lead quality

How to Measure “Lead Quality”

What’s your lead quality?

You hear a lot about lead quality these days. That’s encouraging news. It used to be that when you talked about sales leads, the focus was always on lead quantity – getting more leads. High response rates always seem to rule the day, but at some point, marketers began to realize lead quantity isn’t enough. You also need to consider the quality of those leads.

Defining lead quality

When you qualify a lead, you are looking for some way to rank or sort your leads so you can prioritize your time for follow up. You can measure lead quality in two ways – by their closing potential and by their revenue potential.

  1. Closing potential describes how easy it will be to convert that prospect into a customer.
  2. Revenue potential describes how much money that prospect could generate over a lifetime or a fixed period of time.

Two leads – two very different expectations

Clearly, not all sales leads have the same potential. Let’s look at two examples:

Assume you are a menu printer and you get two leads, one is from a single pizza shop and the other is from a chain of family dining restaurants.

On the lead form, the pizza shop owner provides his telephone number and best time to call. And also checks off the box “Urgent.” The closing potential is high, but as a single pizza shop, the revenue potential is low – maybe even too low to meet the minimum requirements of the printer.

For the chain of restaurants, it’s a different story. The lead form provides no telephone number and includes a check off of the “Long-Term Interest” box. As a restaurant chain, the revenue potential is high – maybe very high depending on the number of restaurants in the chain. But the closing potential is low based on the “long-term interest” indication.

One will close more easily, but the other will bring you a larger sale. So which is the better lead?

Lead qualifying criteria

There are a number factors that go into determining lead quality. You may be familiar with the BANT formula. BANT, which stands for Budget, Authority, Need and Timing, is a checklist of sorts that is commonly used by sales people to qualify their leads. BANT has its critics. Personally I think it can play a role, but you need to adjust it with each situation. Not all of the elements are equally important.But I would also add two more items – Revenue and Interest. Let me go through each item:

  • Budget – Does the prospect have the budget for your product or service? Many sales people are instructed to ask prospects how much they have allocated for the project, but this is often premature. The reality is many new prospects can’t answer that question – especially early in the process.The more important question is can they afford you? We initially answer this question by researching the company’s size – either by sales volume or number of employees. While this isn’t always reliable, it’s a good start.Even if your prospect can afford you, budget is also a matter of expectations. If someone has never bought a product or service like yours, they may have no sense of what it costs. Is it $500, $5,000 or $50,000? Just giving the prospect a ballpark number or a price range, could help to determine whether the prospect meets the Budget criteria.
  • Authority – Does this prospect have the authority to make a purchasing decision? Many sales people only want to talk to the owners and managers (the people who sign the checks), but I would argue that there are many other “influencers” in the process that also need to be considered.This is especially true in today’s world as lower level employees are often asked to conduct initial research on the web. And many final decisions are made not by an individual but by a team.You should also note that staffers are often the ones who will actually use and benefit from your product or service – and while they may not write the checks, they can specify and/or influence the decision.
  • Need – Is there an actual need for your product or service? On the surface, this seems pretty obvious. If you pave driveways, you need to reach homeowners who have driveways, right? If you sell an app for the iPhone, you want to know you’re speaking to iPhone users. But it’s not always that easy. You may have a product or service that could be used – or is likely used – by companies of a certain size in a particular industry, but you have no real evidence of need until you ask.
  • Timetable – What is the timetable for a decision? Some leads come to you ready to buy today, but they are few and far between. The reality is that most have long-term plans or no timetable at all.Even if you get them to respond to your offer, it may be to satisfy a curiosity more than to help with a purchasing decision.Many techniques and incentives are used to accelerate the timetable and move that purchasing decision closer. Sometimes these can work. At the very least, keep them engaged and try to move them to the next step in your sales process.
  • Revenue – how much business can they bring you? When you look at revenue, you look at both the size of the purchase and the potential for repeat business.Getting back to my menu printer, the chain of restaurants is clearly a better prospect than a single pizza shop owner – at least from a potential revenue standpoint. But don’t assume the largest companies are always best. Sometimes you discover that the largest companies are bad prospects because they do what you do in-house.Finding the sweet spot is the key.It may take a while to find your sweet spot. Many sales organizations separate out those prospects with the highest revenue potential and apply very aggressive sales and marketing strategies for what they call Targeted Accounts or Major Accounts. This results in two marketing tracks – one for the largest potential customers, the other for everyone else. And that’s okay.
  • Interest – Are they interested in what you offer? In many ways, this is what lead generation is all about – getting people to raise their hands to say they are interested. Through list research, we can usually identify prospects with the budget, authority, need and revenue potential, but interest needs to be demonstrated. It can be demonstrated in a variety of ways:
    • By the offer – if the lead is responding to a free demonstration instead of a white paper, you can see the interest is higher.
    • By the contact info provided – if the lead provides a telephone number and best time to call, you can see the interest is higher.
    • By the method of response – if the lead responds by phone instead of reply mail or landing page, there is greater sense of urgency.
    • By questions on the lead form – if the lead is willing to answer some qualifying questions.

Later in the sales process, you can further assess their interest by their email open rates and click-throughs, and if you have the right software, by their return visits to your website.

Lead quality from different lead sources

When you measure lead quality, consider the source of your leads.

    • Direct marketing leads – If your leads are coming from direct mail, email or telemarketing, chances are you did some list research before you executed your campaign.

This means that all leads should have been pre-qualified for budget, authority, need and revenue. With the response, you also get interest.

  • Online marketing leads

– Contrast direct marketing leads with leads that come from online marketing or so-called inbound marketing (search, blogging, content).

Online leads are very appealing because of their low cost, but lead quality is always an unknown quantity. The reason is you have no control over who visits your website, so you don’t know anything about these leads. All you know is they were interested enough to give you their email address, but that’s not enough. Your lead could be the CEO of a major prospect or a college student doing research. Until you are able to gather more information through a follow-up step, the lead will remain suspect.

  • Traditional media leads

– This is not unique to online marketing though. You have the same challenge with traditional media marketing (print, radio, TV) because you cannot control who sees your ad and responds.

This is not meant as an argument for one source over another. Even if one source provides greater lead quality insight, chances the cost per lead of that same source will be higher.

Three ways to manage lead quality

Once you have gathered all the information you can on a particular lead, what do you do with that information? You need some way to prioritize your leads and some system to keep it all organized.

  • Lead bucketing
      – The most common method is to drop them into buckets – to simply label every lead as either a hot lead, a warm lead or a cold lead.

This is not much of a system at all, but it’s a way of getting started. Eventually, you will find a system that can help. Here are two better methods:

  • Lead scoring

– Lead scoring is a popular method of lead qualification that attaches numerical values to each lead. So you would rank each lead (e.g., on a scale of 1-3) by how well it met your lead quality criteria (budget, authority, need, timetable, revenue and interest).

For example, the highest score on a 1-3 ranking would be 18 (6×3), the lowest score would be 6 (6×1). Of course, the scale could 1-5 or something larger. In developing your lead scoring system, you might also want to give more weight to one or more of the categories. If, for example, you decided that authority was not as important as the other categories and that revenue and interest were more important, you might create the following scale.

– Budget 1-5
– Authority 1-3
– Need 1-5
– Time table 1-5
– Revenue 1-10
– Interest 1-10

This gives more weight to revenue and interest, and less weight to authority

  • Lead mapping

– Lead mapping uses the same categories as the above except that instead of using numerical attributions, leads are placed in appropriate steps of the sales process. Start by mapping out your own sales process. Here’s an example:

– Inquiry
– Lead
– Qualified Lead
– Sales Engaged Lead
– Sales Ready Lead
– Proposal Lead
– Trial Customer
– Customer

As information is collected and actions are taken, the lead moves along the sales process.


Advertising and marketing campaigns are often declared winners or losers based on the number of leads they generate. But that’s a very simplistic measurement. You also need to take into account lead quality. Instead of looking at your response rates or cost-per-lead, establish some benchmarks for a qualified lead, and then start looking at your qualified response rates or cost per-qualified-lead.

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