A lead is a qualified buyer that has an interest in becoming a customer of your business. Becoming a lead is a natural stage in the typical customer journey, somewhere between their discovery of the brand and the first purchase from the brand. A lead must be “nurtured” and guided towards the sale, their questions answered and their objections handled.
Leads come in many temperatures. A lead is considered “cold” if all you have is their contact information and they have never heard of your organization—but their demographics, occupation, or other characteristics identify them as a potential prospect. A lead is considered “warm” if they know your organization and have expressed some form of interest in your organization. The warmer the lead (i.e. the more interest), the easier they typically are to convert to a paying customer or client.
They may have expressed that interest in any number of ways—by filling out a survey, mailing a response to a direct mail campaign, submitting an inquiry through an email form, submitting their contact information in exchange for a free gift or informational product, becoming a social follower—even by simply visiting the company’s website if the website is armed with a retargeting pixel.
By definition, a lead can be followed up with by the sales team or other team members in your organization. That means you have to have some kind of contact info for them. A lead is not just a name—it must come with an email address, a phone number, a social media channel, or another way of contacting them.
In addition to warm vs. cold, a lead may be qualified or unqualified. A qualified lead is a lead that could benefit from your product, service, or solution, and is in a position to buy it. There are two major types of qualified leads—sales-qualified leads (SQL) and market-qualified leads (MQL).
Sales Qualified Leads (SQL)
There are leads, and then there are great leads. Typically, the highest-quality leads are sales-qualified leads (SQL). Not to be confused with a structured language query (that’s SQL in computer science), in marketing and sales an SQL is a lead who has expressed interest in buying from an organization, and who has the ability to buy.
Think about a lead that enters their email address into a contact form. If they enter their information to access a free gift or information product, maybe they are interested in becoming a buyer; maybe they aren’t. Not necessarily an SQL.
Consider another lead, one that fills out a contact form and asks pointed questions about the product. You can infer that they are at least considering buying, perhaps shopping around to compare your product, service, or solution to competitors. This person is much more likely to be an SQL.
The other component of an SQL is being qualified to buy, not just interested. First and foremost, a sales-qualified lead can afford to buy your solution. Secondly, an SQL can not only afford the solution but will get the maximum possible value out of the solution. The lead might be qualified to buy along these lines if they fit a certain demographic (age, occupation, credit, etc.), past purchase history with competitors or adjacent companies, or if they confirm their qualifications by their answer to a direct or indirect question on a survey.
This makes it more likely that the lead will convert not only to a customer or client, but also a repeat buyer and potential brand ambassador to build positive word-of-mouth around your organization—the best possible form of marketing.
Marketing Qualified Leads (MQL)
Beneath SQL is MQL—marketing-qualified leads. An MQL has expressed interest in your brand in some way. Maybe they followed your social media profiles or filled out an email opt-in form to get a free gift or another valuable freebie.
This is better than nothing—at least they know you exist, and you have a channel of communication to follow up with them. An MQL is a perfectly good lead, worthy of follow-up.
What is missing? The qualification. Can the lead afford the product, service, or solution? Can the lead make maximal use of the solution, leading to repeat business and brand ambassadorship? Who knows. Demographic data might give you some idea, but generally speaking, an MQL is less warm and less qualified than an SQL.
Does this mean that an MQL is not worth following up with? Absolutely not! An MQL might be a future SQL and indeed a future purchaser that just needs more qualification, as well as more nurturing towards a purchase.
Generally speaking, MQL is a step on the lead lifecycle—from MQL to SQL to customer. Some customers may skip straight to SQL, while others may transition quickly from MQL to sales. But the goal at this stage in the customer journey is to transition MQL to SQL as quickly as possible.
Other Types of Leads
While SQL and MQL are the two major categories of lead qualification, a few others are worth mentioning. Examples include:
- Product-Qualified Leads (PQL). A product-qualified lead (PQL) is a lead that has used your product, perhaps on a free-trial basis, and might be a warm prospect to become a paying user of the product. This is especially common for Cloud services companies that offer one-week, two-week, or thirty-day free trials.
PQLs may be warmer leads because they may have experienced value from the product and know what their money will get them. It can also reduce the cost of customer acquisition significantly when properly performed.
- Service-Qualified Leads. Service-qualified leads are similar to product-qualified leads in that they represent a portion of the current user base. Whereas PQLs have experienced value based on a free trial of your product, a service-qualified lead is a current paying user of your service who may be ripe for an upsell or cross-sell.
These users have indicated a potential interest in upgrading their service stack. They can be an easy source of revenue for an organization and way for sales teams to meet their quotas. After all, you’re already dealing with a happy customer who is spending money with you and wants to spend more money with you.
- Unqualified Leads. Unqualified leads have not been screened in any way. They may have come from a purchased list of leads, or it could be as simple as reaching out to everyone within a given zip code or a certain demographic profile.
On sales floors of decades past, hapless new salespeople may have been asked to simply dial the phone book or knock on doors—true cold calls. It’s a shock-and-awe approach, but not very high-margin.
Unqualified leads may have their place in some sales organizations, but one of the best reasons to hire a lead generation service is to avoid this fate—to focus the talents of your sales team on actual qualified leads, to do more with less. The internet makes it easier than ever to perform a basic level of qualification on all leads.
If some leads are “better” than others—or at least, at a glance, more likely to escalate towards a sale—an organization needs a way to identify the “quality” of the leads they acquire. Lead scoring is a process by which leads are sorted based on their various qualities, including buying temperature, qualification, and position within the customer journey.
This isn’t entirely or even mostly to figure out how much attention to pay to each lead. Ideally, every lead gets nurturing treatment, because every lead is theoretically a potential sale waiting to close.
Rather, lead scoring dictates the treatment each lead gets—customized nurturing treatment based on where the lead stands within the buyer’s journey. A “hot” lead may be ready for a hard close, but a cold or MQL lead may need a softer touch. A hard close may scare them away. Lead scoring can also help triage leads into the hands of the right salesperson, the team member best qualified to shepherd those leads to the next stage in the buying journey.
So what could lead scoring potentially look like? Here are the basic steps:
- Buyer Personas. Buyer personas are avatars that represent an ideal customer. The buyer persona may have a personal name and come with a list of identifying characteristics—age, sex, income, occupation, job title, industry, interests, passions, hobbies, etc. A lead might be scored based on how close leads skew toward the buyer persona.
- Examine Buyer Behavior. Document prospect actions at every touchpoint and begin to build a map of behaviors that lead a buyer to purchase. What do prospects do when they open an email from your organization? Land on a website? Interact with social content? You can then begin to position a lead within the customer journey based on the actions they have taken and the behaviors they have exhibited at each touchpoint.
- Set Scoring Features. Define the attributes of a lead—demographic, behavioral, etc.—that might set one lead apart from another. Chart out what characteristics might make a lead warmer or cooler, more qualified or less qualified. This should be done in concert with the sales team, who speaks directly to the customers, and the customers themselves, who can provide better direct input than a thousand educated guesses.
- Set Scoring Values. Now that you know what characteristics differentiate one lead from another, it’s time to set a numerical value for those characteristics so you can compare apples to apples. Think of it as a “point value” for your lead, which can help you develop a distinct and personalized process to implement for each lead based on its characteristics.
The Basics of Lead Generation
Leads are generated through marketing—the act of creating brand awareness and brand trust to the point where your brand becomes “top-of-mind” in your field when someone thinks of your industry. Marketing to generate leads comes in two basic forms—outbound marketing and inbound marketing.
Outbound marketing used to be the only way to get your message in front of prospects and generate leads. All forms of “traditional” marketing—billboards, magazine ads, cold calls, etc.—were outbound marketing. Essentially, outbound marketing takes your message to the market, as opposed to the market coming to your message.
This is done by “renting” a user’s attention—for example, paying a TV network to insert a commercial into a show that people turn up to watch in droves, preferably people of your target demographic. Another example is holding an event or creating a stall at a trade show where prospects will pass by.
While inbound marketing gets the lion’s share of the attention, outbound marketing has an important place in modern marketing campaigns. It’s not just “antiquated” techniques like billboards and direct mail—which do still work! Modern digital marketing practices offer many opportunities for digital outbound marketing. Examples include:
- Display Ads. Essentially a “billboard” on a website, digital banners on websites are commonplace, and an easy way to rent the attention of a user and to demographically target that messaging—buy a display ad from a website that is popular with your target demographic.
- Sponsored Content. Sponsored content is like a display ad, only it is content instead of imagery—a blog post or article that fits in with the surrounding content, but directs traffic to your brand.
- Pay Per Click Ads. Another form of rented attention in the digital world is pay-per-click ads, which can be run on search engines, social media platforms, or ecommerce marketplaces. The site displays your ad and charges you for every time a user clicks on the ad—so the page they discover after clicking needs to convert.
Inbound marketing is all the rage in the digital world. Rather than going to the customers as with outbound marketing, inbound marketing involves creating the conditions for your customers to come to you—to discover your brand, possibly before they even consider making a purchase.
Inbound marketing is all about giving value as opposed to renting attention. The distinction can be subtle, but inbound marketing has the potential to build strong, organic brand preferences in your potential customers. Why? Because you aren’t fighting for their attention, interrupting their TV shows or Facebook feeds to shout your message at them.
Rather, inbound marketing puts the consumer in the driver’s seat. Whatever actions you took behind the scenes to facilitate the brand discovery, the prospect at least feels like (s)he is in the driver’s seat, discovering your brand in the course of their ordinary activities as the natural solution to their problem.
Examples of inbound marketing include:
- SEO. Whereas search engine PPC ads are a way to buy your way to the top of search engine results pages (SERPs), SEO is a way to earn your way to the top. Customers do take notice of this and reward top organic results with more traffic. They trust top organic results more, and the resulting brand preference feels more like an informed decision compared to the hard sell of PPC. Pair SEO with a high-converting website, and it’s the perfect storm for lead generation.
- Content Strategy. A sub-strategy of SEO, content is one of the best ways to offer value to your prospects. They may not even be looking for products or services—they may just be looking for answers to questions. By answering their questions in the form of blogs, videos, and other content, you can build organic goodwill that your prospect perceives as earned, rather than demanded.
- Social Media. Consumers love social media. As opposed to sponsored content that interrupts social feeds, acquiring organic followers who love your social content is a powerful avenue to not only nurture leads but turn your leads into brand ambassadors through social sharing.
Why is Lead Generation Important?
The “lead” stage is natural in most buyer journeys. Before they become a customer, most prospects will become a lead that requires outreach and nurturing toward a sale.
By extension, if a company has no leads, it is unlikely to generate sales. Most prospects don’t transition from cold traffic to paying customers. They have to pass through the lead stage, opening the door for sales professionals to close the sale.
Moreover, even paying customers are leads for other products and upgraded services. Even a completely automated sales process, like an ecommerce store or digital sales funnel, must involve the collection of the prospect’s contact info as a lead.
What if the prospect doesn’t buy right then and there? At least with the contact info, they become a lead—a prospect who discovered the brand and was interested enough to hand over contact information, and therefore potentially an interested buyer in the future.
Even if the prospect does purchase through the automated customer journey, many companies don’t make their real money on the first purchase. The first purchase may not even cover the expense the brand incurred to acquire that customer. Rather, their money is made on the back end—on upselling and cross-selling to that prospect.
In that sense, a past customer is a lead for future sales and a critical source of revenue for many organizations. By focusing on back-end sales, companies can afford to spend more than their competitors to acquire a lead—the ultimate winning strategy in marketing. Whoever can afford to spend more to acquire a customer, wins that customer.
Do B2B Companies Need Lead Generation?
B2B (business-to-business) companies depend heavily on lead generation due to the differences that distinguish B2B customers (businesses) vs. B2C customers (consumers).
Business-to-consumer (B2C) organizations need to reckon with the peculiarities of consumer behavior. Consumers tend to make impulsive or emotional purchases, but they also like a deal. Competing on price can work (at least temporarily) for B2C sales. So can automated sales funnels and customer journeys, which can be calibrated to increase buying temperature and lead to automated sales.
B2B organizations have an entirely different hurdle of trust to clear. Businesses don’t indulge in impulse purchases. They aren’t even necessarily looking for the lowest price. When they go shopping, businesses seek the best solution. After all, with the right solution, a business might stand to make a lot more money than they spend on it. Raw pricing isn’t as important as return on investment (ROI), the amount they stand to gain in exchange for what they spend.
B2B organizations must therefore convince prospects that their solution is the best. This may require significant content and outreach from sales representatives to understand the prospect’s needs, pain points, and concerns, overcome objections and facilitate the transition from lead to paying customer.
What are the different methods of lead generation?
Many well-established methods of lead generation exist. Different methods will be more or less appropriate, depending on the organization. We have mentioned a few of the above in the “basics of lead generation” section, but here is a more comprehensive list:
- Search Engine Optimization (SEO). SEO is the process of improving your organic ranking within the index of major search engines like Google, Yahoo, Bing, etc. Your ranking consists of the authority of your domain, combined with its relevance for high-converting keywords that your prospects might be searching for. With high enough authority and relevance, your site will appear at the top of search engine results pages (SERPs), a high-traffic position. Of course, whatever web page your prospects find when they click on the SERP result, it had better be calibrated to convert those prospects to leads.
- Direct-Response Digital Marketing. While SEO is about organic growth, direct-response digital marketing is about buying your way into those high-traffic positions. This might include pay-per-click search engine ads (“search engine marketing” or SEM), pay-per-click ads or banners on other websites like Amazon, and pay-per-engagement social media ads. Again, the website you direct them to has to be designed to convert traffic to leads.
- Social Media. While you can use social media sites like Facebook or Instagram for direct-response digital marketing, another powerful way to generate leads is to post attractive social content, which entices people to engage, share, or direct message (DM) you. All of these engagements are leads because they represent the user’s interest in the brand, as well as a channel to contact them.
Many of the subsequent methods spring from the early methods, but they get more specific about how you will convert traffic to leads. For example, you could use direct-response digital marketing to promote a webinar. Conversely, content marketing is usually part of an SEO strategy.
- Webinars. If you can create a live or pre-recorded online class, tutorial, demonstration, or another form of webinar content, you may attract interested attendees. Each attendee has to register for your webinar, providing their contact information—in other words, becoming a lead for you to follow up with! You can also end your webinar with a sales pitch to try and close some of those leads then and there.
- Lead Magnets. A “lead magnet” is usually a freebie or giveaway—a free eBook, a free mini-course, etc.—that will tempt visitors to enter their contact information to receive. People are usually perfectly willing to enter their email address and/or phone number to get some valuable free content. Once they enter their contact information, you are free to follow up with them.
- Content Marketing. A form of inbound marketing, content marketing is about discovering what questions your warm prospects are asking, and then stocking the internet with branded web pages that answer those questions. After seeing several pieces of authoritative content, a prospect may choose to reach out to you with further questions and become a lead.
- Retargeting Pixels. You can arm any web page with a retargeting pixel, which adds a cookie to the user’s browser. You can then build a retargeting list to put direct-response ads on every website the user visits, including social media sites, blogs, and ecommerce stores.
Finally, we come to traditional methods of lead generation, which still produce results to this day and may still have a place in modern lead generation campaigns.
- Direct-Response Marketing. Traditional forms of direct-response marketing include TV ads, print ads, direct mail, billboards, door hangers, car wraps, and more. While they tend to be pricey and hard to quantify in terms of results, they absolutely can produce significant lead flow.
- In-Person Networking. If your warm prospects gather in certain places to network, you can go there in person, exchanging phone numbers, social follows, business cards, and other forms of contact info to follow up with.
- Events and Trade Shows. If your industry thrives on events or trade shows, you can throw one or attend to create traffic and collect leads from the attendees.
- Cold Calls. From door-knocking to dialing the phone book, cold-calling is a time-honored form of lead generation that is not for the faint of heart.
How do you identify a successful lead generation campaign?
To identify a successful lead generation campaign, you have to track results. One of the advantages of digital marketing is that it is easy to track—every action on the web is documented and can be quantified using analytics tools. Offline marketing is harder to count—you may have to rely on a written questionnaire, phone surveys, or other forms of self-reporting.
Once you know how many leads a particular campaign generated, you can divide that number into the cost of the campaign to determine your cost per lead. What is a good cost per lead? It depends on other factors, including your lead conversion rate and customer lifetime value.
With these metrics, you can form a basic equation of the return-on-investment (ROI) of your lead generation campaign.
Of course, that assumes all leads are created equally, and we know they are not. You should also score the leads produced by the campaign and track how many of the new leads are sales-qualified leads (SQL), marketing-quality leads (MQL), and so on.
What are some lead generation tips?
- Build a site that converts. Marketing tactics like SEO and SEM direct traffic to a website. Make sure that website is armed to convert! The site has to look great, prompt visitors to convert through easy-to-find calls to action, and possibly offer the user some incentive to convert, like a webinar or lead magnet.
- Discover what your prospects want. If you want to attract leads through content marketing or social content, do your research. Use keyword research tools to find out what questions your customers have, which you can answer with content. Study what types of social content your prospects “like,” comment on, and share.
- Separate Lead Generation from Sales. They really are two separate activities—lead generation creates the leads, sales close the leads. Create a sharp separation by establishing a different department or hiring a separate third-party lead generation service.
Online Lead Generation vs. Offline Lead Generation
Both online and offline lead generation efforts can produce similar results. Online lead generation steals the lion’s share of the attention for several reasons:
- It’s more budget-friendly. Organizations with smaller budgets may find offline lead generation methods, like billboards or TV ads, prohibitively expensive.
- It’s harder to quantify. With online lead generation, analytics tools can tell you exactly what method generated which lead. Offline lead generation may get the phone ringing, but if you don’t specifically ask the customer how they discovered your brand, you may never know.
That being said, some organizations in certain industries will experience excellent ROI from offline marketing methods. It should at least be considered in a holistic lead generation strategy.
What are some of the largest lead generation niches?
Lead generation services thrive on niches—industries that they can cater to directly with leads those industries will value. Some of the largest lead generation niches include:
- Insurance. The insurance industry is a huge lead-generation niche since nearly everyone is a potential interested and qualified buyer. Big players have big bank accounts, which they use to claim as much lead flow as possible.
- Legal. Qualified leads represent big money to law firms, including large fees and ongoing retainers.
- Home Services. Home service providers often don’t have the time or talent to generate their own leads outside of referrals and word-of-mouth business. A home services contractor could expand from a solopreneur to a significant enterprise off of lead generation services alone.
- Credit Cards. Like insurance, credit cards enjoy a wide base of qualified buyers. Credit card issuers fight hard for consumer wallet space, and they pay handsomely for their leads.
- Education. The education industry has diversified significantly, with more competition due to online education and global mobility. No longer able to depend on a stable of local in-person students attracted to a school’s reputation, the education industry depends more and more on lead-generation services.
- Real Estate and Mortgage. Real estate and mortgage lending is bloodsport, with intense competition for qualified prospects and a lot of money on the line. Real estate and mortgage lead generation are gladiatorial and highly lucrative.
- Senior Care. With aging populations and longer lifespans, the competition for qualified senior-care and assisted living clients has heated up significantly.
What is lead generation outsourcing, and why do some companies choose to do it?
Outsourcing your lead generation means hiring a third-party lead generation service provider to generate leads for you using any or all of the above-mentioned methods. Such a lead-generation service may charge you a flat fee, a fee per lead generated, a fee per sales-qualified lead generated, or something similar.
Hiring a professional lead generation service may be an extra expense, but you have the advantage of not having to devote time and resources to generate leads yourself. Expert lead generation services may even produce greater ROI than you could through your own efforts by generating more leads, more sales-qualified leads, and possibly by helping you increase your lead conversion rate.