A man in profile sits at a desk facing an open laptop. He wears a headset and speaks into the attached microphone.
If you determine that a lead is interested in your company, it would likely be a good idea to reach out to them. However, this strategy could scare away other types of leads. — Getty Images/Vadym Pastukh

If you’re a business owner or a sales and marketing professional, you know you need to generate leads to keep your business growing. But what are sales leads? How do you classify them? And how should you treat the different types of leads?

What are sales leads?

Sales leads are, quite simply, potential customers. However, there’s a difference between a “lead” and a “prospect.” A prospect is someone who has shown interest in your company and its goods or services. You’ve had some sort of two-way communication with them, and they are moving down your sales funnel until, if all goes well, they become buyers.

Some business owners and sales leaders consider prospects as “hot leads,” “working leads,” “qualified leads” or “nurturing leads.” That just means they are leads who have expressed interest in your company. Now you are moving them through the sales funnel using a variety of tactics and strategies. Whatever name you give these prospects within your organization, the goal is to provide them with more information quickly so you can convert them into customers.

But before we dive into converting prospects who are further down your sales funnel, let’s explore the various types of leads you’ll encounter at the top of your sales funnel. Learning how to nurture each type of lead in a cost-effective, timely and practical way can help your business grow.

One thing leads have in common is that you or someone in your sales and marketing department has identified them, via demographics or past buying behavior, as someone likely to be interested in your company. But you’ll want to approach each type of lead differently to achieve the best results.

Types of sales leads

Cold leads

Cold leads reside at the top of your sales funnel. They may not be familiar with your brand. They may have replied to one of your posts on social media or found your blog in a Google search and commented on it.

In general, these leads will be the hardest to nurture as you’ll have to build trust and brand recognition while educating them about your company so they can decide if your offerings are a good fit.

A cold lead could also be someone on a cold-calling list or email list, or someone you have identified as fitting the demographics of your ideal customers. The goal at this stage is simply to set up first contact with these leads and determine if they are worth any time pursuing them.

Starting a conversation with warm leads should be easier than trying to gain the attention of cold leads.

Warm leads

Warm leads are familiar with your brand. They may have found your company through a referral from a trusted friend. Maybe they’ve discovered you through your inbound marketing efforts — such as blogging or social media outreach — and they’ve reached out for the answer to a question or to find out if you can help them solve their problems.

Starting a conversation with warm leads should be easier than trying to gain the attention of cold leads. Reach out — via phone, email, social media or even SMS — and remind them of past conversations or ask them questions about their specific needs.

Information qualified leads

Information qualified leads, or IQLs, are a specific type of warm lead that has already given you some information about their needs. Maybe they filled out a form to download an e-book that tells you something about who they are. You know they fit the demographics of your customers, but you may not know anything else about them.

Marketing qualified leads

Marketing qualified leads, or MQLs, have slightly more information about your company than IQLs, because they’ve done more than just downloaded one content asset. Maybe they attended a webinar, have visited your site frequently or interacted often with your team on social media.

The marketing department can continue to nurture this lead with quality content or encourage someone on the sales team to reach out and determine if the MQL is really a good fit as a customer.

How to qualify your sales leads

Identifying where leads sit in the sales funnel — and determining at what point a lead becomes a prospect — can be tricky. Depending on the size of your sales team and how many leads you have in your funnel, you may decide to pursue a conversation with warm leads, MQLs or SQLs. However, having a salesperson reach out to cold leads could scare them away if they are still getting to know your company.

To determine when to reach out to a lead, you’ll want to gauge their qualifications based on demographic information, their needs and their budget. You can gather this information by monitoring their online activity with your brand or through a discovery call.

The better you are at classifying and qualifying leads, the higher your conversion rates will become.

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