Leads: Who Needs Them?

Some CRM systems use Leads, others  use Contacts and Accounts. The best solution for your business depends on several factors in your sales and marketing strategy.

Targeting your effortA CRM user on Insightly’s Support Community recently asked the question: “Why would you ever bother with leads? Why not just load a lead in as an opportunity with a low % probability.”

An excellent question!

A Lead record in a CRM system is the basic information regarding any unqualified person or organization that your company might possibly do business with, sometimes termed a “Suspect”. Suspects can come from a purchased list, a website form, trade shows, referrals and other marketing efforts.  They are the very top of the sales funnel. Creating a Lead record for a Suspect is often the first step in the sales process.

Lead records can be thought of as temporary entities, a “holding tank” for unqualified contacts and companies. As the sales process progresses and the Suspect is qualified, it is removed from the holding tank and converted to a Contact and/or Account [+]. ← Hypotext: Click to expand for more information

This conversion represents the change in status from an unqualified prospect to one with which you are likely to do business. If the lead turns out to be disqualified (i.e. not a viable sales prospect), it is usually deleted [+] from the database.

Some people would disagree with deleting even a disqualified lead, claiming that they might become qualified prospects in the future. I agree, in some cases.

Common sense enters into play here, and if there is a reasonable chance of doing business with them in the future, they should be converted and kept on the database for nurturing and future contact. But for clarity, here I will say that if they are disqualified, they will be deleted.

The Lead “holding tank” is like a firewall,  protecting your database of Accounts and Contacts from becoming cluttered with people you don’t know, and leads that you never followed-up on.

However many CRM systems don’t have separately designated Lead records; they have a single database of Contacts and Accounts. Every lead is entered as a Contact or Account with a status field or tag to identify them as a Suspect, Lead, Qualified Prospect, etc. The danger here is not completing (or even starting) the follow up. Over time your hot leads cool off, and join the thousands of other useless contacts collected over the years that clutter up your CRM.

So Why Wouldn’t You Use Leads?

  • Your CRM system doesn’t have separate Lead records, so every lead is entered as a Contact or Account.  The critical step here is to flag all incoming Contacts as Suspects (i.e. Unqualified Leads) using the system’s tags or Contact/Account status fields. Then manage your sales process to ensure that the lead queue is processed in a timely manner, with all suspects either qualified and moved forward in the sales process, or disqualified and deleted from the database.
  • If you deal with a small number of prospects, or you build relationships with the same prospects over a long period of time. Especially in long, complex sales cycles taking months or years before they are ready to buy, tracking communications with the contact in order to nurture the relationship and to keep your fingers on the sales process can make the difference between a “win” and a “loss”. You may also need to identify multiple contacts in the organization, and monitor the relationships they have with you and others. In this case you could forego the Lead record and simply add all new prospects as Contacts and Accounts. You can separate your suspects and qualified prospects from your customers using system tags or relationship type or status field, and then report on your market penetration and lead backlog, segregating your data based upon this field.

Then Why Would You Use Leads?

  • Leads  are a great feature to keep the unqualified prospects in a “Holding Tank” and out of your main Account and Contact database until such time that they are either a) qualified and a user initiates a conversion process to bring the lead into your main database as a Contact; or b) disqualified and deleted from the Lead pool.
  • Lead records typically have less detail than Account and Contact records. They are simple to enter into the system and allow you to track activities, nurture, and capture the critical information needed to either qualify or disqualify them as sales opportunities. This is especially valuable if you have a large market, your strategy is to process a high volume of leads, or you are constantly meeting new people and acquiring lists.

I have used both strategies. I use Insightly in my business. Until recently, Insightly did not have Lead records, so everyone went in as a Contact and Account. I added an “Organization Type” custom field at the Organization (Account) level, where I segment the Accounts as Suspects, Qualified Prospects, Customers, etc. (you could also use Insightly’s Tags to segment these records). Filtering for Suspects gives me a quick list of unqualified leads that need attention.

Another client I work with uses Zoho, and brings all new Suspects into Zoho CRM as Leads. We convert them to Contacts and Accounts once they are qualified, or delete them from the Leads pool if they are disqualified.

Both strategies work well,  but in either case your have to manage your leads. In the former by keeping tabs on the Organization Type field to keep you pool of Suspects from stagnating, and in the latter by managing the Lead record backlog. The end result is the same, the paths to get there are just slightly different.

Do you use Leads in your CRM, or do you enter all new entries as Contacts? How is it working for you? Tell us about it in the comments below!