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What are leads in sales and how can they boost profits?

What are leads in sales: entrepreneurs at an office having a discussion

Key takeaways

  • Sales leads are people who have shown an interest in your business and might buy from you
  • Leads require nurturing, such as follow-up emails or sales calls, to move through your sales funnel
  • Your marketing plan should include strategies for different types of leads, including market-qualified leads and sales-qualified leads

Every sale starts with a lead. Perhaps they responded to your marketing campaign or you received their details by referral. Maybe they just stopped by your storefront for a sample. Anyone who shows interest in your business and might become a customer is a lead—and it’s your job to capture their interest and information.

As a business owner, generating leads and turning them into sales is a crucial part of building your customer base and generating profit. Yet nearly 40% of marketers say that generating high-quality leads is one of their greatest challenges. With so many options available to customers, it’s difficult to know which lead generation channels to pursue, from online forms to organic search traffic.

How can you overcome these hurdles and convert leads to repeat customers? First, learn about the different types of leads and how to pursue them. Next, check out the lead-generating strategies below to boost your business’s bottom line.

What is a sales lead?

A sales lead is anyone who might be interested in your product or service and can eventually become a customer. It can also mean the data associated with that potential buyer.

As a potential buyer, a lead is at the very top of your sales funnel. You or your sales team can then follow up with the potential customer to nurture them through the buying process. Your marketing efforts can also encourage a potential buyer to progress in their customer journey, in hopes of ultimately closing a deal.

Types of leads

What are leads in sales: employee wearing headphones while at a virtual meeting

Turning sales leads into customers requires careful planning. With the right lead nurturing, there’s a good chance you’ll make a sale. But not all leads will buy from you. In fact, there are different kinds of leads—some warmer or colder than others.

Cold leads

When someone is outside your sales funnel, they’re a cold lead. There’s a good chance they’ve never heard of your brand. You or your marketing team might have gotten their contact details from a professional directory or a lead generation company, or perhaps they were a referral from other customers or a third party at a networking event.

For cold leads, the best approach is to reach out by cold calling or cold emailing them with a sales pitch. If they respond positively, they become a lead. If not, don’t annoy them further—move on to warmer prospects.

Leads vs. prospects

To maximize lead generation, you can pursue prospects—potential customers who belong to your target audience and are interested in your company’s products. While leads have taken a step toward knowing or liking your business, prospects are a bit further down the sales funnel and have shown signs of warming up to a sale.

Turning a lead into a prospect involves dedicated follow-up. Perhaps a potential customer responded well to a cold call, or they visited your website and signed up for your email list, or maybe they entered a competition you ran at a trade show or on social media

At this stage, you might only have their name and contact information, most likely an email address. Through lead generation, you might have gathered other useful demographics, such as their gender, age range, marital status, or income level.

In the next step of the sales process, you should reach out—most likely with a follow-up email. For example, if a lead signed up for your mailing list, they should receive a welcome email. Each follow-up should offer value—not just a sales pitch—such as a special offer, discount voucher, or buyer’s guide. If they respond, you have two-way communication: Your lead has now become a prospect.

Market-qualified leads vs. sales-qualified leads

Once you follow-up with a prospect, you can do further lead qualification, which is essentially determining how close they are to buying.

  • A market-qualified lead (MQL) or “warm lead” has shown some interest in buying but has no solid plans to do so
  • A sales-qualified lead (SQL) or “hot lead” is ready to buy

For market-qualified leads, you or your marketing team should stay in touch, educate them about your products or services, and/or send weekly newsletters that add value. To move warm sales leads through your sales pipeline, show them how you can address their needs and pain points. Each touch along the pipeline gets them ready to buy. 

Meanwhile, sales-qualified leads might find you without any work on your part—perhaps through referral or online research. Once a hot lead starts comparing features and prices, give their contact information to your sales reps or make contact yourself. You or a salesperson should follow-up to learn what the potential customer needs, answer any questions, and hopefully close the deal.

Tracking your leads

Once you understand the question “What are leads in sales?” you might start wondering how to manage those leads. In an effective sales funnel, you know where each lead is in the buying process at all times. You can track leads manually, but as your business grows, you’ll probably need to invest in automation

Customer relationship management (CRM) systems automate lead management, making it easier to apply the correct marketing strategy for each stage of your sales funnel. CRM systems like Zoho CRM and Salesforce can track your leads’ contact details, where they are in the process, and how likely they are to buy—known as lead scoring.

Get to know your target market 

Another crucial step in lead generation is getting to know your target market. If you want to generate high-quality leads from marketing campaigns, you need to be able to target your ideal customers—rather than pursuing cold leads that are unlikely to become prospects.

Outline your ideal customer’s characteristics, including age, location, occupation, interests, values, and spending habits (in other words, create buyer personas). A few strategies for gathering this information include: 

  • Sending a short questionnaire via email or social media channels
  • Posting a question on social media, such as “How did you hear about this business?”
  • Researching a competitor’s target market demographics 
  • Monitoring customer engagement on your channels (e.g., Yelp reviews, posts on Twitter, LinkedIn, or TikTok)

For example, if your customers regularly engage with you on a social media channel like Instagram, run a marketing campaign there. On the other hand, if they’re executive-level professionals, you might focus your advertising efforts on LinkedIn

Your lead generation strategy

Employees having a meeting

There are many ways to start generating leads, whether organically via outbound strategies like content marketing or reaching out directly through inbound strategies like direct sales calls. 

Many lead generation strategies include a lead magnet, or an incentive to encourage potential leads to give you their contact details. Choose something that provides value but doesn’t cut into your profits, such as a sample product, a 10-minute introductory consultation, or a trial subscription. 

Other examples of lead generation include:

  • Getting contact details from a lead generation company or professional directory and making cold calls
  • Advertising on radio, social media, or news sites
  • Exhibiting at trade shows
  • Hosting a webinar or marketing event that addresses a pain point
  • Attending conferences and networking events 
  • Developing a website with a landing page and pop-up invitation to sign up for your newsletter
  • Writing a press release about a new product
  • Running an email marketing campaign that educates and inspires potential customers
  • Creating a content marketing strategy, including blogs, vlogs, white papers, and social media posts
  • Implementing strategic search engine optimization (SEO) across your website and marketing campaigns
  • Creating a referral program with rewards for existing customers 
  • Claiming your Yelp Business Page so you can receive and respond to messages and/or requests from customers

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Leads in sales are at the root of your business

So what are leads in sales? Leads in sales are people who might buy from you or enter your marketing funnel. To generate more of these potential buyers, start by understanding your target audience. Then select lead generation strategies that work for both your customers and business. 

Stay in touch with your leads through regular content over email or social media. As they learn more about you and how you can address their pain points, they’re more likely to become loyal, returning customers.

For more on growing your business, learn about the different stages of building a business and the best growth strategies at each stage.

The information above is provided for educational and informational purposes only. It is not intended to be a substitute for professional advice and may not be suitable for your circumstances. Unless stated otherwise, references to third-party links, services, or products do not constitute endorsement by Yelp.