The sales cycle is defined as a process through which companies pass while selling a product or a service to a customer. It includes all the activities which are associated with closing the deal. Many companies have different activities and steps that are related to their cycle. There is no clear definition of the sales cycle, which will encompass all the products in all the industries because there are many variations in products.
Every sector or every company will have its cycle and steps, which is why generalizing the sales cycle is not possible. For some products like consumer goods, the sales cycle will be concise, on the other hand, for other products which are more expensive like medical equipment, the sales cycle can go for months or even years.
Importance of Sales Cycle
Having a fast sales cycle is better for business because it will generate more revenue in the given amount of time than a company with a slower sales cycle. The cycle can also vary depending on the campaign for the product.
Measuring the sales cycle is essential since the Sales cycle is one of the critical KPI of the sales team in almost every organization. It may be measured in different terms, but the overall idea is the same.
Measuring the turnaround time for every sales cycle lets the company know about the quality of the product and the acceptance in the market.
The longer the sales cycle, the longer is the time required for realizing revenue, which will delay profit realization for the company. The sales cycle must be short to fulfill sales quotas or sales targets.
The sales cycle is crucial to prospect formation. The sales team will have a lead or prospect list, and this list will be updated as and when the sale materializes. The sale will take place only when the sales cycle is for a short amount of time.
The sales cycle also helps to determine the productivity per sales employee.
Companies can study the Sales Cycle of the product and understand the hurdles which cause delay of the cycle. They can work to remove them.
A customer can be analyzed, and the sales pitch can be designed according to where he is present in the sales cycle.
Stages of the Sales Cycle
The sales cycle is a series of events or steps that take place to convert a prospect into a customer. Typically, there are seven stages of the sales cycle, but it is to be kept in mind that not every customer is going to follow all of these seven steps.
Sometimes the customer may skip a step and go to the next stage directly or, in some cases, customized additional steps may be required to convert the lead into a customer.
1. Lead list
To sell something, you must have a lead list in place. The lead list is the list of prospective buyers who are interested in buying the product, may not be your brand, but are interested in purchasing the product in general. They understand the basics of your product and are interested in buying it depending on various factors like the price of the product, features, and availability.
Having a lead list is like having a map with GPS. It gave the sales team way and guided them to move forward to make the transaction happen. The lead list is something that the teams work on relentlessly, take follow-ups to convert them to prospect. That prospect is then further worked upon and turned into a customer.
The interest of the customer can be explicitly expressed to the company person, or it can be sent via an email, or simply the customer may have browsed through the website where he has spent more than an average visitor. This will give the lead just to the company, which will be forwarded to the sales team.
2. First contact
Once you have finalized the lead list of the customers interested in your product, then you can start contacting them one by one. The first step going ahead is to initiate contact with them. The most preferred and most professional way of reaching the customer is to meet the customer in person. But meeting in person may require appointments.
This is where the salesperson is supposed to get in touch with the customer via his contact details and ask for a suitable time to meet. Once the appointment is fixed, the salesperson can go to meet the customer. In some companies, a dedicated person will schedule an appointment and pass it on to the sales team. The primary objective during the first visit is to establish contact and lay the foundation to build a business relationship.
The salesperson will ask about the needs of the customer and will probe about his exact requirements. The sales pitch is not necessarily expected during the first contact, but understanding the needs of the client is more important. The salesperson is expected to meet everyone in his lead list at least once.
3. Funneling the customers
The next stage is to use the sales funnel on the leads. Sales funnel is a tool by which customers can be separated and segregated based upon their needs and the time of closing the deal. Some customers immediately move from lead to a prospect and then go ahead to the negotiation stage of sales; on the other hand, few customers may remain in the lead for a very long time.
Although customers may have shown interest in your product, they may not buy it immediately due to multiple factors. These factors, if within the control of the salesperson, he can negotiate and talk it out with the customer and close the deal. But if the elements are not under the control of the salesperson, then the deal will wait till the customer is ready to buy the product or service.
In such cases, the customer will be entered into the prospect list for a very long time. On the other hand, some customers immediately pass from the lead stage to the negotiation stage.
The sales funnel kept to monitor and record all of these transactions so that the sales team can prepare a projection accordingly. The customers who are moved in the funnel ahead are then met with an objective of the sales pitch. One by one, the advantages of your product can be discussed with the customer as to whether the shortcomings of competition or the competitive edge that your product offer is to be addressed in the subsequent sales calls with the customer. If required, a senior manager is to be accompanied by sales calls.
4. Product discussion
This stage is where the actual review of the product happens. The customer is informed about the advantages of the product, features, and benefits of the product. The product should be placed in such a way that the need of the customer is addressed, and something extra is given to the customer. The added advantage is what will probably close the deal.
A sales pitch can be a presentation in which the customer is presented about the product formally. It can also be a discussion in which there is communication between the customer and the sales team about the product, or it can also be a conversation with digital tools like email, instant messenger, or online chat with customer support. Sometimes sales pitch also happens on a phone call.
All the possible doubts from the mind of the customer are to be addressed with your sales pitch. The salesperson also has to keep in mind about the presentation as well as his body language, verbal tone, posture, and other non-verbal communication tools. Even the appearance of a salesperson can influence a deal.
5. Customer objections
You have to ensure that communication is not only one way in which you keep on explaining the features and benefits, and customers understand. It should be interactive in which the customer raises objections about the product. These objections can be technical or non-technical. Complaints from customers mean that the customer is interested and wants you to convince him.
The doubts can also be about the price of the product or even about the terms of the contract. Let the objections come from the customer so that you know what precisely the customer is expecting from the product. Listen and understand the customer patient see. Reconfirm from the customer if you have understood him correctly by asking the same question the way you have followed.
Once you know that both customer and you are on the same page, then you can readjust your sales pitch accordingly to overcome those objections and concerns. The common concern in every sales pitch is about the price of the product. The salesperson can break down the price per unit cost or per day utilization cost so that it sounds less to the customer, and the customer realizes the value of the product.
Effort should be made to discuss the technology or science of the product Because once the customer is convinced about the technology or quality of the product, then he would not mind paying the expected amount.
6. Negotiations and Sales Closing
Once the customer is convinced about your product, then the next step is to negotiate and close the deal. In bargaining, the salesperson will tell the expected price of the product to which the customer may or may not object. In case the customer does not object, the salesperson can directly proceed to close the seized. In case the customer objects for the product price, then the salesperson can negotiate.
A firm conviction is needed to convince the customer. The salesperson can negotiate with either price or product. If there is no margin left with the salesperson in the cost of the product, then the salesperson will try to convince the customer based on its advantages and features and will make his product stand out amongst the competition.
If the salesperson has a margin for negotiation, then he will offer a service or a freebie without reducing the price, or he will reduce the cost directly. In either case, the objective is to negotiate and close the deal.
Once the customer agrees to whichever method the salesperson has chosen, he can go ahead and close the deal by signing the required paperwork and collecting the required payment. This is a very critical stage in the sales cycle because if the customer does not agree to the price, then the deal may get postponed or canceled.
Excellent convincing skills with a good customer relationship is what will work in closing the deal. Sometimes the agreement may be closed in the first visit itself, but that does not happen every time. Multiple visits may be required from the team to close the deal.
7. Generate referrals
The final step of the sales cycle is to generate a reference. The new customer, once satisfied, will share his contacts and recommend some other potential buyers for your product. This will save time and energy as well as resources to generate news eats. Relation of the existing customer with your prospects is a valuable tool to convert them.
It is essential to remember that every customer is different, and every customer will require a customized sales cycle. The stages can be as short as a few minutes for some customers to a few hours for others. You also have to keep in mind to provide excellent after-sales service for the customer to be satisfied. Some products may require multiple visits, while others may require a single installation and application. In any case, you have to ensure that the customer is happy about the purchase so that positive feedback can be generated.
Sometimes it so happens that the customer may not have any reference for you. In that case, it is recommended to collect a feedback form from the customer about his experience of the product and the service you have provided, and then with the permission of the customer, the salesperson can share the feedback with his lead list that he is working upon. Positive customer feedback can generate a lot of business.