Marketing Planning

Prospects vs. Leads – What’s the difference and why should I care?

I’ve talked to many sales and marketing professionals over the past decade about tactics and tools they use to generate more business. I’m always a little surprised when someone tells me they…

Estimated Read Time:  5 minutes


I’ve talked to many sales and marketing professionals over the past decade about tactics and tools they use to generate more business. I’m always a little surprised when someone tells me they purchase “lead lists” but do not do any sort of inbound lead generation. What they are buying is actually a list of prospects that their sales team will need to actively contact, whether that is through cold calling, mailing letters or online outreach.

When a lead comes to a business, it’s a much different sales process since people do up to 80% of all of their pre-sale research before ever talking to a salesperson. By the time a lead comes to you, they already know what they want and have identified your company as an option to solve their problem.

So What’s the Difference Between a Prospect and a Lead?
A prospect is an individual or company who fits the criteria your company has designated as an ideal customer. Typical traits include demographics like age and income range, where they live, their family situation, as well as traits like industry and business size.

A prospect may or may not know they are in need of your product or service and have not shown any particular interest in your business. When you hear the term “cold calling” it refers to contacting these people.

A lead, however, is someone or a company who raises their hand and says, “I want to talk to you.” Sometimes a lead comes in the form of a phone call, an email, a web form submission, or they show up to your store. Leads know they have a problem and are actively looking for a solution. They’ve identified you or your company as someone who can help solve their problem and are evaluating whether or not they should work with you.

2 Sales vs. 1 Sale to Close the Deal
With a prospect, there are essentially two sales. The first sale is educating the person that they have the problem that your company solves. In my world, it’s showing construction companies that they are losing money by either
A) not being found by Ideal Customers who turn to the internet to find a reputable contractor, or
B) turning off potential Ideal Customers who correlate an outdated and unprofessional website with poor craftsmanship

After convincing a prospect that they have a problem, the next sale is demonstrating to them that your company is the best option to solve the problem.

Taking a Step Back and Looking at the Bigger Picture, the Sales and Marketing Funnel
When trying to figure out what the best mix of marketing tactics is for your company, you need to remember the big picture and refer back to the sales and marketing funnel. The sales and marketing funnel has awareness at the top, consideration of alternatives in the middle and finally purchase at the bottom.

Understanding the difference between a lead and a prospect, as well as outbound and inbound sales, is necessary when creating your marketing plan. A prospect is higher up in the sales funnel, meaning you’ll need to move them further through the process to get them ready to buy.

Leads – Bottom of the Funnel
The most successful companies start by capturing as many opportunities from the bottom of the funnel as possible. Obviously, people who are ready to buy and are reaching out to you tend to close the fastest. These people or companies, by definition, are leads.

A strong inbound marketing plan will fill your pipeline with leads who are ready to talk to you. It’s not easy to build a website that attracts ideal customer leads, but it certainly pays major dividends in the long run. The skills needed to create a successful inbound campaign include web design and development, SEO, possibly PPC and social media, writing, video production and talent, and more.

Prospects – Top of the Funnel
The next step is to start “planting seeds” as we refer to it around here. Planting seeds means focusing on the top of the funnel and building awareness with prospects. Since these people have never heard of you and are not necessarily looking for your product or service, it requires a different message and skill set than what’s needed for a lead generation campaign.

A successful outbound campaign, designed to turn prospects into leads, involves proactively reaching out to people and companies who look like they could be one of your ideal customers. Skills needed include web design and development, potentially social media, writing, print design, cold calling, and door knocking.

So, What’s Best For My Company?
Ultimately the best companies use a combination of both, but you need to look at your organization to determine which is best for you. Here are the questions you should ask yourself before choosing one tactic or the other:

Am I capturing as many leads from my website that I would like?

If yes, it’s time to prospect. If no, it’s time to build up your lead machine.

Do I think my ideal customers search for the products or services I sell online?

If yes, you better make sure your online presence is optimized for converting leads. If no, read the question again.

Do I have or want to spend the resources on salespeople on staff to actively pursue prospects?

If yes, it’s time to prospect. If no, it’s time to build up your lead machine and train people to respond to incoming leads.

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