Shortening the sales cycle is among the top priorities for sales teams. How can analyzing your sales pipeline help you reach the conversion stage faster?

Performing a sales pipeline analysis is beneficial if you want to increase sales. It works even if you are satisfied with your current sales performance. But what exactly is a sales pipeline analysis, and what is its importance?

Analyzing the sales pipeline involves examining leads to understand their status and progress. In this blog, we explain the importance of conducting a sales pipeline analysis and list six top sales pipeline metrics to monitor.

What is sales pipeline analysis?

Sales pipeline analysis helps you examine your sales pipeline to understand what is happening with your leads and why.

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What does sales pipeline analysis tell you?

Analyzing the sales pipeline provides crucial insights into your potential customers. What prompts the leads who convert to do so? What causes those who do not stay? Out of the two options, which one occurs more frequently?

How you choose to carry out your analysis is totally in your hands, but it is often beneficial to examine different key performance indicators (KPIs) to understand the impact of your efforts.

Why conduct a sales pipeline analysis?

Conducting a sales analysis is important because it lets you understand how to enhance your sales strategy. It demonstrates your strengths, enabling you to replicate those accomplishments in the future. Similarly, it also reveals the areas of weakness in your sales, such as where leads are being lost.

Utilizing data from sales pipeline metrics to adjust the entire sales process can lead to consistent growth in sales numbers, resulting in a progressively higher ROI.

Six sales pipeline metrics to track and analyze

We have previously highlighted the importance of monitoring various pipeline KPIs to effectively conduct a sales analysis, but which specific KPIs should be tracked?

Here are six key performance indicators to examine in the sales pipeline.

Rate of conversion at each stage

Your conversion rate indicates the percentage of leads that turn into conversions. Naturally, the term “convert” has various interpretations. At the beginning of the sales process, it could just involve subscribing to your newsletter. However, ultimately, it translates to the lead buying something.

It means you need to analyze your conversion rate individually for every step in the process. Monitoring the conversion rate lets you pinpoint where you are losing the majority of leads. Having a high conversion rate at the end of the funnel but a low one at the start implies that your top-of-funnel sales process requires improvement.

Duration of sales cycle

The length of your sales cycle reflects the average duration of a sales cycle or the time it takes for the average customer to move from the start to the finish of the pipeline.

The more time spent in the pipeline, the higher the likelihood of dropping out before making a sale. Furthermore, the more time it takes for potential customers to move along the sales process, the slower your income will come in.

Speed of sales pipeline

The velocity of sales pipeline progress is linked to the length of the sales cycle. Instead of tracking lead retention in the pipeline, it focuses on the speed of revenue generation within it.

To figure it out, simply multiply the total deals in the pipeline by the average deal size, then divide by the average duration of the sales cycle.

This metric is advantageous for the same purpose as the length of the sales cycle – it shows the speed and effectiveness of your sales pipeline in generating revenue for you.

Customer acquisition cost (CAC)

CAC is an average cost measurement to earn a new customer. To determine your CAC metric, add up all your marketing and sales expenses over a specific time frame and divide by the total number of new customers acquired in that period.

It provides an idea of your expenses related to your sales pipeline. If your Customer Acquisition Cost is excessively high, you are spending way too much, or your sales strategies are yielding very unsatisfactory outcomes. In any case, you should focus on adjusting the ratio to benefit you.

Churn rate

Another vital factor to pay attention to is the customer retention rate. The churn rate is essentially a metric that indicates the portion of your potential and existing customers you no longer have within a specified time frame. To find it, divide the customers lost by the initial number of customers for that period, then multiply by 100.

It’s probably needless to mention that the higher your churn rate, the more negative impact it has on your situation. A high churn rate indicates that something in the later stages of your process is causing people initially interested to leave, so your task is to determine the cause.

Net promoter score (NPS)

NPS is a measure of customer satisfaction. It just evaluates the level of satisfaction your customers have towards your company. Survey your customers to determine your NPS by asking how probable they are to endorse your business, rating on a scale from 1 to 10.

A high NPS signifies satisfaction among customers for your company, while a low NPS suggests significant potential for enhancement. If your Net Promoter Score is not meeting your expectations, ensure to also inquire with your customers about how they believe you can enhance it. Next, apply those enhancements to boost your NPS score.

Wrapping it up

Understanding and efficiently controlling your sales pipeline will result in notable enhancements in your results – this is something we can all agree upon now. The sales team gains from the sales pipeline and aids in overall team achievements as long as the entire organization is in sync with revenue objectives. Businesses that achieve sales targets understand the importance of effectively managing the sales pipeline to track a prospect’s progress through each stage of the sales process, enabling them to nurture leads and increase conversions.

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