easily. As soon as you realize it, you can start improving your sales cycle management. And if you do, it will greatly impact your selling process.
Bringing new hires up to speed
A clearly defined sales cycle will help you train new sales hires faster. Since it's a repetitive process, they'll know exactly what to do in each situation and get enough time to prepare for it. It also benefits sales managers, who can pass on their knowledge and best practices more easily since the team follows the same plan.
More sales qualified leads
By looking at the different sales cycle stages, your sales team will quickly identify low-quality leads that never become paying customers and those who churn quickly and, as a result, increase your customer acquisition cost.
If you succeed at generating more high-quality leads, not only will you shorten your sales cycle. You will also increase your customer lifetime value like Sensorem, one of our customers, and ensure that your sales team's time is well-spent.
Better customer experience
Imagine a situation where a prospect who visited your site and signed up for a newsletter immediately receives a demo invite. When they fail to sign up, they get a series of follow-ups, which annoy them so much they decide to mark the email as spam.
Just because someone signed up for your newsletter doesn't mean they're ready to purchase your product. A perfect sales process ensures that prospects advance through the sales cycle at the right time, resulting in a better customer experience.
What are the differences between B2B and B2C sales cycles?
B2B: Multiple decision-makers, which prolongs the sales cycle
The sales process at B2B companies is usually more complex. Various stakeholders take part in the sales process and have different needs and expectations regarding the purchasing products. There is also a set of criteria that must be met, including:
- tech/functional specifications,
- business requirements,
- costs, etc.
Since there are numerous stakeholders involved at different stages of the sales process, it takes longer to seal the deal. It also requires more time and effort to educate them and to build meaningful relationships. On the plus side, B2B sales usually bring in more revenue and are more long-lasting (if handled well).
B2C: Brand matters as a driving factor for purchases
The typical sales cycle in B2C tends to be much shorter than in the business-to-business sphere. The reason? You don't need to get the buy-in from numerous stakeholders, as it's the individual who is the decision maker.
The biggest blocker in B2C sales closing is usually the point where the prospects come by your pricing. If you managed to convince a potential customer that you're selling a great service or product, a purchase from a financially well-off client will likely be a formality.
However, if a prospect loves what you do but isn't sure whether they can afford it, the sales either won't come so easily or won't happen altogether. The latter group might turn to a less costly alternative – especially if you're in a saturated niche.
How long should a sales cycle be?
As mentioned earlier, the sales cycle length depends on the type of product you sell, the sector you're in, and whether you're in a B2B or B2C space. There are some industry benchmarks you can look at to check how you compare against your competition. If you notice that you're far behind, you can look for ways to improve your sales process.
Geckoboard discovered that in the case of B2B companies, it takes 102 days on average to close a deal. However, it's worth knowing that the industry average can differ between sales pros and businesses. A smaller B2B deal can turn out to be a short sales cycle that takes three months to finalize, while larger ones require between six to nine months to close.
How to refine your sales cycle
Find out which stage takes the longest (and why)
To spot where in the sales cycle you lose most of your leads, sales leaders should assess the sales pipeline stage conversion rate. The formula is very simple – if there were 250 people in your “lead qualification” sales cycle stage, and 75 of them proceeded into the “pitching” stage, then your conversion rate is 30%.
So, is this good or bad? On top of the above-mentioned industry benchmarks, compare these values to your past results. If your conversion rate has dropped, you'll see if it's a relatively new issue or was similar six or twelve months back.
Define your KPIs
There are a ton of KPIs (key performance indicators) you could set to assess your sales cycle. Some of the most common ones include:
- sales-to-date this month/year – a comparison of the same time period last month/year.
- sales cycle length – how long it takes on average to go from Stage 1 to Stage 7.
- customer lifetime value – average total revenue a customer has brought in.
- customer acquisition cost – the amount of money you spend to win a customer.
- churn rate – how many customers leave you (and, potentially, how many of them come back).
Be sure to focus on the highest-performing channels
Analyze which channels have the highest performance rate (for example, which get the most responses when you first engage in conversation). Align sales with these channels instead of investing money in actions that haven't worked for a while now.
That being said, analyze your channel performance regularly – if you see a sudden drop in your results from, say, LinkedIn, experiment with a different approach or new medium.
Embrace an omnichannel approach
If you can analyze data from your entire company tool stack (CRM, surveys, website analytics tool, etc.), high chances are you'll find the answers to many questions you've had about your sales cycle performance. As a result, you'll better understand which step of the sales cycle a person is in.
For instance, if you use an omnichannel tool like LiveChat, you can trigger a live chat message if you see someone reading a high-intent page like pricing and engage them in a conversation. And if they're looking at a lower-intent page, like your blog, you can invite them to sign up for your newsletter (so establish yourself as a brand that adds value).
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Optimize your sales cycle for the best results
Regardless of whether you're a sales leader in B2B or B2C, you need a solid sales process. Leaving things up to chance could prove dangerous to your entire organization. For this reason, I recommend following the tried-and-tested approach I shared in this post.
Also, be sure to use your data's potential to the fullest! Adopting an omnichannel approach for your sales and marketing teams will ensure you're using the best message for each stage of the sales process.
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