What Is Lead Generation?

The most basic definition of lead generation is that it is ‘the initiation of customer interest or inquiry into the products or services of a business‘ (Wikipedia definition).  While some lead generation tactics are used for passive purposes such as list building or newsletter sign-ups, most tactics are employed for more active and aggressive purposes like cultivating demographically desirable and pre-qualified sales leads or refining a global audience or pool of potential consumers into a targeted one.

The Purpose of Lead Generation

Whether you are selling to consumers (B2C) or other businesses (B2B), there are two obstacles that must be overcome before you can actually close a sale.  You have to provide a compelling response to the following questions:

  • Why should I talk to you?
  • Why should I buy from you?

Most companies try to answer both of those questions simultaneously, using the same content, calls to action, sales pitches, and other strategies.  In reality, those two questions make up two distinctly different parts of the equation and should be treated as such, with your marketing strategies and sales processes focused on each one individually rather than looking at them as being indistinct from one another.

When you tell a potential customer why they should buy from you, you are engaged in the sales process.  Convincing that customer to pay attention and respond to your marketing content, however, by telling them why they should talk to you in the first place, is the primary purpose of lead generation.  A potential customer must first be interested enough to want to know more about what you are selling before they will begin the earnest effort of deciding whether or not to finalize their role in the sales process.

The Lead Generation Funnel

Lead generation, just like making sales, has a ‘funnel’ through which a potential customer must go before they become a qualified lead.  Some marketers consider lead generation as part of the sales funnel, albeit the broadest part at the beginning of the funnel, but others separate it and tackle it as a separate part of the overall marketing process. While the processes of generating leads and making sales should be viewed as separate and distinct for your overall marketing strategy, the bottom of the lead generation funnel overlaps with the top of the sales funnel.

Once a lead has reached the bottom of the lead generation funnel and attained the status of qualified and interested/engaged lead, he or she is ready to begin (or has already begun) the journey through your sales funnel to the end – which is the completion of a sale and the conversion of that lead into a paying customer. The first part of the lead generation funnel comprises your marketing efforts, rather than your sales efforts.  Before a potential customer can become a final sale, they must first be attracted to your offer (whether it’s a product, service, or something else entirely).

Associated with the book, Lead Generation for Dummies, Dayna Rothman writes for the ‘for dummies’ website and provides a comprehensive explanation of the components of a lead generation funnel and how they are used to move a person from a window shopper to a qualified lead to a final sale.

Stage 1: Awareness – At this stage, an individual is dancing around the widest opening of your lead generation and sales funnel.  They are aware of who your company is by name or that you offer certain products or services (in general), but they have done little more than visit your website, check out your social media page, or anonymously download a free document (like a white paper or eBook) through one of your marketing links.

Stage 2: Name – The interested individual has now become part of your database of potential leads, because they have signed up for a newsletter or other subscription, or given their personal contact information as part of a non-anonymous download.  While the individual’s interest may be slightly piqued, they are still not officially a lead at this point, because they may decide your company isn’t worth patronizing or your offerings don’t meet their needs.  A name is, after all, just a name until they become an actionable lead.

Stage 3: Engagement – Once your company has established meaningful communication with the individual, there has now been introduced a certain level of engagement.  This can come through the individual’s initial actions (such as downloading a white paper and expecting a marketing response from the company) or through your company’s initial actions (such as including that individual in an email marketing campaign with a targeted recipient demographic to which the individual belongs).  At this point, the individual is fully inside your lead generation funnel but not yet committed to your sales funnel.

Stage 4: Target – After you have established engagement with your potential lead, you must determine if they fit within your target audience.  The use of targeted recipients for email campaigns is slightly different than establishing an individual as belonging to your company’s desired customer base.  For example, someone who downloads an eBook describing symptoms, attributes, and cycles of drug addiction might be interested enough to reach Stage 2 and 3, but they cannot be compelled to achieve Stage 4 because their interest in drug addiction is to enable them to act in a support role for a friend or family member; thus solutions and assistance for addicts would be of no benefit to them personally.  A ‘target’ (in this context) is someone who has a desire or need for what you are offering and is ready to explore available offers so they can make an informed selection.

Stage 5: Lead – Closely aligned with Stage 4, this stage means the interested individual has become more engaged with your company through various methods and meets the criteria you have established for your target audience or desired customer base.  This is the point in your overall marketing funnel where the individual progresses from deep within the lead generation funnel to the beginning of the sales funnel.  While not a qualified lead yet, he or she is well on their way.

Recycling – At this point, when the individual is passed from your lead generation efforts to your sales team, he or she may not be ready to commit to a sale.  There are plenty of reasons why an interested and engaged potential consumer can fall out of the sales funnel at this point, and you should not discard them entirely.   Recycle them back into your lead generation funnel and attempt to re-engage him or her in the future.

Stage 6: Sales Lead – After your potential consumer has reached this point, it’s time for your sales team to step in and take action to guide the individual to a final sale.  The individual has expressed interest, become engaged, and should now be vetted by the sales team as a qualified lead.  This is the final point before the individual makes a commitment to a sale.  (If the sales team finds that the customer is firmly hesitant, for whatever reason, the individual can be ‘recycled’ back into the lead generation funnel for future action.)

Stage 7: Active Opportunity – Your initial, tentative lead has now reached the point where they are a qualified lead and you have an active sales opportunity that aligns with his or her needs.

Stage 8: Final Sale – Your qualified lead has made a purchase and become a bona-fide customer of your company.

After the Sale – Ongoing Lead Cultivation Efforts

Once your lead has reached ‘customer’ status in your sales funnel, you should make every effort to maintain a strong level of engagement and on-going relationship with him or her.  Many companies see a high level of profitability through repeat business and customer referrals, so it is important that you maintain the B2C or B2B relationship to encourage future purchases and referral leads and customers. It is extremely important that you devote attention to maintaining a relationship with your now-existing customer and either soliciting repeat business from that individual or encouraging them to provide you with referrals for potential leads and future business.

I realize this was already stated in the previous paragraph, but it is critical to your business that you stay ‘friends’ with your current customer base.  An extremely easy way to do this is by reaching out to your existing customers on a regular basis by sending an email. Your email can be short and sweet (‘we hope you are enjoying our product/service’) or it can encourage a response (‘please let us know if you have any questions, problems, suggestions, feedback’) or inform them of a new or similar product or service (‘check out the upgraded version’).

Regardless of the content of your email, make sure it opens the door to communication rather than closing it. Many companies just don’t realize how vital repeat business is to their success, and often let existing B2C and B2B relationships fall by the wayside while they focus on attracting new leads and customers.  Eventually, that pool of potential leads will dry up, which means you certainly should not neglect the customer ‘oasis’ already in your back yard.

Managing Leads and Making Sales

Part of an effective marketing strategy is the use of lead generation management and the establishment of mutually agreeable (to sales and marketing) criteria for determining when a potential or qualified lead should or can move on to the next step in your overall marketing funnel. Without knowing how to maximize the lead generation efforts of your online content, whether it is blogs, social media, landing pages, or your company’s website itself, you could be losing countless leads (and profits) simply because you aren’t utilizing effective lead generation management.

Furthermore, if you do not have criteria in place to help determine when a potential lead should be progressed forward through each stage of your lead generation and sales funnels, you could lose leads (and profits) simply due to indecision or ineffective sales or marketing on your part rather than the consumer.  Your marketing and sales teams will not have a cohesive guideline for determining whether or not that lead is ready to move forward, ready to be recycled, or ready to be converted into a paying customer.

Today’s digitally-driven society makes it incredibly easy for you to capitalize on numerous methods for generating leads and making sales, especially if you have the right support teams in place to nurture leads and encourage engaged individuals to complete their journey through your sales funnel. Don’t let a lack of understanding about the importance of lead generation or your failure to truly grasp how it can boost conversions and sales when used effectively keep your company from reaching a high level of profitability and achieving your marketing goals.


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