How Should We Define a Qualified Sales Lead?
Having a common definition of a qualified lead is essential to effective lead to opportunity conversions in the funnel. But sadly too many organizations lack a clear definition of a qualified lead that is understood and followed by marketing and sales.
When this happens, you see a breakpoint in the funnel. The lead flow passed from sales development reps (SDRs) to quota carrying sales reps is either too fast or too slow. Much like a car, your revenue engine either gets flooded with gas or chokes from lack of fuel. Either way the engine runs sub-optimally.
Sales and marketing leaders frequently ask Vorsight, “How should we define a qualified lead?” The classic consulting answer of “it depends” is never more applicable than in thinking through lead definitions. Despite what you hear from some “experts,” there is not and should not be a universal definition of a qualified lead. There is too much variability in organizations and their sales cycles for that.
Let’s explore some of the variables that impact the definition of a qualified sales lead. How you define a lead depends on:
- What you are selling and who you are selling to
- Your sales cycle times and average deal sizes
- If the field sales team is hunters/farmers or only hunters
- The sizes of the teams who qualify leads, do outbound prospecting, and carry quotas
- The number of initial leads (aka inquiries) that marketing generates
- The number of highly scored sales ready leads that marketing generates
- The gap to quota faced by the individual sales rep
Before we get into how these variables affect your lead definition, we first need to revisit our old friend BANT.
The acronym BANT (Budget, Authority, Need, Timing) is used by many organizations to gauge the degree of qualification of a lead. There are many debates over the efficacy of BANT in the modern selling environment. Google ‘BANT is dead’ to see for yourself. And the debates make sense. In many cases buyers no longer have pre-defined projects with set budgets and timeframes anymore. Asking a team of SDRs to BANT qualify every inquiry that marketing passes their way means that the sales team probably won’t get a lot of leads.
My friend Ken Krogue, founder of InsideSales.com, proposes a new acronym called ANUM (Authority, Need, Urgency, Money) to address this. I personally love it. The subtle difference is that absent of projects, marketing and sales teams need to create demand higher within the organization. You need to start by building need with the authority figures in a prospect account. Only once you have authority and need can you build urgency and help them figure out how they are going to fund it. This subtle difference between project-based solution selling and challenger-based consultative selling has been proven empirically by the research team at the Corporate Executive Board (my former employer). Buy the book The Challenger Sale by my friends Brent Adamson and Matt Dixon for more on this.
Keep ANUM in the back of your mind as we return to the definition of a qualified lead.
Think of the lead hand off from marketing (or SDRs) to sales as light passing through the lens of a camera. If you open the aperture wide, more light passes through. You might want to do this on a darker day or in the evening when there is less light. If you close the aperture, less light passes through. You might want to do this on a bright sunny day or indoors to avoid over-exposing the picture.
The degree to which you open or close the aperture depends on how many leads the organization needs to thrive. Adding or removing a letter from ANUM becomes a great way to dynamically adjust this.
Here is a spectrum of options when it comes to lead definitions. On the left side of the spectrum you see a wide open aperture. This organization has decided to define a qualified lead as a meeting with the right person at the right account that meets our ideal customer profile (ICP). The only variable present from ANUM is the A for Authority.
Organizations might use a loose lead definition if they:
- Are far behind quota
- Have few SDRs
- Have sales teams who only hunt
- Have few inquiries through marketing
- Sell to senior people at larger organizations who don’t come inbound
- Have an evangelical product that is still unknown by the market
The goal for this aperture position is to let a lot of leads through and give the sales team lots of ‘at bats’ to build their opportunity pipelines. A strategy would be to do more outbound prospecting to find people who meet this definition of a qualified lead.
On the other end of the spectrum you see a mostly closed aperture. This organization has decided to define a qualified lead as meeting with the right person at the right account that meets our ICP as well as having a specific need, urgency to take action, and an understanding of the source of money to fund the purchase. All of the variables of ANUM are present: Authority, Need, Urgency, and Money.
Organizations might use a tight lead definition if they:
- Have a lot of SDRs
- Have sales teams who hunt/farm and are too busy for new opportunities
- Have a lot of inquiries through marketing
- Sell to junior people at smaller companies who more readily
- Have a hot offering that is creating pull demand
The goal for this aperture position is to only pass the most highly qualified leads. This keeps the sales team focused on the best deals. A strategy would be to stop doing outbound prospecting and instead rely on marketing automation software like Eloqua, Marketo, Pardot, HubSpot, Silverpop, etc. to do system automated lead qualification and scoring.
Most organizations pick something in the middle of the two extremes. Clients of Vorsight’s outsourced appointment setting service typically receive meetings with the right person from the right target account with interest and, in some cases, specific needs. Our BDAs (same as SDRs) do their best to identify urgency and money as well. These are difficult to establish when outbound prospecting. Put yourself in the shoes of the executive being called out of the blue. Would you be willing to answer questions about budget when two minutes ago you didn’t even know this solution existed? It’s like going to a bar, meeting a girl, and asking her to marry you before the first date. It’s possible, but highly unlikely.
There are dangers with each approach as well. If you open the aperture too wide you will flood the sales team with Fool’s Gold. They will waste a lot of time qualifying. If you close the aperture too narrow you will lose out on opportunities with people in active buying cycles who get frustrated in the lack of a human response. Corporate decision makers increasingly tune out drip email nurture streams from marketing automation. While you wait for the lead to score high enough to call, they have already selected another vendor.
The B2B sales and marketing analysts from SiriusDecisions tell us that a balanced mix of inbound and outbound is always present in healthy sales funnels. This may be counter-intuitive to the “cold calling is dead” crowd, but the SD research to back it up is very clear.
I hope this helps as you think through the right definition of a qualified lead for your organization.
Editor’s note: This guest post by Steve Richard originally appeared on Vorsight’s Inside Sales Tips Blog.