What is the sales cycle? The sales cycle includes all the activities that a company performs when selling products or services to prospects. It provides a framework for organizations and sales professionals to understand where prospects are in the process of becoming a customer.
Successful businesses need a steady influx of new customers to thrive and grow. It’s unwise to leave this critical process to chance or use a haphazard array of tactics to secure new business. Instead, you need a formal sales cycle process that provides guidance to sales teams.
As the Harvard Business Review explains:
“So what does it mean to have a formal sales process? For starters, it means having clearly defined stages and milestones that are universally understood by your salespeople. Your sales team shouldn’t have to guess where a particular deal stands or how they should be managing deals in each stage. In addition, your sales process should align with how your customers move through their buying process.”
Providing a sales framework is one benefit of having a formal sales cycle. A well-structured sales process also helps companies forecast revenues and plan for growth. As sales processes mature, organizations can understand how many prospects they need at each sales cycle stage to achieve desired revenue targets.
Common benefits of the sales cycle
- Organizing the pipeline
- Providing a framework for sales activities to guide next steps
- Streamlining onboarding for new sales team members
- Allowing teams to communicate about and collaborate on sales pursuits
- Designing lead nurturing strategies for prospects
- Forecasting sales and revenue to support financial planning
Having a sales cycle supports business growth
Research has shown a clear link between having a structured sales cycle and revenue growth. One study from Vantage Point Performance and the Sales Management Association surveyed executives about their year-over-year revenues and the effectiveness of their sales methodologies. While companies with ineffective sales management achieved a 4.6 average growth rate, those with effective practices had a 15 percent higher growth rate.
Even more impressive: Organizations with the most robust sales cycle practices had 28 percent higher revenue growth than those with ineffective sales approaches.
What’s the takeaway? Putting effort into structuring and managing your sales cycle can yield measurable financial returns and strong growth potential.
Choosing the right sales cycle for your company
When exploring sales cycle frameworks, you may find various models. One sales cycle model in wide use includes five steps, while another popular model has seven stages. You’ll also find sales cycles with eight, nine, or 10 stages.
Which one is correct? The answer is that you should use the sales cycle approach that is correct for your business.
Another thing to keep in mind is that the length of cycles can vary widely. For some types of businesses, the entire sales process may typically take hours. Often, business-to-consumer (B2C) companies are more likely to have short sales cycles.
By contrast, for business-to-business (B2B) companies, the sales cycle can take months or even years. For that reason, B2B companies may benefit from a more detailed sales process with defined stages and action steps.
A typical sales cycle framework
You may have quick-turnaround sales with a short sales cycle. Or you may need a more expansive sales cycle to align with a longer sales process. Looking at a typical framework can help you clarify the right sales cycle stages for your company.
The sales cycle begins when your company lets potential customers know about your business and what you have to offer. In this stage, your goal is to identify target customers and ideally gain permission to contact them.
Both marketing and sales can manage lead generation programs. Here are a few examples of lead generation activities that you may consider implementing:
- Running advertisements online
- Having contact forms on your website
- Giving away free content — such as ebooks or white papers — in exchange for email addresses
- Hosting or participating in events
- Offering a demo or free product trial
- Running a promotion or giveaway
- Sourcing lead or contact lists
- Outbound prospecting via phone or email
Through the activities of the first stage, you can develop a steady inflow of leads. Your next step is to begin contacting them. However, you shouldn’t treat all leads alike. Some people may still be gathering information and won’t welcome a sales call. Others may be ready to buy so that direct sales contact will be valuable.
For example, one lead may have downloaded an ebook from your website and provided contact details to access that information. Chances are, that person is conducting research and not nearing a purchase. Keeping that person on your email list and sending nurturing emails is a smart next step.
Other leads may fill out a form on your website and request a product demo. You should reach out to those leads personally as soon as possible. Asking for a demo is a clear sign that someone is seriously considering a purchase. Acting quickly can help you close a sale.
After contacting your lead, you must determine if they are the right fit for your business. You need to know if they have a need or problem you can address and the funds to buy your products or services. Also, you need to find out if they can authorize a purchase and when they expect to make a decision. This step is known as lead qualification.
You may be able to accomplish some lead qualification during earlier steps of the sales cycle. If you have an online form, you can ask questions that help you understand if the lead is a good fit for your business.
Another way to gain the insight you need to qualify leads is by having a discovery call. Have a list of standard qualification questions that you talk through during this discussion. You may also be able to collect these insights via email.
In some instances, your lead qualification activities will lead directly to a sale. Other times, a lead may not be ready to buy but is a good candidate for a future purchase. You should stay top-of-mind with those prospects through lead nurturing.
In a nutshell, lead nurturing is a structured way to maintain contact with a prospect and guide them toward a purchase. A simple lead nurturing approach is sending monthly newsletters that stay in touch with customers. You can supplement these recurring emails with other outreach, such as special promotions or event invitations, that can motivate some leads to progress toward becoming a customer.
Making an offer
When prospects are getting close to a purchase, they’ll need to assess whether your products or services are right for them carefully. Also, they’ll want to understand pricing. Some companies have set pricing, but other businesses make customized offers to each customer.
One signal that someone is nearing a purchase is requesting a product demo or a trial. This is true in both B2C and B2B sales. For example, someone shopping for a car will want to test drive it before they buy. Someone buying software for an organization may request a demo to see user interfaces, test out the functionality, and clarify customization options. In scenarios like these, prospects are showing an intent to purchase.
You should satisfy their request for a demo, identify their pain points, and articulate how your product or service meets their needs. These insights will help prospects understand how what you offer fits into their lifestyles or businesses. In addition, you should make them a relevant offer. Let them know precisely what you will provide them and how much it will cost. They may accept, or you may move into a negotiation phase.
Negotiating and handling objections
After you have made an offer, your lead will need to respond. They may not accept right away and try to secure more favorable pricing or terms. At this stage, you should be prepared to address common objections that may surface. Here are a few examples of the types of objections you might hear:
- “We’re still considering options.”
- “I don’t want to commit right now.”
- “I’m looking at your competition and may go with them.”
- “Your product seems too complicated.”
- “I’m not sure if you have all the features I need.”
- “I think I can get a better deal somewhere else.”
Make a list of the objections your company frequently encounters and know how to address each one. For example, if someone expresses concerns about learning how to use a new product, share any documentation, online tutorials, or training options you offer and discuss customer support.
Also, if a lead suggests that your price is too high, walk them through a return on investment (ROI) calculation. You can also allow them to propose what they’d prefer to pay and negotiate to a mutually agreed-upon amount.
Of course, paying a lower price may mean sacrificing some functions or features, but the ultimate goal is giving the prospect what they need at a price they find reasonable, while making a profit.
Closing the sale
After reaching an agreement, it’s time to close the sale. This step can involve forms, contracts, and payment. You may have administrative tasks to complete, such as adding the customer to a database or updating your sales pipeline.
During the sales process to-date, you may have built a relationship with your prospect. Now that relationship is evolving in a new direction, as your prospect becomes your customer.
For that reason, it’s important not to make closing the sale feel purely transactional. If it makes sense, introduce your new customer to other colleagues or support professionals to help the customer feel connected to your business.
Take time to help customers schedule any next steps —such as training or follow-up visits. Actions like those can make new customers feel reassured that they have chosen a company that cares about quality service and fostering strong bonds with customers.
Putting your sales cycle to work for your business
No matter the size or focus of your business, having a sales cycle is a must. A sales cycle gives your team a structured process and a common set of milestones. You’ll avoid confusion about where different leads are in the sales process and empower team members to work together on sales pursuits. As you strengthen your sales cycle, you can convert more prospects to customers and see your revenues climb.
While there are typical sales stages, there is not a one-size-fits-all sales process that works for every company. You should examine your internal practices and understand how customers buy from you and create a sales cycle that works for your business.
No matter how many stages you choose or how long your sales cycle lasts, you’ll need to generate a steady influx of leads for your business. You’ll also need to make contact with leads, discern whether they are a good fit, and nurture them toward a sale. Some leads may convert quickly, but others may take time. As sales near closure, you may engage with activities such as demos, providing offers, and negotiating final terms.
Although closing a sale brings one chapter to an end, you’re embarking on the next phase of a relationship with your new customer. Build on the bonds you’ve developed during the sales cycle to foster loyalty and grow your business.What is a sales cycle? It encompasses all the steps companies take when selling to prospects or customers. Find out more. #contentmarketing #marketing Click To Tweet