Meaning, 3 different types, how they affect models

Table of Contents

What is a Lead?

Different Types of Leads

How Leads Affect Your Financial Model

How To Generate Leads For Your Business

How To Find Business Leads

Lead Management Process

How To Convert Marketing Leads Into Customers

What is a Lead?

In Sales & Marketing lingo, a lead is a person or business who is interested in a product or service you sell. Businesses can label prospective customers as leads based on many different criteria, the most familiar examples being when you click on an social media ad or provide your email to sign up for a free trial. Leads are important because they tell you if your marketing efforts are working and give you reliable data on who you should focus on selling to. If you define a lead as someone who signed up for your newsletter, you'll know if your marketing is working if you're getting newsletter signups, and your sales dollars are almost certainly better spent on trying to a acquire someone who has signed up for your newsletter versus someone who has not.

Different Types of Leads

You can see why your definition of a lead is extremely important - if your definition of a lead does not adequately describe a potential customer, then you are focused on the wrong people.

Many business have multiple types of leads to further segment potential customers and prioritize who they should spend time and money acquiring. B2B companies with large contracts and long sales cycles (the avg. length of time between first contact and closed sale), generally have more types of leads, which we'll discuss in a moment. But first, here are the most common types of leads:

  1. Cold lead (CL). These leads signify initial interest, where, for example, the potential customer may have provided some contact information in exchange for access to an eBook the company produced as part of their content marketing efforts. We'll assume that the company targets all cold leads with digital ads.
  2. Marketing qualified lead (MQL). These leads indicate continued interest in the product or service. Continuing with the example above, suppose that the individual who downloaded the ebook has now clicked a targeted ad. This indicates that the lead is "warm" and the company should start trying to close the deal. In our example, we'll assume that when a CL becomes an MQL, they become part of the company's email marketing campaign.
  3. Sales qualified lead (SQL). These leads indicate strong interest and willingness to make a purchase. In our example, we'll assume the prospective customer scheduled a demo by clicking on a link in a marketing email, turning it it into an SQL and "hot" lead. That's when a salesperson will get involved in the demo call, and begin trying to win the customer and close a sale.

I hope you're starting to see why lead segmentation is so important, especially in B2B. Salespeople are expensive and it is of utmost importance that they spend their time selling to people who are most likely to buy. If you have a sales cycle that requires multiple sales meetings and large, consequential sales, misunderstanding a prospective customer's willingness to buy can be a very serious issue. You don't want to spend the time and money selling to someone only for the sale to fall apart.

How Leads Affect Your Financial Model

Leads affect your financial model because they usually cost money to generate. Unless you've built a viral product that acquires tons of customers through word of mouth, you're going to have to spend money to market and promote your product. One way to calculate the effectiveness of your lead generation strategy is to use the metric, Cost-per-Lead (CPL). The formula for CPL is as follows:

Total Marketing Spend/Total Number of Leads generated

Your CPL can be a big driver of your overall customer acquisition cost (CAC), and is a metric many companies track closely. However, it has to be remembered that a high-CPL business can still be very profitable if they are able to make large and/or recurring sales off their expensive leads. This is why, while very important, CPL is not a "catch-all" metric - it must be weighed against the profitability of the prospective customer over the course of their relationship with your business.

How To Generate Leads For Your Business

Generating leads for your business is crucial for growth and success. The more leads you acquire, the higher the chances of converting them into customers. Here are some strategies to generate leads:

Content marketing: Create high-quality, informative, and engaging content that caters to your target audience. This includes blog posts, whitepapers, ebooks, videos, podcasts, and webinars. By offering valuable content, you position your business as an authority in your niche and attract potential leads interested in your products or services.

Social media marketing: Utilize social media platforms such as Facebook, LinkedIn, Instagram, and Twitter to share your content, engage with your target audience, and drive traffic to your website or landing pages. By participating in relevant online discussions and using targeted hashtags, you can increase your visibility and attract potential leads.

Email marketing: Build and maintain an email list to send regular newsletters, promotions, and personalized offers to your subscribers. Use lead magnets, such as free ebooks or discounts, to encourage users to provide their email addresses. Email marketing is an effective way to nurture leads and move them further down the sales funnel.

Search engine optimization (SEO): Optimize your website and content for search engines like Google to improve your online visibility and attract organic traffic. Perform keyword research, create high-quality content, and ensure your website is mobile-friendly and fast-loading. Good SEO practices increase the likelihood of attracting potential leads through search engine results.

Paid advertising: Invest in pay-per-click (PPC) advertising, social media ads, or display ads to target specific audiences and drive traffic to your website or landing pages. Use audience targeting features to ensure your ads reach the right people, increasing the chances of generating qualified leads.

How To Find Business Leads

Finding business leads involves identifying potential customers interested in your products or services. Here are some strategies:

Networking: Attend industry events, conferences, and trade shows to meet potential clients and generate leads. Join professional networking groups and online communities relevant to your industry to connect with like-minded professionals and potential leads. Networking helps you establish relationships and gain referrals from others in your field.

Online research: Conduct online research to find potential customers by using search engines, social media platforms, and business directories. Look for online discussions, forums, and groups where potential customers might be asking questions or expressing interest in your products or services. Engage in these discussions and provide value to establish your expertise and attract leads.

Cold calling and emailing: Reach out to prospects through phone calls or emails, presenting your products or services. Use a targeted approach by researching the prospect and personalizing your pitch. Although cold calling and emailing can be time-consuming, they can be effective in generating leads when executed properly.

Referrals: Encourage current customers, partners, and acquaintances to refer potential leads. Offer incentives, such as discounts or freebies, to motivate them to recommend your business to others. Referrals are a powerful way to find new leads, as people tend to trust recommendations from their network.

Lead generation tools and services: Use tools like LinkedIn Sales Navigator, Hunter, or Leadfeeder to find and collect leads. These tools can help you gather information on potential customers, such as contact details and company information, making it easier to reach out and initiate the sales process.

Lead Management Process

Effective lead management is crucial for converting leads into customers. Here is a step-by-step lead management process.

  • Capture: Collect lead information through various channels, such as website forms, social media interactions, or events. Use tools like CRM software or marketing automation platforms to store and organize lead data, making it easier to track and manage leads throughout the sales process.
  • Qualify: Evaluate each lead based on predefined criteria to determine their likelihood of becoming a customer. This can include factors such as budget, need, and decision-making authority. Use lead scoring systems to rank leads and identify which ones should be prioritized for sales efforts.
  • Distribute: Assign qualified leads to the appropriate sales team members for follow-up. Ensure that leads are distributed evenly and efficiently among your sales representatives to optimize their workload and increase the chances of converting leads into customers.
  • Nurture: Maintain communication with leads through email marketing, social media, or other channels to build relationships and keep them engaged with your business. Share relevant content and information to showcase your expertise and address their needs. Lead nurturing helps move leads through the sales funnel and increases conversion rates.
  • Track and analyze: Monitor lead activity, such as website visits or email opens, and use this data to evaluate the effectiveness of your lead management process. Analyze lead conversion rates, time to conversion, and other metrics to identify areas for improvement and optimize your lead management strategies.

How To Convert Marketing Leads Into Customers

Converting marketing leads into customers is the ultimate goal of your lead generation and management efforts. Here are some steps to effectively convert leads.

Personalize your approach: Tailor your communication and marketing messages based on the lead's preferences, behavior, and needs. Use data collected during the lead capture and nurturing stages to understand their pain points and interests, allowing you to customize your approach and increase the chances of conversion.

Build trust and credibility: Share case studies, testimonials, and reviews to showcase the value of your products or services. Provide high-quality content and demonstrate your industry expertise to establish your business as a trusted authority. Building trust and credibility is essential for turning leads into customers.

Offer solutions: Clearly explain how your product or service can solve the lead's problem or fulfill their needs. Use data and insights gathered during the lead nurturing process to address their specific concerns and demonstrate the benefits of choosing your solution over competitors.

Create a sense of urgency: Use limited-time promotions, discounts, or exclusive offers to encourage leads to take action sooner. Creating a sense of urgency can push leads to make a decision, increasing the likelihood of converting them into customers.

Monitor and test: Continuously track and analyze your conversion rates, and test different strategies to improve your results. Use A/B testing to experiment with various marketing messages, calls-to-action, and design elements to determine which approaches yield the highest conversion rates.

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