What is a lead in sales and marketing?

A lead is any person that shows interest in your product or service. Find out more about different types of leads.


Last Updated: February 27, 2024

 by Lari Numminen.

If you work in sales and marketing, you're likely to hear a lot of different definitions and opinions about leads.

What exactly is lead?

A lead is any person that shows interest in your product or service. Leads can come both through sales initiatives where the person is contacted directly by your business, or through marketing where the person shows interest in your product or service. 

Each company will have their own definitions of what a lead, whether it is defined by sales, marketing or product engagement. The key common aspect is that it is an individual person (ie. not a company) with the potential of turning into a paying customer. 

Types of Leads

Leads are categorized based on their interaction with your business and their likelihood of becoming a customer. Understanding these categories helps tailor your marketing and sales strategies effectively.

Sales Qualified Leads (SQLs)

Sales qualified leads are any relevant contacts who have expressed a clear interest in your product or service. This can be people who have requested a product demonstration on your website, or people who have accepted a sales meeting with your team.

Marketing Qualified Leads (MQLs)

Marketing qualified leads are typically relevant contacts that have engaged with your marketing content and can be contacted by your sales team. This can be persons who have submitted their email address to access sales material on your website or after seeing your advertisements on social media.

Product Qualified Leads (PQLs)

Product qualified leads are any contacts that use your product and show interest in paying to use the product more. This could be people who have used a product trial or free version of your product with interest in upgrading. 

The definition for an SQL, MQL or PQL differs in each company, or these abbreviations are not used at all. Some companies they simply talk about "leads." Whatever the case, sales and marketing teams need to be aligned on definitions, so to avoid any confusion or conflict down the line.

Cold vs. Warm vs. Hot leads

In addition to lead types you can also evaluate how far along are different leads in their purchase decision. 

  • Cold leads - Cold leads have had minimal interaction with your brand. They might have stumbled upon your website or heard about your business through a campaign. While they're not actively seeking your offerings, with the right approach, they can be nurtured into interested prospects.
  • Warm leads - Warm leads are familiar with your brand and have shown interest, either by signing up for a newsletter, following your social media, or downloading a whitepaper. They're not yet ready to make a purchase but are more receptive to targeted marketing efforts.
  • Hot leads - Hot leads are those who have demonstrated a clear intent to purchase, such as requesting a demo or adding items to a shopping cart. They require immediate attention from sales teams to convert their interest into a sale.

The basics of lead generation

Lead generation is the process of attracting and converting strangers and prospects into someone who has shown interest in your company's products or services.

Here's a brief overview of how businesses identify and attract potential leads in a typical B2B or software business:

  1. Content creation: Producing valuable content tailored to the interests and needs of your target audience. This can include blog posts, videos, infographics, and more.
  2. Landing pages and Calls-to-Action (CTAs): Designing landing pages that provide specific offers or information in exchange for contact details, along with compelling CTAs that guide visitors towards these pages.
  3. Social media and paid advertising: Utilizing social media platforms and paid ads to reach a wider audience and direct traffic to your landing pages.
  4. Email marketing: Sending targeted and personalized emails to nurture leads through the sales funnel.

Lead qualification

Qualifying leads is crucial to ensure that your sales team focuses its efforts on prospects most likely to convert. Three popular frameworks for lead qualification are BANT,  CHAMP.

BANT (Budget, Authority, Need, Timeframe)

  • Budget: Does the prospect have the budget to purchase your product or service?
  • Authority: Does the contact person have the decision-making power?
  • Need: Does the prospect have a need that your product or service can fulfill?
  • Timeframe: Is there a specific timeframe within which they plan to purchase?

CHAMP (Challenges, Authority, Money, Prioritization)

  • Challenges: What challenges does the prospect face that your product or service can solve?
  • Authority: Similar to BANT, it assesses if the contact can make purchasing decisions.
  • Money: This focuses more on the prospect's financial capacity to make the purchase.
  • Prioritization: Determines if solving the challenge is a priority for the prospect.

MEDDIC (Metrics, Economic buyer, Decision criteria, Decision process Identify pain, Champion) 

  • Metrics: What quantifiable benefits will the customer realize by implementing your solution? 
  • Economic Buyer: Who has the budget authority and final say in the purchasing decision?
  • Decision Criteria: What standards or criteria will the customer use to evaluate and choose a solution?
  • Decision Process: What are the specific steps and timeline in the customer's process to finalize their purchase decision?
  • Identify Pain: What are the customer's main pain points or challenges that your product or service can address?
  • Champion: Who within the customer's organization believes in your solution and will advocate for it internally?

Bottom line

By understanding these lead types and employing strategic lead generation and qualification processes, businesses can significantly improve their conversion rates and sales efficiency. The journey from a cold lead to a hot one involves meticulous planning, targeted content marketing, and a deep understanding of your audience's needs and behaviors. With these insights, you're well-equipped to generate leads that not only fill your sales funnel but also contribute to sustained business growth.

Frequently asked questions about leads

Q: How do leads differ from prospects?
A: Leads are potential customers who have shown some level of interest in your company but may not have been qualified yet. Prospects are leads that have been assessed and deemed fit with your target market criteria, indicating a higher likelihood of becoming customers.

Q: Why is lead management important?
A: Lead management is crucial for efficiently tracking and nurturing leads through the sales funnel. Proper lead management helps in prioritizing leads, ensuring timely follow-up, and increasing the conversion rates from leads to customers.

Q: What tools are used for lead management?
A: Various Customer Relationship Management (CRM) systems, email marketing platforms, and marketing automation tools are used for lead management. These tools help in organizing leads, automating communications, and analyzing lead behavior and campaign performance.

Q: How can I improve the quality of leads?
A: Improving lead quality involves refining your targeting criteria, creating more engaging and relevant content, optimizing your lead capture forms, and continuously analyzing and adjusting your lead generation strategies based on performance data.

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