If you are new to CRM systems, I highly recommend that you work closely with the implementation company to make sure you understand the pros, cons and consequences of decisions regarding all the processes that need to be considered before you go-live. You can save yourself and the rest of the company at lot of frustration and false starts by leaning on the experience of others so that you can avoid common pitfalls and by reinventing the wheel.

One thing to remember is that while there are definitely wrong ways to use a CRM, there is no single right way to use a CRM. There has to be meeting of the minds where the company and the sales organization agree on the processes so the information in the CRM can be interpreted as accurately as possible. I say as accurately as possible, because unlike accounting, where an entry can be clearly determined just by looking at the debits and credits, information in the CRM will be subject to every user’s interpretation. For instance one salesperson’s view of the status of a particular account could very well be different than the status of a different salesperson’s view if the exact same situation and set of facts existed for that salesperson. To add to the complexity, each reviewer’s interpretation of any notes in the CRM could very well be different than other reviewer’s interpretation.

One of the most important processes that needs be finalized is defining the sales cycle that will be used by every CRM user. The objective of clearly defining the stages is to make sure that all salespeople understand what the various stages mean and how management will interpret each stage. With this knowledge, the salespeople can categorize each account appropriately and therefore communicate the account’s progress in the sales cycle in accordance with the company’s agreed upon definitions.

Sales Cycle Stages

With specific regards to sales cycles, it is important to define the stages in the CRM so that the stages are not too few nor too many as each condition has its own set of problems.

  • Too few stages will result in information that is not all that useful
    • Not enough information to obtain a good sense of the progress, or lack thereof, for a particular deal. For example, by taking this to the extreme, a sales cycle in the CRM could be as simple as 1) Contacted Prospect and 2) Won/Lost illustrates this point rather nicely. Someone reviewing the account stage would not be able to get a good feel for how the deal was progressing as there are not enough stages to discern anything other than the opportunity is either open or closed.
  • Too many stages: Are the costs worth the information and how accurate will the information be?
    • Will bog down the salesperson by increasing the number of times the salesperson will be forced to update the stage in the CRM; hint: salespeople hate bureaucracy.
    • The delineation between the different stages could very well be subject to a large amount of interpretation by each salesperson as they try to classify each account’s proper stage.

Now to really throw a wrench into the whole discussion, many people use two sales cycles. Depending on your particular situation, this might very well be best practices. To clarify the two stages:

  1. Initial Sales Cycle: This includes the stages required to get the account into a position where it has a reasonable chance to close. An example is:
    1. Lead: Have very little information on account (perhaps purchased a list of companies); Need to do some research.
    2. Qualifying: Have basic information, but lack enough information to determine if the account is worth pursuing; i.e. is it a fit for our product/services, but do they have enough budget?
    3. Development: Solid account to target, but they are not quite ready to make a purchase decision within the next 6 months.
    4. Working: Solid account to target and they are ready to make a purchase decision within the next 6 months
    5. Opportunity: Ready to make a purchase decision with the next 3 months.
  2. Subsequent Sales Cycle: Once the account has become an Opportunity in the first sales cycle, this sales cycle defines the stages to close the deal as a win, a loss or a no decision. An example is:
    1. Discovery: meeting to understand the requirements of the account
    2. First Demo
    3. Second Demo
    4. Checking References
    5. Win, Lose, No Decision

It is best practices to assign all accounts that have reached the second sales cycle to not only assign a stage to the Opportunity, but also to input into the CRM at least the dollar value, the percent probability to win the deal and the time frame for the decision.

Management Review

Closing note; one of the toughest parts, but a critical key in properly interpreting the CRM information is to know the tendencies of each salesperson. For example, one particular salesperson will be very reluctant to put a high win probability on a deal, for fear of disappointing management while another salesperson may always be overly optimistic. In addition, the notes they enter into the CRM may reflect their conservative or optimistic tendencies. In any case, you will most likely need to adjust your analysis of the raw data based on the person who input the information to properly interpret the situation.

One approach that some companies use to help mitigate individual bias or tendencies is to assign a fixed probability to each sales cycle stage. For instance, a prospect that likes the first demo could be assigned a 10% win probability. If they make the shortlist of vendors, then it the probability will be increased to 30% and so on. I personally do not particularly like this approach as there are too many nuances to each deal including how many short listed vendors were selected or does a key decision maker have a pre-disposed bias to your or one of your competitors product.