Expanding your existing customer base is critical to the growth and survival of your business. At the same time, it can often seem like for every real prospect, there are another dozen or more that ultimately prove to be fruitless.
That's why you need to employ a formal lead qualification process to improve your conversion rate. This five-step guide will show you how to qualify a lead or prospect.
Overview: What is lead qualification?
Lead qualification is the process of determining how likely a lead is to ultimately make a purchase. While this process is applicable to high-dollar individual purchases — for example, houses and cars — it’s more commonly seen in business-to-business (B2B) sales.
Why is it important for small businesses to use lead qualification?
Success in any business consists of working both smart and hard. To that end, lead qualification will allow your sales and marketing teams to make the sales pipeline as efficient as possible. However, there are several more reasons lead qualification is important.
1. Actionable metrics
You have to move beyond informal sales comparisons such as "salesperson A regularly outperforms salesperson B." Using a lead qualification system will allow you to generate more granular and actionable data.
What is each salesperson's lead conversion rate? How is this conversion rate tied to the number of total sales and revenue generated?
In addition, by using a win rates chart like the one below, you can understand the effectiveness of each type of marketing and sales campaign you deploy.
2. Lead nurturing
Lead nurturing is an important activity to build into the customer life cycle that will help you convert leads into future sales.
3. Learn from failure
You can look at failure as simply the production of unexpected knowledge. While some potential customers will never be a good fit for your products and services, what overall patterns can you identify in these lost opportunities?
For example, if you're consistently losing sales to companies of a certain size — say, under 100 employees, or over 500 — why is that the case? Which of your competitors are they using instead? What can you do to retool your marketing efforts or products and services to more effectively appeal to them?
How to qualify a sales lead
When you begin formally prospecting for customers, consistency in your efforts is key because what you're doing is formalizing your sales process, and that requires valid data. In the end, you'll have a system for sales that isn't dependent on a few gifted salespeople but can be applied across your entire sales team.
Step 1: Define buyer personas
Sure, it would be nice to think that everyone everywhere is a potential customer, but that's just not the case. Instead, each product and service has a primary customer as well as secondary customers.
Tips for defining buyer personas:
Identifying the characteristics of your customers — both existing and desired — will allow you to tailor your marketing efforts to those groups as well as quickly determine if a new lead is likely a viable prospect.
- Use current customer data: Look to your current customer base to see what common demographic information they share, including job title, company and size, industry, number and frequency of purchases, and revenue generated.
- Identify target customers: The information above will tell you who you’re serving now, but is there a new, different group you'd also like to target? If so, you'll need an equally detailed buyer persona for that group to focus your marketing and sales efforts.
Step 2: Research potential customers
Before a potential customer reaches out to you or shows interest in your offerings, you can assume they've done some research about your company and products. That is not, however, a one-way street, as successful lead qualification requires you to do your homework, too.
Tips for doing customer research:
Taking the time to do some initial research on your leads will not only aid the chances of a future sale, it will also allow you to quickly disqualify leads that are not a good match, freeing you up for the next best opportunity.
- Know the company: Take a long look at the company's website to see what its products and services are. Read any press releases posted there, or other news online. Are the company’s size, mission, and needs compatible with your own capabilities?
- Use LinkedIn: Once you know who your initial contact is, as well as anyone else who is part of the decision-making process, check out their LinkedIn profiles. Especially when you're doing inside sales, it’s a good idea to gain a sense of who you're talking to as well as any commonalities and connections beyond just having the name, job title, and phone number for an initial sales call.
Step 3: Know what questions to ask
Everyone's time — both yours and the person you're talking to — is valuable, so you need to ask the right questions to determine as soon as possible if there’s a deal to be made. We'll go over some specific question methodologies below, but here are a few general principles.
Tips for developing qualifying questions:
Your initial conversation shouldn't come off as an interrogation, but the combination of thoughtfully worded open-ended questions and close listening on your part will allow you to quickly learn what you need to know.
- Use SPIN questions: Situation, problem, implication of inaction, and need (SPIN) questions will let you quickly assess the potential for a sale.
- Distinguish between interest and intent: A key distinction in determining the viability of a lead is whether your prospect is showing interest or intent. People are interested in all kinds of things they’ll never do — skydiving, losing weight, going to Iceland — which is why these are called aspirational goals. When someone intends to do something, though, the potential for a sale increases dramatically.
Step 4: Score your leads
Business intelligence and metrics thrive on hard numbers, so implementing a lead scoring system will produce the data necessary to improve your sales figures.
Tips for scoring leads:
You'll need to score the answers to each of your questions in the previous section. In addition, score both demographic (job title and department of contact, company and size, and industry) as well as behavioral information at your website (web pages viewed, number of views, emails opened, and webinars attended).
- Scoring system: Use a scale of 1-5 to score each category of information, where 1 is least applicable, and 5 is the most. Then, calculate the range of scores to indicate hot prospects, possible prospects, prospects to be nurtured, and nonviable prospects.
- Refine the scoring instrument: Once you've initially defined your lead scoring system, set up reviews at regular intervals to see how the system could be tweaked and adjusted to better forecast qualified leads.
Step 5: Capture all the data
The days of conducting sales via Rolodexes and notes scribbled on the backs of business cards are long gone. In the modern business environment, one of your essential lead prospecting tools will be a customer relationship management (CRM) system for lead management.
Tips for capturing customer data:
You want to use the best CRM software for your needs. This will be particularly important so you can capture customer information over time about sales as well as construct an ongoing narrative of communication no matter who at your company interacts with a client.
- Measure customer analytics: Once you crunch all of the potential data to produce sales analytics, the actionable sales tips produced will further streamline your sales efforts and refine your sales funnel.
- Automate communications: After you've established customer behaviors and characteristics in your CRM software, you can individually automate your email communications with them so that no critical interaction falls through the cracks.
Methods for lead qualification
There are different methodologies you can use to generate the specific information you'll need to determine each qualifying lead. You should be familiar with the most commonly used frameworks available to decide which one is best suited to your company, customers, and sales.
Method No. 1: BANT
First developed by IBM in the 1960s, the budget, authority, needs, and timeline (BANT) method identifies promising leads by asking the following questions:
- Budget: What is the prospect’s budget?
- Authority: Does the prospect have the authority to make a purchase decision?
- Need: What are the business's needs?
- Time: What is the time frame for implementing a solution?
BANT's simplicity and success has made it the de facto standard for decades. Still, it's been gradually overtaken by other methodologies, such as the two below. That's due to its emphasis on seller-side concerns and the assumption that buyers already know the solution they need and are ready to make a purchase.
Method No. 2: CHAMP
Developed by InsightSquared in direct response to BANT, the challenges, authority, money, and prioritization (CHAMP) method begins with the customer's need, their biggest concern, as opposed to the budget, your primary interest:
- Challenges: What challenge/problem needs to be resolved?
- Authority: Where does the authority for decision-making reside in the company?
- Money: What are the financial investment expectations to implement a solution?
- Prioritization: Where does addressing this problem fall within the company's overall priorities?
While CHAMP is more customer-centric than BANT, it doesn't dive particularly deep into how the customer will define success for the project, which can leave your sales team scrambling at the proposal stage to demonstrate the value that will come from choosing you as a provider.
Method No. 3: GPCTBA/C&I
Even more focused on the customer's needs is HubSpot's goals, plans, challenges, timeline budget, authority, consequences, and implications (GPCTBA/C&I) framework. More specifically, each area employs the following questions:
- Goals: What is your company's No. 1 priority?
- Plans: What is the plan to achieve this goal?
- Challenges: What current difficulties have been identified with this plan?
- Timeline: What is the timeline to solve this problem? Until then, what remedial actions are being taken?
- Budget: How much has been spent so far to achieve this goal? What additional funds are available to allocate for it?
- Authority: How does the company purchase these types of products? Who makes this buying decision, and what are their concerns?
- Consequences: What happens if the company does not reach this goal? What are the costs if the current situation remains the same?
- Implications: Once this goal is accomplished, what additional opportunities will become available?
While the strength of this method is the depth and breadth of the information generated, that can also be a weakness as inexperienced sales team members may struggle to cover all of these topics in the course of an organic conversation.
Begin qualifying your sales leads now
The saying that "time is money" is a cliche, but it's become a cliche because it's true. If you're not already qualifying sales leads — or are using an informal, ad hoc system — there's no time like the present to implement this important process into the customer acquisition efforts of your sales and marketing teams.