What is a Prospect Versus a Lead?

Definition of Prospect and Tips on Prospecting for Sales

Target Your Prospect
••• Credit: Adam Gault | Getty Images

What is a Prospect?

Like many industries, business has its own language and terms. Several are used interchangeably, even though they don't actually mean the same thing. This is the case with the terms "prospect" and "lead."

A prospect is a potential customer that has been qualified as fitting certain criteria. In most cases, a prospect:

  • Fits your target market.
  • Has the means (money) to buy.
  • Is authorized to make buying decisions.

Prospects don't have to have indicated an interest in buying. They just need to meet the above criteria. 

For example, if you sell virtual support services to small businesses, a prospect would be a small business manager (target market), that can afford your services, and who can make the decision to hire you. If your contact doesn't have permission to make a buying decision, then he's not your prospect. 

Determining if a contact is a sales prospect is the first step in the selling process. Once you've determined that the person meets the criteria, he is a prospect and you can move into the next phase of the selling process. 

Whats the Difference Between a Prospect and a Lead?

A prospect is often confused as a lead. A lead is unqualified contact. Any potential client or customer you meet that hasn't been qualified as a prospect, is a lead. In the sales process, you gather leads first, qualify them into prospects, and then move them through your sales funnel or process. 

What is Prospecting?

Prospecting is the act of finding leads and turning them into prospects. Leads come from a variety of places. You can buy lists, skim the phone book or search the Internet, or talk to people while you're waiting in line at the grocery store. In most cases, whatever form you use, your goal is to determine if the person could be come a prospect, by qualifying them on one criteria, usually target market. For example, you can buy lists based on demographics and interests (target market). You can narrow a phone book or Internet search on your target market's interests.

And while you're standing in line, you can strike up a conversation that would get you information about whether or not the lead was in your target market. 

Once you've determined that the lead could be a prospect (fits at least one criteria), you then work to qualify them under the other criteria. This can be done in a variety of ways, including a phone call, in person meeting, online form, email, etc. Your goal is to determine if the lead is a good candidate for what you offer (target market), and has the money and ability to buy. 

Many home business owners end up wasting time on the sales process because they don't qualify leads before trying to sell to them, or they spend too much time on unqualified leads. 

The Sales Process

Prospecting leads and qualifying prospects are just two steps in the sales cycle. An overview of the sales process includes:

  1. Prospecting: Gathering leads.
  2. Qualifying Leads into Prospects. This shouldn't take long and usually involves a few short questions to make sure your lead meets the criteria of prospect. 
  3. Selling Phase: The selling phase of the typical sales cycle begins once there is a qualified prospect. The selling phase can be short or long depending your product, whether or not your prospect wants or needs it, and how well you promote the benefits of what you offer. As a direct sales representative, you might be able to sell your goods during the first presentation. However, when trying to recruit others into your business, that process may require several conversations. With that said, each presentation of your product or service should include a call-to-action and a close. If the prospect say's he's not ready, add him to your list to follow up with later. If he says no, ask if you can keep them on your list and contact them in the future.

    Organizing Your Prospects

    Sales prospects are a business' greatest asset. These are contacts that you've talked with and meet the criteria of your best potential customers. Prospects are a future revenue stream. The best way to track your prospects and communications with them is with an inexpensive Customer Relationship Management (CRM) database. There are many great inexpensive and free CRM tools available.

    Prospect tracking not only allows you to keep information about your prospects, but also, you can input notes on all your conversations, such as their questions and concerns that you can address later. You can add their birthdays and an alarm so you can send a card. You can also keep track of where they are in your sales process. For example, a lead can become a prospect, and a prospect can become a sale, and hopefully a repeat buyer.