What Is a Lead? A Beginner’s Guide to Sales Leads

What Is a Lead? A Beginner’s Guide to Sales Leads

Table of Contents
Table of Contents

Every business, whether it’s a small six-person startup or a multimillion-dollar corporation, is continuously looking for ways to expand its customer base and increase sales.

One of the most fundamental ways businesses can achieve that is through lead generation.

A lead, or sales lead, refers to any individual or organization that has the potential to become a customer.

Attracting sales leads is easier said than done, as customers nowadays are overwhelmed with information and are able to swift through hundreds of products and services, before finally closing a deal. And so, companies have to work harder to find leads that will eventually convert into buyers.

In this guide, we will be going through the details of what a lead is in sales, the different types of leads, and what steps you can take to generate sales leads for your small business.

Read along to learn about:

What Is a Lead in Sales?

A sales lead is an individual or organization that has the potential to become a customer. Leads are also commonly referred to as suspects as they’re suspected of being future buyers.

There’s a variety of ways your business can gain access to leads - advertising, direct mailings, referrals, informative blogs, content campaigns, and so on. Your job as a salesperson is to use these promotional efforts to look for leads that will convert into customers and win your business new deals.

From Lead to Prospect

In sales, the terms “lead” and “prospect” are often confused or used interchangeably, as they have similar meanings. Truth is, the words describe two distinct categories of people, and thus, should be handled differently.

A lead is a potential customer that has shown only vague interest in your business. The communication with leads is typically one-sided, they comment on your blog articles, like your social media posts, or browse on the company website. There’s barely any engaged communication or expressed intent to purchase.

When a lead displays an interest to buy, by speaking to you on the phone, chatting on a tradeshow, responding to an email, then that lead goes through a qualifying process and may be considered as a prospect.

More specifically, for a lead to be qualified as a prospect, it needs to fit predetermined criteria such as having the need, intent, ability, and authority to buy. These factors are discovered through research and ongoing conversation, so you can then move further down the sales process, and eventually, make a sale.

Want to learn how to trigger curiosity, build credibility, and use storytelling to attract new leads? Then, head over to our guide on sales psychology, for 9 effective tips on understanding customers.

How Do You Define Your Leads?

Each company has a potential group of leads they want to attract and eventually convert into customers. These individuals that are likely to be interested in your content, product, or services are referred to as your target audience. Usually, they’ll have a number of common characteristics, such as demographics, behaviors, buying patterns, or interests.

Now, targeting a specific market isn’t about excluding people who don’t fit the criteria. Rather, it’s more about shifting your focus and resources into branding for individuals and businesses more likely to buy from you. With a clearly defined group of target buyers, it’s easier and way more cost-effective to reach potential leads and generate sales.

The easiest way to identify your target audience is by looking at your current customer base. Who are they, and why do they buy from you? Search for common characteristics, behaviors, or interests. Which ones bring more sales into the business? It’s highly likely that similar people to them could also be interested in what you provide.

If you want to learn more about how to define your perfect leads, who your product or service best appeals to, and how to build your brand identity check out our guide on small business marketing.

Types of Leads

Based on the level of interaction leads have with your product, we classify them into three main categories: cold, warm, and hot leads.

Cold Leads

Cold leads are people or companies which have either not heard of your business, or have very limited brand awareness. These leads are a fit for your target market, but they haven’t shown any significant engagement in any of your channels.

Obviously, cold leads are the hardest to turn into prospects, so they shouldn’t be your main focus. You can reach out to them through informative phone calls, emails, and social touches.

Warm Leads

If a lead subscribes to your blog, fills out a form, attends your web conferencing, and starts to stick around, they have earned their spot as a warm lead. Warm leads are usually not ready to purchase yet, but they’re curious about your business’ brand and purpose.

To turn warm leads into prospects, it’s important you nurture them by responding quickly, offering demos, sharing other clients’ success stories, or making short-term deals.

Hot Leads

Last, but certainly not least, we have hot leads, which include consumers that have already expressed a desire to purchase a certain good or service.

Hot leads can also be considered as prospects because they’re already seeking a particular service from you, and most likely have the authority and budget to buy. With hot leads, you don’t have to do much nurturing, besides maybe presenting a sales pitch so that they can get a full explanation of the nature and benefits of your product.

How To Generate Leads for Your Small Business

Today’s marketplace is more competitive than ever. You need to incorporate multiple channels into your lead generation strategy, in order to be sustainable and grow.

Here are 7 steps you can take, to identify and generate sales leads in your small business:

1.  Ask for Referrals

It’s human nature to prefer doing business with people you know, or with companies recommended to you, rather than with complete strangers. So, very few things are more likely to turn leads and prospects into loyal customers than recommendations from friends, family, and current customers. This method of generating leads is known as the endless chain referral method, and it’s one of the best sources of scoring sales.

Now, we know asking for referrals may seem tough, but more often than not, clients are happy to refer you to others in their circle in need of what you provide. There’s no need in being shy or hesitant, as long as you’re reaching out to the right people. Choose customers who are happy with your service, and ask at a convenient time, preferably when they’re speaking positively about your work, or after closing a good deal. You could even build a referral rewards system so that for every new lead a customer gives you, they get a discount or coupon.

If you want to learn how to increase your business’s ability to turn customers into repeat buyers and prevent them from shifting to a competitor, check out our guide on improving customer retention.

2.  Revisit Lost Opportunities

When a salesperson leaves a company, their past customers are often neglected. These “orphaned” clients make great leads and can be quickly contacted to develop a relationship, as their personal information is already stored in the cloud.

In addition, if you’ve been selling for a while, you’ve probably reached out to a few clients and businesses that did not want to purchase at the time. Weed out the names who for whatever reason surely will not buy - the rest are solid leads.

Call them again to find out why they didn’t purchase, and what it would take to change that. More often than not, it can turn out that they went to a competitor for a one-time offer, or their priorities at the time didn’t align with your product.

Do this every four to six months, even if the phone call ends with rejection.

It will keep your product at the top of their minds and your business will be the first call in case their situation or needs change.

3.  Take Advantage of Social Media Networks

All of your leads are online, it’s only a matter of establishing contact with them. That’s why it’s essential to build a social media presence on multiple channels - LinkedIn, Twitter, Instagram, or any other profile that can help you generate sales leads.

To stand out from your competitors, use custom and brand-specific hashtags in your posts when they’re applicable. Organize contests, host live videos, offer flash sales and collaborate with influencers to easily connect with your leads.

4.  Build an Informative Blog

Building a blog with informative posts and articles can help establish your company as an expert in your industry. Customers will view you as an authority in the niche, and your content will start driving traffic and in turn land you new leads.

The sky's the limit on topics to write about, but you could start with advice on how to help others in the industry become more efficient, reduce costs, boost sales, and so on.

5.  Connect Through Web Conferencing

While the main goal of a web conference should be to provide your audience with useful insight on topics of interest to them, these live online sessions can also be used to generate new leads.

Pay attention to the people who interact and ask questions during these web meetings, and make sure to follow-up with them after. This could be in the form of a simple email, with a short presentation of the product or service that may interest them, and an invite to reach out with questions.

6.  Create an Email Sequence

When you have an entire sales department to run, you can’t be there at every moment of the day sending out emails to people whenever necessary. This is where a tool known as an email sequence comes in to help.

Email sequences are automated series of emails, that are either sent at predetermined intervals or when a lead takes a specific action, say subscribes to your blog. You can easily set up these sequences through an email software provider, just by segmenting a list of leads, creating an email template, and pressing send.

Now you may be thinking: what information do these emails actually have to contain? Whatever you desire!

They could be used to introduce yourself and your business, discuss how your product solves an issue, its benefits, or they may even contain special one-time offers - it’s completely up to you. What’s important is that in the end, they help you drive sales and achieve your business goals.

7.  Create a Sales Funnel

Once you've decided who you want to target and how to approach them, you'll need a strategy for obtaining their contact details.

One way to do this is by funneling all prospects to a standard form or landing page that allows them to share their contact information in exchange for a free gift, discount, sample, or any other value-added reward.

At this point, customer relationship management (CRM) software is essential for keeping track of targeted users all throughout the process. A CRM is software that can help you track all of your lead’s information, as well as their activities and engagement with your product.

One of the best customer management platforms in today’s market is Deskera CRM. Deskera CRM is intuitive software designed for startups and small business owners and can help you smoothly run your sales, in a matter of minutes.

With Deskera you can manage your customers’ data across various channels in one single platform, arrange upcoming meetings, receive reminders for daily tasks, automate sales reporting, and ultimately close more deals, faster.

Deskera CRM - What is a lead?
Deskera CRM

What Is a Lead FAQ

#1. What’s the Difference Between Leads and Conversions?

When a conversion happens, it means that a potential buyer is converted into a client. The percentage of total prospects or consumers that convert into customers is known as a business’ conversion rate.

Whereas leads are simply the individuals who show interest in your business and can eventually become buyers.

#2. What Makes a Good Sales Lead?

The best leads are leads you have a lot of qualitative data on.

By knowing your lead’s demographics, buying patterns, business situation, organizational structure, you can easily evaluate whether they’re a fit to your buyer persona, and how likely they are to purchase.

#3. How Many Leads Should I Generate for my Small Business?

According to Hubspot’s Demand Generation Benchmarks Report, 77% of businesses with 1 to 200 employees need a range of 1 to 100 leads per month to reach their revenue goal.

However, there’s not one clear-cut answer for all types of small businesses.

The number of leads you have to generate largely depends on your industry, duration of your sales cycle, annual revenue target, and more. You can download a lead generation goal calculator online, or use CRM software to figure out precisely how many leads you need to hit the revenue target.

Wrapping Up

Without a considerable number of leads, businesses are unable to expand their operations or connect with new customers. That’s why it’s crucial every company understands and defines who its potential leads are, as well as follows multiple sales strategies to attract these leads into the business.

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