Definitions & Criteria (Sales Funnel 101)
This is part of an introductory series written for first-time sales managers and also for executives, founders, and owners whose day-to-day is not sales. Links to the rest of the series are at the bottom of this post.
Problem scenario
Here’s the scenario: you are a founder and you hear the following complaint about leads…
Pause right here.
When you read the above meme, whom did you assume was making the complaint?
Sales or marketing?
It could be read either way and with good reason.
Marketing could complain that the disqualification rate is too high meaning that sales is doing a poor job of qualifying.
or
Sales could complain that the disqualification rate is too high meaning that marketing is sending too many leads that are, shall we say, unqualifiable.
If your lead conversion rate was indeed off target and the disqualification rate was too high, how would you know where the problem lies?
Well, this is why definitions are so important.
The need for definitions
Any discussion of a sales funnel needs a common definition of terms.
Everyone knows what a sale is, right? Seems pretty black-and-white.
So why not aim for the same level of clarity for leads and opportunities?
Definitions for lead and opp should be agreed upon, codified, socialized, reported with, and clear to all stakeholders.
If they are not, then you run the risk of the following sorts of exchanges between sales and marketing.
Underneath the frustration pictured above, both sales and marketing have an idea (explicitly stated and codified or not) of what constitutes a lead. In the above scenarios, their respective definitions don’t match. Each team is singing from its own songbook.
Reality: everyone operates from some understanding of what a lead and opportunity are. So your choices are simply:
- Everyone operates from their own definitions
- Everyone operates from the same definition
Even if leadership provides no definitions, sellers will instinctively assess the potential “lead” or “opp” across various criteria such as title (is this the right person?), need (are we a potential fit for each other?), means ($), urgency of need (timeline), etc. They will arrive at a conclusion based on instinct, experience, etc. about if this is a “lead,” an “opp,” or of any value.
The job of sales and marketing leadership is to agree on and codify those criteria. Seller Jerry, Seller Jane, Sales Manager Joe, sales ops, and executives may all have their own idea about what an opp is. Sales and marketing leadership need to get everyone aligned around definitions and black-and-white criteria for a customer being designated as a lead and advancing through various stages of the buying process.
Solution: criteria (as black-and-white as possible)
There are probably dozens of ways you can slice and dice this based on your sales cycle, industry, sales org, etc. The bottom line is that you need definitions and criteria. You need “gates” that inform when something is allowed to move to the next step.
If you only use lead and opp, that’s fine. If you use MQL, SAL, SQL, lead, opp, and then 15 stages of opps, that’s fine, as well. If you want leads and opps to move through the Seven Layers of the Candy Cane Forrest, that’s fine. Create what works for your situation and your sales process.
You are aiming for clear criteria for stage advancement.
Example
As an example, let’s grab the common BANT criteria (Budget, Authority, Need, and Timeline) and plaster it across the popular Marketing Qualified Lead, Sales Accepted Lead, and Sales Qualified Lead stages. Add a dash of some other stuff and we’ve got…
The above is just an example. Maybe it’s a great fit for your situation. Maybe not. In one sense, you can do whatever you want. The world is your oyster.
“Wait, so are you essentially agnostic when it comes to what the definitions should be?” Good question. No, I am not. My primary point in this post is that it’s going to be unacceptable for your revenue organization to operate without clear criteria and definitions. That’s Step #1. Step #2 is getting the definitions to a place where they make the most sense for your organization, your sales process, your customer journey, etc. Step #1 takes commitment to just do it. Step #2 is a “lifelong” approach of learning and adjusting. Even if you nail it on the first day, things change over time and you’ll need to adjust as things unfold. (So for Step #1, I’d recommend aiming for the Minimum Viable Product. Don’t over-engineer it. Keep simple and to what you feel like you know for sure. Leave room to get more specific later.)
Feedback loop and accountability
Imagine how the above criteria could play out in conversations amongst your revenue teams.
- Question from Marketing: “Hey Sales Rep, why didn’t you convert that SAL to an SQL?” Answer: “Because they don’t have budget available at this time to address the problem that we solve. Our criteria for SQL is that they have budget for this.”
- Question from Sales Manager: “Hey Sales Rep, why did you open that opportunity? We have no chance at that sale, in my opinion.” Answer: “Because I’m talking to a decision-maker with budget and timeline and need. I do agree that we probably aren’t the best fit for their scenario but we do check the boxes in this situation. I opened an opp because it fit our criteria.”
Agreed upon and clear criteria eliminate subjective qualitative interpretations from each party involved. It gets everyone on the same page. It takes the guesswork out and makes it easy for everyone to give an account for their actions and to be held accountable.
Think about it this way. Which of these feedback loops sounds best to you?
- “These leads stink.”
- “We all see that leads are being converted at a 17% rate. That is less than half of the target rate. Assuming sales is properly working the leads, this means that the lead quality is drastically lower than anticipated. Let’s review DQ reason data in aggregate and then drill down where need to be to understand what shifted.”
The former wastes time and frustrates everyone.
The second is clear, builds on previous work, and is actionable.
To get to this point, you need definitions.
Your choices
So the ball is in your court. You have two choices:
- Let everyone operate from their own (probably conflicting) definitions
- Bring alignment around agreed-upon definitions and associated criteria
The former results in a sales funnel with data that is incoherent, inconsistent, and provides limited insight. It sets the stage for extra friction between stakeholder teams.
The latter brings cohesion to the funnel, clarity to the data, speeds up the process of identifying problems, and gets teams on the same page.
Hot take: qualifying is not selling
Put your oven mitts on because this is my mid-morning sports television show scorching hot take.
Repeat: qualifying is not selling.
In most cases, a sales rep’s child, a machine, or even the customer themselves should be able to qualify or disqualify a lead and declare something an opp. Why? Because it should be based on clear criteria.
Qualifying cannot be some nebulous sales magic thing. It’s not about a seller “generating interest.” It’s about a sales process and customer journey that properly identify (at scale and across regions and reps) which is a qualified lead or what constitutes an opp.
Hedge: I’m not saying that no selling happens during qualification. But I am saying that you cannot sell someone into qualification. Qualification (in and of itself!) is not about the positioning of value, overcoming of objections, aligning of stakeholders, etc. It is about applying black-and-white criteria and determining if a prospect meets the criteria.
TL;DR Summary
- Your business needs to know: “Is this an at-bat or not?”
- Everyone knows what a sale is. Why not also a lead and an opp?
- It is sales & marketing leadership’s responsibility to bring clear definition (with criteria) to leads and opps.
- When sales are down, the heat will turn up and arguments will start about leads and opps. You want definitions in place before that happens.
- Having clear definitions ensures that the funnel is meaningful and can be properly analyzed in order to troubleshoot problems.
- You can use as many stages and whatever terms you want. They just need to be defined and clear.
- Success is seen when the definitions are socialized, tracked, and managed to.
- Yeah, it’s hard work to figure out the right criteria. But it’s even harder to operate without it and have your funnel based on a bunch of subjectivity.
