Lead Qualifying

Not all sales leads hold the potential for becoming sales prospects. There are many reasons for this including:

  • Cannot be Contacted – Some prospects may fit the criteria for being a prospect but gaining time to meet with them may be very difficult (e.g., high-level executives).
  • Need Already Satisfied – Prospects may have already purchased a similar product offered by a competitor and, thus, may not have the need for additional products.
  • Lack Financial Capacity – Just because someone has a need for a product does not mean they can afford it. Lack of financial capacity is major reason why sales leads do not become prospects.
  • May Not Be Key Decision Maker – Prospects may lack the authority to approve the purchase.
  • May Not Meet Requirements to Purchase – Prospects may not meet the requirements for purchasing the product (e.g., lack other products needed for seller’s product to work properly).

The process of determining whether a sales lead has the potential to become a prospect is known as “qualifying” the lead. In some cases, a sales lead can be qualified by the seller prior to making first contact. For instance, this can be done through the use of research reports, such as an evaluation of a company’s financial position using publicly available financial reporting services. More likely, sellers will not be in a position to qualify leads until they establish contact with a lead, which may occur in activities associated with either Making Initial Contact or The Sales Meeting.

5 Truths About Lead Qualification – and How CRM Can Help:
1. Not all leads are created equal.

The principle behind lead qualification is that the prospects that go into the lead process have different likelihoods of turning into a sale and different time frames for making that sale. Lead qualification must first classify leads according to their readiness and ability to purchase; and second, to manage all the incoming leads effectively.

Note that “effectively” isn’t the same as actively. Some of the leads that enter the qualification process are never going to purchase, or are very unlikely to purchase. The effective way to handle these is with minimal follow-up, perhaps simply directing them to the company Web site. That leaves your sales staff  free to concentrate on the leads which are more likely to pay off.

The reason for doing this sorting as early as possible is another axiom of the sales process: All leads cost money to follow up on. The more complex and elaborate the follow-up, the more it costs. If you can weed out the low-probability leads at the very beginning of the process, you will save money as well as sales-staff time.

In fact, the process of lead qualification has been codified into the 8-4-2-1 Rule. This rule of thumb states that for every eight leads that pass preliminary qualification, four will lead to sales presentations, which will produce two quotes and finally one sale.

In other words, the sales funnel narrows sharply even once you’ve done your preliminary qualification. Obviously, considering the increasing cost, the further you move into the process, the better it is to narrow the funnel early on. If you can reduce that 8-4-2-1 to a 4-2-2-1, you’ve saved half the cost of lead handling.

CRM helps you manage your leads more effectively in several ways. CRM provides an easier way to develop and codify the processes, checklists and other elements that are the meat of any well-run qualification system. By serving as a central, repository of information on leads as they move through the process, CRM makes leads and their progress visible to the sales staff,  marketing and management alike. With CRM, everyone who needs to can follow leads from first contact to final order.

2. Not all leads are followed-up on effectively.

This is the Achilles’ heel of most companies. For whatever reason, most leads — by some estimates as high as two-thirds or more — are not followed-up on effectively, if at all.

The reasons for this vary, but the primary cause is reps’ low expectations of the quality of the leads. If the sales force perceives 90 percent of the leads passed to them are no good, they’re unlikely to spend time tracking prospects down.

One solutions is to use CRM for expedited qualification of leads and to capture as much initial contact information as possible before leads are passed to sales. Obviously, the higher the percentage of leads that turn out to be “hot,” the greater the sales staff’s enthusiasm to follow up.

3. Not all leads are qualified by objective criteria.

To efficiently qualify leads you need to first define what a lead is with objective criteria – written, external standards that reps can use to separate the sheep from the goats without guesswork or opinion. Second, get everyone’s agreement on that criteria. Third, write it down and fourth, generate a checklist that sales and marketing can both use to determine how qualified the lead is and find out where the lead is in the sales cycle.

Typical criteria used to qualify a potential lead include what degree of authority the contact has in the purchasing decision and whether the company has the budget committed to make the purchase.

Note that many of these criteria are multivalued. Obviously, the best case is that the inquirer is the decision maker and the worst case is that the prospect has no authority at all. However, there are intermediate circumstances as well. For example, the contact may be someone who has influence in the decision, if he or she still isn’t the final authority.
For this reason, the lead-qualification process should be a multivalued one, giving a score of say, 3 to a purchaser, 2 to an influencer and 0 to a person who has no part in the process. The final result of the qualification checklist will be a numerical or letter score that sums up how well-qualified the prospect is.

4. Not all leads are ready to buy.

The majority of leads, even good leads, aren’t ready to buy right away. Even the ones who will eventually buy from you may not be ready to place an order, and a fair number of them are a year or more away from placing an order with anyone.

It’s important that everyone involved in the sales process, from management to sales, understands where each qualified lead is in its buy cycle. By knowing where a prospect is in the cycle, the sales staff can tailor its approach to the potential customer more effectively.

5. Not all leads mean the same thing to sales and marketing.

One of the challenges of managing the sales operation is getting everyone to agree on what a qualified lead is.

To many sales reps, that means a thoroughly checked-out potential customer who is ready to buy today. To many in marketing, a lead is anyone who checked a box on a Web site or dropped a card in the bowl at a trade show.

Using an objective checklist like this is also useful in avoiding arguments between marketing and sales over the quality of the leads being sent over. Marketing often complains that sales isn’t following up on leads, and sales complains back that the leads are of low quality. By qualifying leads using a checklist and sharing it with marketing, sales and management, everyone can see how each lead rates.

A good sales process requires one very important result—CONVERSION. Converting Suspects to Prospects, Prospects to Leads, and Leads to Customers. And the first step to successful conversion is Lead Generation. Lead qualification is an information gathering process that begins when a suspect first crosses your path and continues until you’ve converted a customer or disqualified the contact.

We often see sales and marketing professionals make a very costly mistake—not properly qualifying, and therefore prioritizing, the prospects they engage before investing their time and budget in trying to secure the business. Marketing is too quick to throw the ball over the fence to sales when they get a “name” or “inquiry” and the sales team is too quick to either ignore the lead (feeling it hasn’t been well qualified) or push too quickly for the close. These unfortunate, but real-world, scenarios result in a serious waste in resources, or worse yet, a completely ineffective sales process.

:Lead Qualification Check List:
  • Analyze. Start with the exact information you need to have in order to automatically qualify or disqualify a suspect. To do this, take a very close look at the profiles of your best customers. Define their common characteristics. Are there similarities between them (i.e. their company size, industry, market, needs, values/interests of the buyer, behavior patterns)? Be as specific as you can be and include both psycho-graphic and demographic attributes. Essentially you are hunting for what information you absolutely have to have in order to identify and move the contact from a suspect to a prospect, from a prospect to a lead, and from a lead to a customer?
  • Gather. Once you’ve determined the information you need, create a qualification checklist to help you capture the information. Be sure to include basic contact information, as well as a list of the top 8-10 characteristics from your analysis. Once you’ve created a checklist, put it to work immediately. We recommend making electronic copies available to all of your salespeople, or better yet, incorporating it into your customer relationship management tool. Also, go back and use this checklist with the suspects, prospects, and leads in your current pipeline. Have you gathered all the critical information for each of the opportunities you’re already working on?
  • Rank. Once you’ve gathered the necessary information, use it to rank each of your new and existing opportunities. For example, calculate how many of the 8-10 characteristics align with your prospect and use the data to calculate the quality of the lead (such as COLD=0-3, WARM=4-7, HOT = 7+). Test this against your current pipeline. Are there good leads you’re neglecting and cold ones you’re spending too much time on?

When a Lead Qualification Checklist becomes a permanent part of your process, you’ll be able to quickly rank your leads and determine where you should be spending your time and efforts. Only after a lead has been qualified as a warm or hot prospect do you proceed with an investment in targeting their business. Remember, BE SPECIFIC. Your qualification process is not effective unless it ELIMINATES some prospects from the pool, and highlights the opportunities you have the best chance of winning!