What’s the Difference and What Do They Mean to Your Business?
There are a lot of terms in the business world that tend to get used interchangeably, which can sometimes lead to a lot of confusion. From “customers” and “clients” to “marketing” and “advertising,” the unique vocabulary of certain industries can get confusing when there are multiple words that have similar yet different meanings. A good example of this are “leads” and “prospects.” Many business owners and salespeople will use the two terms to refer to the same general idea: potential clients.
This description isn’t completely off, but the two terms have more specific meanings that are nuanced and better convey their exact relationship to your business. This makes it valuable information, because in order to get customers to buy your products and services, you need to understand who they are and what they need. If you don’t know that, you won’t be able to properly communicate with them. So by clearly defining the terms “lead” and “prospect,” you can better understand where your customers are in the sales process and how to get them onboard with your business.
What is a Lead?
“Don’t find customers for your products, find products for your customers.”
– Seth Godin
A lead is a person or business that you know about and consider to be a potentially good fit for your services, but who you have not qualified yet. In business, lead qualification refers to the process of determining how likely a lead is to make a purchase. So simply put, a lead is a contact that could become a customer based on your first impressions, but need to go through some additional evaluation before they are sure that they are worth pursuing. As such, your leads can be found at the very top of your sales funnel.
There are many reasons to consider someone a lead, but a few examples include:
- They’ve “liked” or “shared” some of your social media content.
- They’ve commented on a blog post.
- They’ve received a cold email from your marketing department
There are also more specific categories for leads based on how they have interacted with your business. These include:
- Marketing qualified leads (MQL): A lead that has interacted with marketing materials. Not ready to buy yet, but seems receptive to further communications.
- Sales accepted lead (SAL): A lead that the sales team considers a good match with their predetermined criteria, but that the team has not yet contacted.
- Sales qualified lead (SQL): A lead that the sales team has interacted with and identified as a potential prospect. Unlike a SAL, an SQL has shown enough interest to determine their chances of making a sale
When you have leads, you need them through the sale qualification process to ensure they are a good fit. Some companies aim to sell regardless as to whether their product is right for the client, but while this might score some short-term sales, it will do little for your long-term business reputation. Instead, you should listen for their pain points, determining if your company’s products or services are the right solution to their problems.
What is a Prospect?
“You are out of business if you don’t have a prospect.”
If a lead is an unqualified contact, then a prospect is a qualified contact that has moved further down the sales funnel. Whereas you’ve likely only had one-way communication with a lead, one of the keys to moving forward with a prospect is establishing a two-way conversation. Most importantly though, a prospect has expressed interest in your services, rather than just fitting in with your target audience.
A few examples of activities that qualifies someone as a prospect includes:
- They’ve connected with you or a member of your organization over the phone or through email.
- They’ve met you face-to-face at an event.
- They’ve responded to an official business survey or other marketing outreach.
While gathering leads is an important part of the sales process, your business needs prospects in order function. After all, any business can find leads that fit within your target market, but it’s much more difficult to find someone who’s actively interested in working with you. To get that point, look for qualities: budget, authority, need, and timing (collectively called BANT).
What’s the Difference (and Why Does it Matter)?
Now that we’ve explained what leads and prospects are, it should be apparent that the two terms are related, but different in their own right. Still, some might wonder why this matters so much. The answer: communication. Good communication is essential for building strong business relationships and securing sales, and understanding where people are in the sales process makes it easier to understand how to communicate with them.
Leads are often contacted in large groups, using methods like cold calling, email marketing, and other automated programs. It is entirely possible that a lead has directly interacted with you or anyone else in your business… and that’s a good thing. A business almost always has more leads then they could reasonably pursue one-on-one communication, so using these methods is often preferable then pouring resources into directly reaching out to people who aren’t going to do business with you. Yet once a person or a company becomes a prospect, it is time to utilize more personalized and engaging communications to get them to the point of sale.
So going forward, try to be more aware of the potential clients you have in your sales funnel, and ask yourself if you can tell at a glance if someone is a lead or a prospect. Business is all about communication, and having a clear distinction between leads and prospects makes it that much easier to communicate with the right people at the right time.