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What is a lead in CRM?

Published in crm, sap-crm-consultant by max.favilli, 05/06/2010 (edited on 30/11/2014 ) 2

Let’s talk leads.

lead in the sales cycle
What a lead can lead you to.

When you have spent ten years working only on CRM projects you start to loose some grasp with reality. In other words, not all companies knows what CRM really is, even if they have one. Or at least they don’t understand every bit of it.

Let’s talk leads, to you it may be obvious what a lead is, but is not obvious to everyone, and often it’s quite foggy what the difference between a lead and an opportunity is, sometimes a lead is even confused with a prospect.

In my experience companies does start to adopt new stages of the sales process from the far end backward; in the “history of sales” companies started with sales order, a sales order is a very well understood concept, as soon as the sales order process is well established they start to adopt the preceeding stage: the quote; and so on backward. As soon as the quote process is fully exploited a new stage start being explored: the opportunity; and finally once the opportunity process is mature within the company comes the lead.

What’s a lead?

A lead is the first step of the sales cycle.

Leads does records a potential interest in purchasing a product or service, the interest is potential and in a lead neither the product nor the customer is necesseraly qualified. The main business partner assigned to the lead is usually a prospect. But a lead is not a prospect.

What’s the difference between a lead and a prospect?

You may have heard you can buy a list of prospects from companies like Dan&Breadstreat, or Kompass, and you maybe heard people referring to them as leads. A prospect is a potential customer, or in other words an unqualified customer, but not a lead.

A lead, does record a potential interest in purchasing a product or service. A prospect has not generated any interest yet, is just a prospect.

But as soon as your sales agent, or your call center agent, talk with the prospect, or meet him (maybe at a fair), is potential interest is recorded… in a lead.

What’s the difference between a lead and an opportunity?

Well, you may have heard an opportunity is “a good chance for advancement or progress” (Merriamo Webster), or that an opportunity does record “a recognized possibility for sales of products or services”.

That bring us to my favourite definition for an lead, a lead is an unqualified opportunity.

In a lead you don’t know what you are going to sell, and you don’t know (precisely) to who you may be end selling, but in an opportunity you have clarified things a little bit, and you know you have a potential to sell something specific, maybe not necesserally as precise as a specific product of yours but at least a family of products or services.

Let’s make an example.

Someone named Tom call your call center because he heard from a friend you sell rubber products and he is interested. You have potential interest and a potential customer, you have a lead!

But you later (throught the lead qualification stage of your sales cycle) discover Tom was looking for erasers while you sell rubber tyres, you qualify the lead as (ice) cold and you don’t go further.

Someone else named Jim is browsing on the web looking for rubber products and click on a Google adwords ad leading him to your website, where he fill in a form asking for information about your products. He doesn’t know but he actually created a lead in your ERP/CRM. One of your sales agent contact him (again as part of the lead qualification stage of your sales cycle) and discover Jim is looking for the right kind of tyres for a new sport car his company is going to launch into the market next spring. Now you have a potential sales of a specific family of products, sport car tyres, and a prospect; your agent will hurry up to create an opportunity.

What’s the added value of using leads?

Well, if you (really) read through all this post and you have a basic understanding of what sales is all about now is quite obvious why it maybe useful to implement lead management. If you want to scrupulously track the efficency of your sales cycle, measure the conversion rate of each stage, secure you are not wasting money investing in fairs or you plan to start an aggressive outbound marketing campaing through your shiny call center… you need leads.

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Comments

by Gulshan - 23/12/2010 alle 04:57
Loved the way you made the distinction between leads, prospects and opportunities. I had a very silly question though, from what I understand, prospects(individuals who have not shown potential interest) could be converted into leads, that might further end up being opportunities; then why in the 'funnel' diagram in this post do we see the 'Lead' as the largest filtering down to the prospects and not the other way around? Thanks!
Risposta di Max.Favilli il 2/12/2011 alle 14:06
You can generate leads from a prospect. Or you can generate a prospect from a lead. Hope I didn't add confusion with the picture which is depicting the second case only. In the first case I described, with the guy name Tom calling the IC, we actually have a lead before the prospect, and later no prospect at all, in the second example with Jim asking about tyres you have a lead followed by a prospect and an opportunity. But in my opening paragraph talking about D&B and prospect DBs I am of course describing the opposite.