Understanding CRM Deal Stages and How to Align Them With Your Sales Process

When we discuss inbound marketing, we focus on a methodology with four key areas: attract, convert, close, and delight. That methodology pulls out key marketing activities for each stage, including inbound marketing’s greatest partner: inbound sales. “Sales” is what happens during the “close” phase of the methodology, and though it shouldn’t be a mystery to marketers, there can sometimes be some “secret sales rep mojo” surrounding the entire process — and that’s where CRM comes in.

Your CRM (client relationship management) system theoretically houses all of the information you could ever need to know about a current or prospective client and every time his or her account has been “touched” by sales, marketing, service, or anyone else in your organization. With 70 percent of organizations looking to close more sales in the next 12 months (according to HubSpot’s The State of Inbound 2016 report), how you track in your CRM can be essential.

What’s a “Deal Stage” Anyway?

One key component of CRM is tracking the sales process. Depending on the system you use, you might be talking about “Opportunities” or “Deals” or some other term, but all of these words indicate the same thing: a prospect who is actively engaged in the sales process. For simplicity, I’m using “Deal” throughout this article to indicate all of these terms.

When you look at “Deals” in your CRM, it’s likely that you’re looking at a sales pipeline or sales funnel that categorizes all of the team’s deals into a few buckets — or stages. These stages should explain exactly where each prospect is in your sales process and how likely he or she is to close as a customer based on that stage. For that reason, it’s essential to set up your deal stages to match how your team actually sells. They’ll be slightly different for every business, but there are some basic rules to follow.

Default Deal Stages

Every CRM has some default deal stages and probabilities built in. Here’s how a fresh version of the HubSpot CRM will break down the sales process, where you can see that HubSpot refers to deal stages directly as “Sales Pipeline.”

What does each of these stages mean? Here’s some insight:

Prospecting

A very low probability deal. In the prospecting stage, a sales rep has spoken to a contact at the company and is just starting to establish a relationship, but hasn’t set up a formal appointment. At this stage, a new lead has likely just been passed from sales to marketing.

Appointment Scheduled

Now a contact has “officially” agreed to a meeting with a member of the sales team. What that first appointment will look like will vary greatly depending on your business model, but it will typically be an in-person, video, or phone meeting during which a sales rep starts reviewing the prospect’s needs. The win probability, by default in HubSpot, moves up to 20 percent.

Needs Analysis

During this stage, your team is analyzing the prospect’s needs based on the first conversation and is determining if your companies are a good fit for each other. By default, the HubSpot win probability does not change at this point, as the needs analysis is conducted internally and is not a signal of the prospect’s readiness just yet.

Qualified to Buy

Here, based on your needs analysis, your team has determined that your company and the prospects could have a great relationship together — which means that the prospect is now “qualified to buy.” This qualification bumps up his or her probability to 40 percent. At this point, reps typically start scheduling the next step: some form of more formalized demo or presentation.

Presentation Scheduled

Just as it sounds, at this point, your reps are preparing to talk to the client about your specific solution. Because their contact is more bought in, the probability is upgraded to 60 percent. You’ve now cleared the 50 percent hurdle!

Decision-Maker Buy-In

Until this point, your team may or may not have been working with a decision-maker. Although it’s great to build an internal coach to get you through the sales process, ultimately, the team needs to have buy-in from a decision-maker who can ask for — and sign — a contract. If after your presentation the decision-maker gives a verbal “yes” signal, the deal can move to an 80 percent probability.

Contract Sent

After that verbal signal, it’s essential to send a formal proposal or contract with pricing and terms — this is the only way that sales can really close the deal. You should be sending a contract when you’re about 90 percent certain a deal will actually close.

Closed Won

The CEO loves you, you send the contract, and it is signed: Congratulations — you can mark this deal “Closed Won” and start onboarding your new client.

Closed Lost

At any point during the process above, you can lose a deal. Maybe during your needs analysis, you find that your organization isn’t the right fit and refer the prospect elsewhere; perhaps the prospect doesn’t have enough budget left for the year. Whatever the reason, at this point, the deal should be marked “Closed Lost.”

At this point, “But won’t that affect my deal-close ratio?” is a question most sales reps will ask. And the answer is, quite simply, “Yes.” This is where customization is incredibly important.

What Should I Customize with CRM Deal Stages?

Closed Lost Reason

The first customization to make with deal stages is asking for a reason once a deal is marked lost. This can provide valuable information for both sales and marketing teams. Here’s an example:

Company X has a marketing team that generates leads, a business development team that prequalifies leads for sales, and dedicated sales reps who work qualified deals as established by business development. Here are two ways that “Closed lost reason” can work at Company X:

Scenario 1: Unqualified Appointments

Marketing hands off a bunch of leads to business development, which follows up to establish relationships and find the best fits. Business development creates deals at the “Prospecting” and “Appointment Scheduled” stages and hands them off to sales reps. The sales rep for that territory calls the prospect to introduce him- or herself and confirm the appointment, but finds that the prospect doesn’t have enough employees to qualify to purchase the product — basic information that should have been collected by the business development team. At this stage, the rep should mark the deal stage to “Closed Lost” and the reason to “Disqualified Appointment” — and should probably have a conversation with the business development team about qualification.

Scenario 2: Competitors

In this scenario, the marketing-to-development-to-sales-loop works the same way, but the appointment is qualified, and the rep conducts the needs analysis, moving all the way through the deal stages to send a contract. At this point, the CFO gives the contract a big thumbs-down, because a competitor has similar value but much lower pricing. The deal is marked “Closed Lost” with a reason such as “Competitor — Pricing.” Over time, sales and marketing leadership can track these “Closed Lost Reasons” to see why deals are lost and what can be improved.

Deal Stage Names

Of course, depending on what you sell and how you sell it, the actual stages of your sales process are likely different from what’s outlined above. There’s nothing wrong with that, as long as the stages are aligned with what sales is really doing. For example, instead of “Presentation Scheduled,” it will make much more sense for many companies to use “Demo Scheduled” or even to spell out multiple demo steps, from the first demo to a demo for the decision-maker.

Probability

The probabilities included above are for sales forecasting. They can give you an idea of potential revenue in the pipeline and how that revenue is weighted: $10,000 at 90 percent probability is more valuable than the same amount at 10 percent because it’s much more likely to close. When customizing probability, it’s important to reflect an actual likelihood of a deal closing — not some random number. Although some sales reps like to intuitively add a percentage to a deal, having these probabilities closely aligned with the sales process will streamline reporting and forecasting.

The Alignment Conversation: Where to Begin

Of course, the big story behind every CRM conversation is alignment. Sales, marketing, and organizational leadership (including the CEO and CFO) must always be aligned as to which activities are important and how they are measured. Sometimes, CRM customizations must be made to have the most accurate reporting for the finance team. Other times, the CEO needs a quick view of the pipeline before his meeting with the VP of sales. The marketing director must be able to track how many leads actually become deals and customers and which leads fall out of the process.

All of this boils down to one thing: communication. To start seeing success with your CRM, start the conversation early and have it often. Never be afraid to ask questions of — and even schedule interviews with — other members of the organization to get the most out of your CRM.

Originally published at www.smartbugmedia.com.