Pop quiz: What’s the difference between leads vs prospects?
Most sales pros tend to use these terms interchangeably (even though yes, they really are different).
So what the heck are the differences between leads, prospects, and opportunities? And why do these differences matter?
Table of Contents
- Leads vs Prospects vs Opportunities
- What Is a Sales Lead?
- What Is a Sales Prospect?
- What Is a Sales Opportunity?
- Leads vs Prospects vs Opportunities: 3 Reasons the Definition Matters
- 6 Ways to Qualify Leads and Prospects
Leads vs Prospects vs Opportunities
Okay, I’ve got some bad news for all you logically-minded readers out there.
There’s no universally accepted, firm definition of all these terms.
What counts as a “prospect” to one organization may not to another. Or they may prefer to call that a “lead.”
It’s perfectly fine to have your own definitions for each of these terms.
But here’s what’s important: you should have an internally consistent definition.
In other words, you need to have firm boundaries between leads, prospects, and opportunities. These need to be formally defined by your organization.
That said, we have some definitions, guidelines, and considerations that can help you come to a comfortable conclusion for how to define leads, prospects, and opportunities.
I’ll give you my definitions and you can modify them as you please.
What Is a Sales Lead?
I consider a sales lead to be anyone who expresses potential interest in a product or service.
For example, let’s say someone chooses to download an eBook you wrote.
Or someone subscribes to your email list because they loved your latest blog post.
Or maybe they filled out a form on your website, interested in seeing a demo of your product.
It doesn’t matter how they originate.
What matters is that they’ve instantly distinguished themselves from the rest of the population – people who browsed your website and took no “conversion” action.
You have their name. You have their email address. And you know they’re at least a little bit interested in your product.
This, my friend, is a lead. An unqualified lead, but a lead nonetheless.
What Is a Sales Prospect?
That “qualification” dimension is an important one.
Why? Because qualification is essentially what separates a lead from a prospect – at least, in my book.
Sales prospects are leads who have been qualified.
Usually through conversation. One of your sales reps reaches out to a lead. They ask a few introductory questions. They get some extra information.
And at a certain point, it looks like this lead could be a great fit for your company.
At this point, the lead becomes a prospect.
If the lead doesn’t feel like a good fit, you might consider removing them from your lead pool entirely.
The hard part here is determining how qualified a lead has to be to become a prospect.
For example, should it meet 6/10 criteria for being a good fit for your organization? What if it meets 5? It’s tough. You’ll have to define that for yourself.
At this point, you might be asking to yourself, “then what’s the difference between a prospect and a qualified lead?” Spoilers: there isn’t one. Not really.
What Is a Sales Opportunity?
Okay, so what about opportunities?
A sales opportunity is essentially a qualified prospect who has a high probability of turning into a sale.
This is the most debatable designation, for one reason: how do you determine what leads to a “high probability” of a sale?
Even assuming you have a perfect method for calculating the potential to close, is the limit 75 percent? 80 percent?
In any case, you’ll have to construct a system in two parts for generating opportunities:
- How do you determine the probability of closing? You can use all the information you’ve gathered so far to estimate the likelihood of securing this deal.
- How high a probability is good enough to label it an opportunity? This is subjective, but all salespeople on your team should feel like they have a good chance to win this.
Leads vs Prospects vs Opportunities: 3 Reasons the Definition Matters
So does it really matter whether we call them leads vs prospects vs opportunities?
Yes. How you define and think about these different titles can play a significant role in your sales strategy success.
Imagine this scenario. One salesperson hands off an opportunity to another. Salesperson B accepts and gets ready for a breeze of a close – but instead, they face objection after objection, and find out this person is barely a fit.
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The issue at the heart of this misunderstanding is different definitions of “opportunity.”
Salesperson A thinks an opportunity is anyone who might buy from your company eventually, while salesperson B thinks it’s only an opportunity if someone’s ready and eager to buy right now.
Neither of them is strictly wrong. But this is a sign that you don’t have standard definitions in place, and your team is suffering from it.
2. Funnel migration.
Defining these terms is essential if you want to move people through your sales funnel efficiently and reliably.
In fact, defining these terms could help you construct your sales funnel in the first place. For example, what does it take to turn a lead into a prospect? What criteria do they have to meet? How can you learn whether your lead meets these criteria?
Of course, these terms can also support a healthier, more robust sales analytics system.
How many of your leads qualify to become prospects? What percentage of your initial lead pool eventually converts to become full-fledged customers? How many of your opportunities become customers and what are the characteristics that distinguish them from others?
This is also recursive. Studying your sales analytics can help you determine how accurate your sales forecasting and opportunity estimates are. If 80 percent of your “70 percent” opportunities eventually close, you’ll need to adjust your numbers.
If you do this consistently, eventually, you’ll find much more effective strategies and you’ll gradually increase your close rates and total sales.
6 Ways to Qualify Leads and Prospects
Most of the distinctions between leads vs prospects vs opportunities stem from how (and if) they’re qualified. All opportunities began their journey as leads, but not all leads will become opportunities.
So what factors make a lead become a prospect? Or lead a prospect to become an opportunity?
These are some of the most important factors to consider.
1. Do they fit your target customer persona?
Hopefully, you have a target customer persona – a model that defines and/or emulates the type of customer you want for your organization. What is the job title of this customer? How big is the company they work for? Where do they live? How do they think?
Once you establish these parameters, you can define specific qualities that put a person into this mold or exclude them from it.
For example, do you target customers who work for companies with 1,000 people or more? If so, a company with only 10 employees won’t be a good fit, and probably won’t turn into a prospect.
2. What are their pain points?
What are the major pain points faced by this customer?
Products and services are designed to address specific pain points.
If your product is going to be appealing, the customer needs to feel this pain – it’s what motivates them to come to your company for a purchase.
If they meet this criterion and have compatible pain points, you can consider moving them to the next stage of the funnel.
3. What is their level of interest in your product?
Okay, so by definition, a lead already has some interest in your company. But how much interest do they really have?
From the outset, your leads may be differentiated. For example, a lead who only entered their information so they could get access to a juicy whitepaper you wrote demonstrates more interest than a lead who requested a demo of your product.
You can also gauge interest in your initial conversations. Does this person seem aware of your brand and invested in learning more about it?
4. What’s their budget?
How much of a budget does this person have? Usually by the time you get this far, you’ll already have a prospect on your hands. Now is the time to determine whether this prospect can become a full-fledged opportunity.
Budget is one of the biggest limiting factors for some sales teams appealing to prospects. For others, it’s practically negligible. Incorporate this as you see fit.
Does your primary point of contact have the authority to make this kind of decision? If there’s someone higher up on the totem pole, you can continue the conversation and work your way toward them.
But you probably shouldn’t count this as an opportunity until you’ve had a conversation with the person (or people) in charge.
6. What’s their timeline?
Sometimes, you’ll encounter a prospect who’s super interested in buying your product generally, but they’re just not ready to pull the trigger.
Maybe they don’t have the budget for it yet, but they’re anticipating funding soon. Maybe they don’t need your services until a certain point in time, such as the beginning of the busy season. In any case, timeline matters.
How many of these characteristics does a lead need to have to become a prospect? How many does a prospect need to have to become an opportunity?
It’s debatable. But no matter what, you should spend time in your own organization discussing these terms in an open, collaborative environment. Define them formally. Get the whole team on the same page. Then use that information to perfect your sales strategy.
Leads vs prospects vs opportunities.
They all matter.
And they’re all a part of your overall sales strategy.
You’ll need to track all of them – including the conversations you have with them – if you want to be successful.
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Jayson is a long-time columnist for Forbes, Entrepreneur, BusinessInsider, Inc.com, and various other major media publications, where he has authored over 1,000 articles since 2012, covering technology, marketing, and entrepreneurship. He keynoted the 2013 MarketingProfs University, and won the “Entrepreneur Blogger of the Year” award in 2015 from the Oxford Center for Entrepreneurs. In 2010, he founded a marketing agency that appeared on the Inc. 5000 before selling it in January of 2019, and he is now the CEO of EmailAnalytics.