Lead Scoring Models

Last week, I started building a lead scoring model for one of our portfolio companies, so I thought it was an appropriate time to begin a short series of posts expounding on the topic. More specifically, I’d like to cover the benefits of lead scoring models, what kinds of companies need them, at what point in a company’s development they should be built, and how to build them effectively.

With many businesses, it is wasteful to have the sales team follow up with every single person who is perceived to have expressed some level of interest in the company’s products or services. Ideally, an optimized sales force should spend much of its time interacting with prospects that have a high probability of buying. Being able to prioritize leads in the order of likelihood to buy or in order of expected value will help improve sales productivity and should help marketing target higher-quality prospects. A good lead scoring model will do this for a business, and will ultimately help close the gap between sales and marketing.

Start-ups generally do not need lead scoring models. Before the expansion stage, companies are usually focused on product development and don’t have a high enough inflow of leads to warrant prioritization. Once a company reaches the expansion stage, has several sales reps, and has more leads than sales can effectively follow up with, it is usually a good time to consider building a lead scoring model.

A lead scoring model is simply a system of assigning point values to leads depending on their characteristics. For example, if leads that have trialed your product convert into sales opportunities at a much higher rate than leads that have not, leads that have trialed should get a lot of points, and as a result, will score higher than leads that have not. Conversely, if you know that trade show leads almost never result in sales, a good lead scoring model will deduct points from trade show leads. The idea is that the higher the lead score, the higher probability that the lead is a serious prospect and is engaged in the buying process. These leads should immediately be given to sales. If sales is spending most of its time engaging with prospects that are ready to buy, the sales team will be more productive (and happier). If marketing knows the attributes of high-quality leads, it will be better equipped to make changes to its plans and campaigns in order to supply the sales team with more of them.