Prospect vs. Lead: What Are the Key Differences?

However, they each inhabit a different part of the sales funnel and require different handling and nurturing techniques to move them closer to the conversion stage.

A lead can be loosely defined as any individual or organization that has exhibited some basic interest in the product or service offered. Leads are usually generated through marketing efforts, which results in them being dropped into the top of the sales funnel.

On the other hand, a prospect is an individual or organization qualified as a potential customer based on specific criteria. 

For example, they may have a proven need for a product, be in a decision-making position for purchasing a product, or be known to have the budget to cover the purchase.

In this post, we’ll look at these differences in depth and explain how Leadfeeder can help your business generate more leads and turn them into qualified prospects.

What is a lead? 

What is a sales lead, exactly? Potential customers with a basic interest in a company's products or services are called sales leads. 

Leads are usually classified into categories—hot or cold—based on how significant the initial level of engagement was and their readiness to make a purchase.

Lead generation is the function of marketing. Social media promotion, newsletter distribution, paid advertising, and cold calling are all marketing activities that could generate leads. 

Once a sales lead has been captured, they enter the first stage of the sales funnel. The sales team then works toward moving a sales lead through the qualification stage and finally to the conversion stage. 

The methods used are similar in both the B2C and B2B space, but the B2B lead nurturing timeline is generally longer.

Types of sales leads

There are various ways to classify leads; not all classifications apply to every business model. 

Smaller businesses without a large internal sales force might only use a handful of categories. 

Others with a well-defined sales and marketing process might use them all. Firstly, there are three basic classifications: cold, warm, and hot.

1. Cold leads: These fit the target buyer persona for purchasing a product, but they’ve yet to express an interest in the company’s offering.  Cold leads can be obtained in many ways, such as purchasing email lists or running a cold-calling campaign. Cold leads are the hardest classification of leads to convert.

2. Warm leads are any entity showing a minimum level of interest in a company or its products. Examples of warm leads are website visitors, people who have engaged with a social media post the company published, and people who were captured through inbound marketing efforts.  Because they already have some knowledge of the company and its products, they’re easier to nurture than cold leads.

3. Hot leads: These are anyone who has expressed an interest in a product and is deemed ready to purchase.  Hot leads usually result from direct queries or interactions, such as a product demonstration. They take the least effort to convert but must be targeted rapidly.

For many companies, especially smaller firms that don’t operate extensive digital marketing efforts, these three categories could be all needed. 

However, three more commonly used categories can help to differentiate how a lead was captured.

1. Outbound leads: These have been generated via outgoing interactions, such as cold calling or email marketing. They’ve not yet expressed an interest in the products on offer, so they’re very similar to cold leads in this respect.

2. Inbound leads: These are leads that ongoing inbound marketing efforts, such as paid social media advertising or own-brand content marketing, have generated.  Inbound leads are considered more qualified as they’ve already actively shown an interest in the products offered.

3. Referral leads: These are leads garnered through direct recommendations—either existing customers or trading partners. The lead comes from a trusted source, so they’re deemed more likely to convert and have more value.

There’s quite a lot of overlap between these two sets of lead categories. However, the latter set does provide a little more granularity and greater insight into how the lead was captured. 

Let’s dig a little deeper and talk about partially qualified leads.

1. Marketing Qualified Leads (MQL): Leads dropped into the sales funnel due to interaction with marketing activities, but they may not be ready for direct sales contact. For example, MQLs could result from email newsletter subscriptions or gated content downloads.

2. Sales Qualified Leads (SQL): Leads that the sales team has decided are ready for direct contact. They’re actively seeking the product on offer and are in a position to make a purchase.

3. Product Qualified Leads (PQL): Leads already exposed to a product. For example, they could be people who have completed a free service trial or are using a free version of a product with a paid upgrade. Product-led growth (PLG) strategies are a good way of winning PQLs as they encourage customers to sign up for free trials and create prime targets for upsells.

This final set of lead classifications overlaps with how we define a prospect. However, it’s important to note that they’ve yet to move on to the direct contact phase of the sales process. 

Therefore, when we define sales leads this way, they’re still considered leads, not prospects.

What is a prospect? 

A sale prospect is a business or individual identified as a prime candidate for buying the products or services a vendor is attempting to sell. 

A prospect is a lead who has been partially qualified using sales prospecting methods.

When it comes to the prospect definition in sales, a prospect will generally have started as a lead and then undergone scrutiny from the sales team to try and discern whether they’re likely to convert if contacted directly. 

For example, they could be people with a clear need for a product and the budget to make the purchase, or they could be one of the decision-making stakeholders regarding purchasing approval.

The sales team will directly engage a prospect to move them to the conversion stage. Depending on the offered product, this might include reaching out to arrange a sales call, a product demonstration, or setting up a free trial. 

The goal of these interactions is to eventually close the sale. Sometimes, this may be an iterative process, moving the prospect closer to purchasing with each iteration. This is part of the lead nurturing process.

Types of sales prospects

Firstly, it must be made clear that some sales and marketing teams use the terms “lead” and “prospect” interchangeably at certain points of the sales process. 

For example, a hot lead might be called a “hot prospect,” but it’s a lead. Only a lead that has been qualified in some way becomes a prospect. 

With this in mind, we can now cover some prospect classifications. Once again, there may seem to be an overlap with lead classifications at first glance, but there are subtle differences.

1. Warm prospect: This prospect has engaged with the business in some way and expressed an interest in a product, but they’re not yet ready to purchase. They are, however, qualified.  A warm prospect needs to be nurtured and guided toward an eventual purchase.

2. Hot prospect: This qualified prospect is deemed very close to purchasing. For example, they may have requested a full quote or a product demonstration.  Hot prospects must be actioned rapidly to close the sale as soon as possible before they cool off.

3. Marketing Qualified Prospects (MQP): These are similar to an MQL. The prospect has demonstrated an interest in a product or service by interacting with marketing efforts like an SQL would.  However, they’ve also been identified by the marketing team as meeting specific qualifying criteria, such as having the available budget, and need to be nurtured.

4. Sales Qualified Prospects (SQP): SQPs have moved from the marketing phases of the sales funnel to the sales phase. They will have demonstrated interest in the product, and the sales team will have discerned that they have the need, authority, or budget to make a purchase.  They’re at the stage of the sales process where an attempt can be made to close.

Some companies also track other prospects, such as C-suite members with purchasing power, key decision-makers, and high-value end users. 

These prospects are generally important to B2B vendors that sell high-ticket products or services. These prospects require extensive nurturing to build trust and authority. 

What is a sales opportunity? 

A lead who has progressed through becoming a qualified prospect and is nurturing and directly in contact with the sales team may be deemed ready to purchase. In this case, they become a sales opportunity.

A sales opportunity has expressed a willingness to make a purchase and has requested a detailed budget or proposal. They will have been fully qualified and have the available budget to make the purchase, as well as the authority to action it.

At this stage, the sales team focuses on closing the deal and turning what started as a lead into a confirmed sale. This is the action stage of the traditional sales funnel.

Lead vs. prospect: key differences 

What is the difference between a lead and a prospect? There are two key differentiators between a lead and a prospect. Below, we’re going to explore the difference between lead and prospect.

The first difference is the level of engagement the person or company had with marketing efforts. 

The second difference is the level of qualification that the person or company can be proven to have. 

We could say that:

• A lead has shown an interest in the product offering but has yet to be qualified.

• A prospect has been proven to have the budget, intent, and authority to purchase.

However, a good sales team will understand that a sliding scale can be applied. 

A lead might have shown a very high level of engagement but only been partially qualified, for example. 

In this case, the sales team might move the lead onto the prospect stage and instigate direct contact.

How to turn a lead into a prospect

Taking the lead through to being a prospect and ultimately a customer follows a tried-and-tested methodology, encapsulating lead nurturing and qualification into several actionable steps.

1. Qualification: A lead is scrutinized to discover whether they match key buyer personas and can demonstrate value through Budget, Authority, Need, and Timeline (BANT). This ensures that sales efforts focus on only the most qualified prospects.

2. Lead nurturing: Leads that don’t have a positive BANT outcome can be nurtured until they do. This involves “keeping the prospect warm” through actions such as email campaigns, content delivery, and follow-up calls.  The aim is to build trust and authority so that when the prospect is ready to make a purchase, it’s the vendor that nurtured them that they turn to.

3. BANT prospects need personalized engagement: If a prospect is fully qualified, it’s time for the sales team to begin direct, personalized interactions with them.  The sales team can do this by finding specific pain points that need to be tackled and tailoring the sales message to tick the right boxes.

4. Proving the value proposition: The sales team will invest time ensuring the prospect understands the service offering and how it can be applied to fulfill their needs.

Improve lead generation and sales prospecting with Leadfeeder

Here at Leadfeeder, we provide a feature-rich sales and marketing tool that can empower companies by providing detailed information about the people visiting a company’s website. 

The Leadfeeder platform can support lead generation efforts and enable simpler and easier qualification of leads to generate actionable prospects, helping your business highlight any lead opportunity. 

Key features of the Leadfeeder platform include that it helps you to:

1. Identify key visitors: Use Leadfeeder to track which companies visit your website. Focus on those that align with your Ideal Customer Profile (ICP) to ensure your efforts are targeted.

2. Analyze visitor behavior: Examine the pages visitors view and their time on each page. This information can help you understand their interests and needs, allowing you to tailor your outreach.

3. Segment leads: Group leads based on their behavior and engagement level. This segmentation enables more personalized and relevant communication.

4. Integrate with CRM: Sync Leadfeeder with your CRM system to ensure seamless data transfer and keep track of lead interactions. This integration helps maintain an organized and up-to-date lead database.

5. Use lead scoring: Implement lead scoring to prioritize leads based on their engagement and fit with your ideal customer profile. This helps in focusing on the most promising prospects.

6. Set up alerts: Configure alerts for specific behaviors or visits, such as frequent visits or visits to high-value pages. This allows for timely follow-ups.

7. Create custom reports: Use Leadfeeder’s reporting features to generate insights into lead generation performance and identify areas for improvement.

8. Enhance outreach strategies: Use the data from Leadfeeder to craft personalized outreach messages and campaigns. Tailoring your approach based on lead behavior can increase engagement and conversion rates.

9. Monitor competitor activity: Track competitors' visits to your site and analyze their behavior. This information can provide insights into their strategies and help you refine your own.

10. Improve continuously: Regularly review and adjust your lead generation and prospecting strategies based on the insights and data provided by Leadfeeder to improve your approach continually.

Using the right applied technology as part of the lead generation and prospect qualification process can significantly reduce overheads and cost of conversion and make the sales funnel more agile.

Discover valuable insights from your website visitors with Leadfeeder. Identify potential leads, track their behavior, and boost your sales. Turn anonymous traffic into actionable data and drive your business growth. 

Start your free trial today and gain a competitive edge with real-time visitor analytics!

FAQs on leads vs. prospects 

Lead vs. opportunity vs. prospect: how do they compare? 

When differentiating a lead vs. opportunity vs. prospect, it could be said that a lead is an unqualified person or organization that has shown some interest in the product or service a company is selling. 

A prospect is a lead qualified in some way, such as having the budget or authority to purchase. 

A sales opportunity is a prospect that has expressed a desire to complete a purchase.

Why does understanding the difference between a lead and a prospect matter?

By ensuring that the sales and marketing team has the expertise to differentiate between a lead and a prospect, the company ensures that only the most promising prospects take up valuable resources.

Knowing what’s a lead and what’s a prospect can ensure that the sales team contacts potential customers ready to purchase at the right time. This is the key to working efficiently for companies with limited sales resources.

What metrics should I track to evaluate lead and prospect performance?

Tracking key metrics is a reliable way to judge the capabilities and performance of the end-to-end sales and marketing process and help adjust the sales funnel. 

Here are some key metrics that could be valuable:

• Lead Conversion Rate: The percentage of leads that were turned into prospects.

• Lead Response Time: The average time the sales team took to respond to a lead.

• Cost Per Lead: The average cost of acquiring a lead.

• Lead Source: This is where a lead came from.

• Lead Engagement Level: How often or deeply a lead has interacted with a business.

• Prospect Conversion Rate: The percentage of prospects that became sales opportunities and customers.

• Sales Cycle Length: The average time it takes for a lead to become a prospect and then a customer.

• Deal Size: The average value of sales opportunities.

• Pipeline Velocity: How quickly leads drop through the sales funnel.