The terms lead, prospect, and opportunity get thrown around a lot in sales and marketing articles. Often, they’re used interchangeably making understanding the differences difficult.
Here, we’ll provide definitions for each of the three terms, explain where they fit in the sales funnel, and explain how you can optimize your efforts to convert more leads into customers.
What is a sales lead?
Simply put, a sales lead is a prospect that has not been qualified. Leads are at the top of the sales funnel. Generally, leads are within your target market, but you don’t know much about them yet.
For example, a lead may come to your attention after a pull marketing strategy prompts them to fill out a form on your website.
The takeaway here is simple: a sales lead is a contact that might become a customer based upon basic preliminary information. With proper lead management, you can nurture leads through the sales process and convert them into customers.
Before we move on, let’s take a quick look at a few other types of “leads”. The term “cold lead” refers to a lead with little to no data to suggest they may turn into a customer.
If you’ve ever been involved with a “cold call”, the individuals on the receiving end of those calls are an example of a cold lead. A “warm lead” on the other hand has done something, such as sign up to a webinar, to suggest they may have interest in your product or service.
If you’ve been doing research on leads vs prospects, you may have come across the terms “sales qualified lead” (SQL) and “marketing qualified lead” (MQL). An MQL is a lead that has been qualified by the marketing team in some way, for example by using predictions from marketing analytics tools. An SQL has been qualified by marketing and sales. Roughly speaking, an MQL equates to the sales prospect stage while an SQL is closer to the opportunity stage.
What is a sales prospect?
Sales prospects are at the next phase in the sales process. A prospect is a lead that has been qualified in some way. Two-way communication, that is the potential customer responding to correspondence your business sent, is a common milestone for differentiating prospects from leads. For example, if a lead responded to a follow-up email expressing interest in your products, that may qualify them as a prospect.
What is an opportunity?
A sales opportunity is even closer to being a potential customer than a prospect. For example, in the B2B (business to business) sales model, an opportunity may be a prospect that is actively testing a demo product you sent them.
Simply put: opportunities are the potential customers that are farthest down the sales funnel before actually making a purchase.
Prospect vs. lead vs. opportunity: What’s the difference?
The terms lead, prospect, and opportunity are often used interchangeably, so differentiating between the three can be difficult. For example, “lead” is often as a catchall term that refers to any potential customer in the sales pipeline, from lead to prospect to opportunity.
Now that we have basic definitions of each of the terms, we can compare and contextualize them. Here, we’ll compare these sales and marketing terms to help you gain a better understanding of them.
Prospect vs. lead
As we have seen, leads are potential customers closest to the top of the sales funnel. This means, of the three terms, leads are at the most preliminary stages of the sales process.
The easiest way to tell the difference between a lead and a prospect is: sales leads that have been qualified become prospects. That is, leads are potential prospects. Of course, exactly what quantifies qualification will vary depending on your business model, target audience, and customer segmentation process, but that rule of thumb applies in most scenarios.
What else is different between leads and prospects?
- Lead generation and lead management are usually handled exclusively by marketing teams, while prospecting responsibilities are often shared between sales and marketing.
- Generally, you’ll have more information on a prospect than a lead.
- Two-way communication has likely occurred between your business and a prospect. This isn’t the norm for a lead.
Lead vs. opportunity
The differences between a sales lead and sales opportunity are similar to those between a lead and prospect, but more pronounced. A sales opportunity is even further along in the sales process and has the highest potential of converting to a customer. Worded differently, an opportunity is a further qualified prospect.
While sales leads are the domain of marketing teams and prospects are shared between sales and marketing, opportunities, or prospected customers, are almost exclusively handled by sales. This is because at the opportunity stage of the sales process, more nuanced and high-touch interaction may be necessary.
Tips for turning your leads into prospects and opportunities
Now that you have the lingo down, what can you do to improve your conversion process and funnel? At a high level, the answer is: know your audience and provide the right information at the right stage of the sales funnel. How can you do that effectively? Here are three tips to help you get started.
Use customer segmentation
Customer segmentation, a.k.a. market segmentation, can help you optimize your sales and marketing efforts more effectively. Effective marketing is all about understanding how your product or service meets a potential customer’s needs.
Of course, every customer is different and a campaign that makes sense for one subset of your audience, might not resonate with another. By segmenting your leads properly, you can better nurture them through the sales process and differentiate between more and less promising leads.
Here are just a few examples of characteristics you can use to segment potential customers
How can you get better data to segment customers early on in the process? One of the easiest ways is to ask a few more questions on sign-up forms, for example, when a customer registers for a webinar.
Additionally, behavioral analytics, such as identifying when a customer abandons a shopping cart, can go a long way. Further, the right CRM (customer relationship management) software can go a long way to help streamline the segmentation process.
If you’re doing a good job with prospect lead generation, you likely have more leads than you can manually follow up within a reasonable amount of time. This is where good segmentation and the right software can make a big difference.
Targeted automated marketing campaigns, such as those you can build with email marketing software, allow you to scale the lead qualification process much more efficiently than you can manually.
In short, marketing and sales automation tools can help make management of your sales pipeline simpler.
Measure your success
Learning from what works and what doesn’t helps you iterate and improve your efforts. Tracking marketing KPIs (key performance indicators) and sales analytics data related to conversion will be a big help here.
For example, an A/B test of two different versions of a form on your website can help you understand which version converts more effectively. The same holds true for email marketing campaigns and performance from a customer acquisition perspective. As an additional benefit, the data you capture can be used to improve your sales forecasting efforts.
Of course, effectively measuring success requires the ability to attribute your results to a specific campaign. This is another area where the right software and strategy can go a long way.
Best CRM software to manage all stages of the sales funnel
As you can tell based on our tips, the right software can make a big difference in sales funnel management. Here are three of the best CRM software products that can help SMBs manage the sales funnel from end to end.
1. Agile CRM
Agile CRM can be a great choice for SMBs looking for a quality CRM that won’t break the bank. The free tier is for up to 10 users and includes features such as: 50,00 contacts and companies, unlimited deals, unlimited tasks, unlimited documents, scheduling, email tracking, 2-way telephoning, and 2-way email integration.
If ease of use is one of your top requirements of a CRM, consider Pipedrive. While they don’t have a “free forever” offering, their pricing is competitive. Many users trust Pipedrive to help them manage their sales funnel. Pipedrive features include: a simple dashboard, email integration, ability to launch and deploy a smart bot for lead collection, sales reporting, and sales forecasting.
3. HubSpot CRM
If you’re in the market for a CRM that can scale from SMB to enterprise, HubSpot CRM may be the right choice. A “free forever” plan makes it possible for even small businesses to give HubSpot a spin, and robust in-depth analytics can be layered in at higher tiers. HubSpot is a leader in the CRM space and supports a variety of integrations and advanced features.
One of HubSpot CRM’s value propositions also directly overlaps with one of our tips: the ability to attribute success to a given marketing campaign.
Final thoughts: Keep customer value in mind throughout the process
There’s no one-size-fits-all approach to properly nurturing leads throughout the sales funnel. B2B is different than B2C (business to consumer). Inside sales strategies are different than outside sales strategies.
For some business models, a potential customer may go from lead to prospect to opportunity to customer in a day. For others, such as with technical B2B sales, a potential customer may linger in the prospect or opportunity phase for months.
Regardless of where your business fits on the spectrum or what technology you use to streamline your efforts, it’s important to keep customer value in mind throughout the process.
At each stage, ask yourself what the customer needs and build a strategy around that. Doing so will help you optimize your sales funnel and convert more leads.