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Companies build sales funnels to house potential customers and provide a structure to create new revenue. At the heart of the sales funnel is the sales cycle. Every sales person actively selling today is working with sales cycles.
To understand sales cycles better we need more definition. We need to understand the patterned relationship that exists between buyers and sellers that allow us to create and track sales stages.
A Patterned Relationship Between Buyer and Seller
Sales Cycles between buyers and sellers follows a general pattern that can be identified, monitored, tracked and, ultimately, managed.
Sellers place the labels of "lead" and "prospect" and "customer" on buyers in order to classify, organize and understand them. Buyers place the label of "lead" and "prospect" and "vendor" on sellers for the same reason.
Every company operating in an industry within an economy has a general pattern of how sales cycles flow. Sales cycles take on characteristics that make them all slightly unique. A retailer has a different style of sales cycle than a manufacturer or a distributor. Some businesses thrive on repeat customers and others never get repeat customers.
The type of product or service that provides the value of the transaction largely dictates the style of the sales cycle. A Coca-Cola selling for $1.59 at 7-Eleven has a different sales cycle than a custom bicycle from Japan.
Here are the seven major characteristics of sales cycles:
- Quantity. Are there a lot of sales cycles. Does the business carry thousands of sales cycles under management or are there only a hundred or so?
- Quality. Does the sales cycle require a high-quality approach? Do sales people need a couple of years of training to become proficient in selling or can a sales person get the hang of it in a few weeks?
- Frequency. How frequent does the sales cycles occur? Does one customer tend to engage in sales cycles frequently?
- Duration. How long is the average length of the sales cycle. Some sales cycles are short, only minutes in length. Others can last three years or more.
- Intensity. What is the dollar volume of the sales cycle? The higher the value of the product or service the greater the intensity of the sales cycle.
- Size. How many people are involved in a sales cycle? How many departments, business units or businesses? What is the size of the buying center?
- Investment. Is there a significant investment in the sales cycle? Does the sales cycle have a high acquisition cost?
Sales cycles are cyclical relationships. A cycle is an interval of time in which a certain succession of events is completed, and then returns again and again, uniformly and continually in the same order. When you've set your sales stages and manage them, you are building cycles. From your target market, leads become prospects, prospect become customers. Again and again. Even after a customer buys, the buying cycle can create repeat purchasing.
The key to cycling a sales relationship is understanding the nature of your cycle. Learn about your customer and the customer's buying habits. Learn about the characteristics of your product. Here's a list of product characteristics that affect your product. These characteristics alter the time frame of your sales cycles. That can shorten or lengthen the sales cycle.
The Sales Stage Process
A sales cycle is a process as much as it is a relationship. It has a start and a finish. It has a beginning and an end. There are inputs and outputs. Value-added steps produce work. Sales cycles meet all the requirements of a process. It also has constraints or things that hinder its progress. Constraint management can be applied to sales cycles like it's applied to a manufacturing line.
Understanding the process of sales cycles is made easier through sales stages. A sales stage is the individual step of the sales cycle signified by a milestone. The simplest sales stage configuration is lead, prospect and customer.
Lead. A lead is a contact from a target market where the seller has a name, address and telephone number to initiate contact. Leads often have characteristics that lead the seller to believe a purchase is likely to happen.
Prospect. A Prospect is a lead who has product interest, has a defined need for the seller's product or service and is able to purchase.
Customer. A customer is a prospect who purchases the seller's product or service.
Create your own sales stages that reflect your pattern between you and your prospects. Capture the milestones that signify movement to the next stage. Be sure and utilize the seven major characteristics of a sales cycle.
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