So, what is the difference between a contact, a lead and an opportunity? The easiest way to explain this is to simply give a description of the three terms and of how they fit into your lead management software/CRM system.
First of all though, a brief explanation of why we talk in terms of contacts, leads and opportunities. The main reason is that it makes it very easy to see where your focus should lie and it keeps your sales pipeline well organised. Think of it in terms of 3 'pots' - one for contacts, one for leads and one for opportunities - which you move prospects through as they get closer to the point of sale. Also, most CRM systems use this method as a way of organising your account, so it's a good idea to understand the process.
What Is A Contact?
From my experience anyway, this is the term that is most often and most easily misunderstood. For example, let's say you have an e-book available on your site, which users can download in exchange for a name and an email address - this counts as a lead, right?
Nope, it's not even close to being a lead. Marketing teams might like to call this a lead because it makes them feel and look better, but in reality this is a perfect example of a contact. It's simply someone who has given you their details in exchange for materials they want to read. Why isn't this a lead? Here are a few of the main reasons:
- You have no idea if they are really in the market for your products or services
- You have no idea when they would be looking to make a purchase
- You have no idea if they are the decision maker
- You don't know if your products or services really fit their need yet
Of course, you could find all of this out by adding more required fields to your download form, although this would almost certainly result in much less conversions. Therefore, you would have less contacts to turn into leads - and that is the point of offering such downloads, so that you can move these people through your pipeline until you reach the ones who are serious about purchasing. The initial download is really only there to make the first introduction - in other words, to generate the new contact.
What Is A Lead?
Following on the from the above, we can say that a contact becomes a lead when they have been qualified. This essentially means that you have gathered further information from the contact and that it looks like - as far as you can tell at that stage anyway - that they stand a good chance of becoming a customer at some point.
For example, here are some points that you would want to consider as you qualify your contacts:
- Do they have a need for your product or service?
- Do they have a budget for your product or service?
- Does your contact have authority to sign off on the deal?
- Are they in the market for a purchase within a reasonable time-frame (according to your own judgement, 3 or 6 months for example)?
- (for more information, please see this post on how to qualify and score leads)
On the other hand, here are some reasons that would mean your contact is not a lead:
- They were looking for information on how to take care of the problem themselves and thought your e-book would help - they have no intention of making a purchase
- They are in contract and just wanted to see what else was around - they won't be going to market again for 5 years
- They were just browsing and came across your site - thought the download looked interesting
- They are a competitor :-)
So, we can see that not all contacts are leads and that it takes a bit more investigation before you can say for sure that someone is a real and proper lead.
What Is An Opportunity?
Following on from the description of a lead, we can say that an opportunity is a qualified lead that you have a real chance of turning into a customer at any particular moment in time. For example, lets say you have qualified a lead (we'll call him Mr Burns) and you have come up with the following information:
- Mr Burns is the decision maker
- He has the budget available to make the purchase
- His company needs your service as they have just dismissed their current supplier
- He wants to have contracts signed as soon as possible
Therefore, you could move Mr Burns into your opportunity pot because you have fully qualified the lead and you should be able to close the deal within a relatively quick period of time.
Hopefully that has helped you to understand the difference between the terms above and that you will therefore be able to keep your sales/lead nurturing pipeline and CRM system tidy and organised :-)
Thanks for reading!
By Alan MacDougall
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Revenue Builder is a small business marketing strategy and tips blog designed to help small business owners and startups maximise sales revenue.