How Sales Leads Work

By: Dave Roos
Sales leads can be generated by a company's Web site.
George Frey/Getty Images

Whether you're selling jumbo jets or Girl Scout cookies, the basic principle of sales is the same -- there's no sale if there's no client. Finding clients can be an expensive, time-consuming, often failure-ridden process. Picture those poor Girl Scouts going door-to-door with their Thin Mints and Samoas: half the people aren't home; six homeowners just went on a diet; and the competition is stiff (Becky and Nancy are working the same turf!).

The first, and, some say, most difficult task for any salesman is generating sales leads. Sales leads aren't clients; they're potential clients. A sales lead is anyone who has expressed interest in the product or service, whether by inquiring directly through a company's Web site, leaving a business card at a trade show, or by responding positively to a sales call [source: Bitpipe].


Technology has made a tremendous impact on the way that salesmen generate leads. For example, realtors used to rely heavily on costly newspaper ads to generate inquiries. But in 2005, according to the National Association of Realtors, 77 percent of prospective home buyers went online to check out listings [source: Pew Internet & American Life Project]. As consumers increasingly use the Internet to search for home information, real estate agents and other salesmen can spend less time and money on prospecting [source: Realtor Magazine Online].

In this HowStuffWorks article, we'll cover some of the most popular techniques for generating and managing sales leads, including helpful technology for tracking and nurturing leads from first contact to closing.

Let's start by exploring the basics of generating sales leads.


Generating Sales Leads

Many sales leads start with telemarketers.
© Photographer: Andres Rodriguez | Agency: Dreamstime

Generating sales leads is the process of making contact with and collecting information from prospective clients. In larger companies, generating sales leads falls to the marketing department, since they're responsible for creating all advertising and outreach materials. However, in smaller organizations, it's common for salesmen to have to do their own sales lead generation.

There are several proven techniques for generating sales leads:


  • Networking
  • Advertising (TV/print/Web)
  • Telemarketing and teleprospecting
  • Direct mail, fax or e-mail marketing campaigns
  • Web sites and search engine optimization
  • Buying a sales lead list

Generating sales leads traditionally begins with networking. This is as simple as contacting your friends, family, former coworkers and existing clients and asking if they know anyone who may be interested in your product or service [source: startupnation]. These referrals are also called sales tips.

Besides networking, trade shows are excellent opportunities for business-to-business (B2B) networking. By setting up a table at a trade show, you can collect contact information from dozens of potential buyers and business partners [source: startupnation].

Web advertising is fast becoming the most powerful way to generate sales leads. According to Nielsen/NetRatings, in the week of September 24-30, 2007, Web surfers clicked on over 53 billion online ads selling everything from financial services to cars to travel [source: Nielsen NetRatings]. These ads often lead to short surveys or contact forms that can be accessed in real-time by sales representatives. More on real-time and opt-in sales leads later.

Telemarketing and teleprospecting are two similar but distinct methods of generating sales leads. Companies contract the services of a telemarketing firm that employs operators who read from a prepared script. Operators sell a product or service directly to the public over the phone. Telemarketing, unfortunately, has a terrible reputation for being a nuisance (calling during dinner hours, offering products that have nothing to do with the potential client, et cetera) and has led to the creation of the National Do Not Call Registry.

Teleprospecting, on the other hand, is a B2B sales technique that employs trained operators -- either in-house or from a third-party teleprospecting company -- to contact targeted business prospects [source: intouch]. In teleprospecting, the callers don't talk from a script. Instead, they familiarize themselves enough with the product or service to be able to gauge the client's interest. If a client wants to know more, the teleprospector refers the client to a salesman.

The quickest way to assemble hundreds or thousands of sales leads is to buy a sales lead list. There are dozens of direct marketing companies who collect and sell specialty lists for certain business and consumer sectors. The advantage of these lists is that a salesman can get instant access to thousands of names and numbers for a few hundred dollars. The disadvantage is that all these names are unqualified leads, meaning they haven't been analyzed individually to see whether or not they're a good match for the salesman's specific product or service [source: MindTools]. We'll talk more about specialty lists later in the article.

Now let's talk about tracking sales leads and the technology that makes it easier.


Tracking Sales Leads

© Photographer: Andres Rodriguez

Generating sales leads is only the first step in a larger process called the sales pipeline or sales funnel. The sales funnel is called a funnel because it starts big at the top (a lot of potential clients) and gets smaller as you move further along in the sales process.

At the top of the sales funnel are all the unqualified sales leads and sales tips that are generated by the marketing department or salesmen using the techniques mentioned on the previous page. As the salesmen continues to work their way down the funnel -- making first contact, evaluating options and negotiating prices -- many of those initial leads will drop away.


It's important for salesmen to have a well-defined, well-organized system in place for tracking sales leads as they move through the sales pipeline. The more a salesman knows about his leads, the easier it is to offer the right services at the right time. To do this, each lead needs to be tagged or updated with important information to help the salesmen do their job [source:].

For example, has the lead asked for a sample of the product? Has the lead changed addresses? Is the lead planning to initiate a large project in six months?

To keep track of all of this tagged information, many companies use special lead tracking software or other customer relationship management (CRM) programs. Lead tracking software has many helpful features for managing a large number of leads simultaneously:

  • Automatically upload sales lead contact information into a database
  • Easily update and tag leads through Web interface
  • Assign leads to salesmen by geographical area or product type
  • Generate reports on success of different sales campaigns
  • Measure return on investment (ROI) of different marketing techniques
  • Automatically collect and import sales inquiries from Web site and other sources for immediate response

[source: LEADTRACK]

In addition to the standard lead tracking software, a product called SalesGenius offers a new technology for tracking sales leads through e-mail. Here's how it works:

  1. A salesman sends an e-mail to a sales lead using the SalesGenius Web site or by using a special SalesGenius plug-in for Microsoft Outlook. The e-mail contains a special encoded link to the salesman's company Web site.
  2. SalesGenius will alert the salesman in real-time when the lead opens the e-mail and when he clicks on the link.
  3. Since each lead accesses the company Web site using a distinct URL, SalesGenius can track and record exactly which pages the lead views and what links he clicks.
  4. Using an online tool called the GeniusTracker, the salesmen can view which leads are currently on the Web site and even "replay" the pages they viewed to understand better what the lead is looking for.

Products like SalesGenius allow salesmen to capitalize on the timeliness of a lead. There's no better time to make a sale than when a lead is actively searching out information on your product. In the next section, we're going to talk about the advantages and disadvantages of purchasing real time vs. opt-in sales leads.


Real-time and Opt-in Sales Leads

Real-time sales leads allow salespeople to contact leads immediately.
© Photographer: Paul Moore | Agency: Dreamstime

Dozens of companies sell real-time and opt-in sales leads. These companies collect leads online through Web ads, surveys and affiliate programs with online retailers. Let's look at some important differences between real-time and opt-in sales leads.

Real-time sales leads are more expensive than opt-in sales leads because they are sent to salesmen seconds after the lead has filled out an online form or survey. This way the salesmen can contact the lead while the product or service is fresh in the lead's mind. A disadvantage of real-time leads is that there's little time to verify if the lead is a legitimate lead with real contact information and a demonstrated interest in the product or service being sold.


A new development in real-time sales leads is something called voice leads. With this technology, voice mail inquiries from leads are sent directly to salesmen so they can call the lead back immediately.

Opt-in sales leads cost less than real-time leads because they aren't as fresh. But the advantage of opt-in sales leads (or even double opt-in sales leads) is that the lead not only filled out an online form or survey, but responded to a confirmation e-mail. Even if the lead is a couple of days old, at least the salesmen know they have a real name with a real e-mail address. The opt-in process also allows for additional product promotion in the opt-in e-mails.

The prices of real-time and opt-in sales leads vary significantly depending on the industry and type of lead. Real-time real estate leads can cost as much as $60 per lead, while dozens of opt-in leads for a home business like Avon can cost as little as $40 [sources: MyBizLeads and RealTimeLeads].

In the next section, we'll look at business specialty lists, another way to purchase sales leads in bulk.


Using Business Specialty Lists

Business specialty lists help salespeople target leads in specific industries.
© Photographer: Pavel Losevsky | Agency: Dreamstime

Business specialty lists are useful for business-to-business (B2B) sales. Salesmen can purchase lists of businesses and professional contacts in the specific industries to which they sell. Here are some examples of business specialty list categories:

  • Attorneys
  • Doctors
  • CEOs
  • Hospitals
  • Insurance agents
  • Real estate agents
  • Small business owners
  • Female executives
  • Fortune 500 companies
  • Home businesses

The companies that sell business specialty lists gather public information into a database, analyze it and break it down by several searchable criteria, including job title, geographic location, annual revenue, number of employees and something called a SIC or NAISC code [source: Great Database].


Standard Industrial Classification (SIC) codes and the newer North American Industry Classification System (NAISC) codes are used by the government to classify businesses for census and tax purposes. Greeting cards, for example, are 2771 and dental equipment is 3843. With this information, salesmen can request business specialty lists for companies in their geographical area that file taxes with certain SIC or NAISC codes.

SIC codes are standard industrial codes set by the Internal Revenue Service.
Image courtesy Internal Revenue Service

Business specialty lists vary in cost depending on how much additional information a salesman wants about the lead (mailing address, credit rating, lawsuits, etc). For a basic business specialty list that includes 25,000 leads with phone numbers and a primary contact name you can expect to pay around $2,500 [source: USAData].

The advantage of a business specialty list is that a salesman can quickly gain access to thousands of targeted sales leads. A possible disadvantage, depending on the list compiling company's quality, is that a certain percentage of the leads may be outdated [source: startupnation]. Unlike real-time and opt-in sales leads, business specialty lists may have been sitting in the database for years. Even with this long list of leads in hand, a salesman will need to verify and analyze each lead to see if it fits well with the product or services he's trying to sell.

Now let's look at consumer specialty lists.


Using Consumer Specialty Lists

Consumer specialty lists let marketers target specific groups, like new homeowners.
© Photographer: Diana Linden | Agency: Dreamstime

Consumer specialty lists are exactly like business specialty lists, except they contain leads for individual consumers, not companies. Salesmen can buy consumer specialty lists to reach highly desired and targeted demographics. Some examples of consumer specialty list categories are:

  • Recent homeowners
  • People who have recently been approved for a car loan
  • Frequent travelers
  • College students
  • Computer owners
  • Pool owners
  • Weight loss enthusiasts
  • Investors
  • Veterans
  • Bankruptcies
  • Households with children

Consumer specialty lists are compiled by collecting information available from various public resources and private partnerships. Companies selling consumer specialty lists can gather data from the U.S. Census Bureau, the Postal Service, credit bureaus, mortgage data, warranty cards, online surveys and good old-fashioned telephone books [source: AccuData].


Consumer specialty lists are slightly cheaper than business specialty lists, costing around $1,000 for the names and phone numbers of 25,000 people who meet your demographic criteria [source: USAData].

The advantages and disadvantages of consumer specialty lists are the same as with business specialty lists. A salesman is handed a huge list of names, but none of these people have expressed direct interest in the particular product or service being sold. The salesman will still have to analyze the leads to figure out which ones promise to be the most fruitful.

Future of Sales Leads

Since sales leads will always be a top priority for small and large companies, expect to see even more technological innovations for generating and purchasing targeted leads. A recent example is a company called Geosemble that's using satellite data to create highly specialized lists of sales leads.

Here's how Geosemble's GeoPrism service works:

  1. Using artificial intelligence software, the company scours satellite images and aerial photos to find homes and businesses with certain attributes like cracked or damaged roofs and driveways, swimming pools, large empty backyards, et cetera.
  2. By cross-referencing that geospatial information with online maps and city records, the software figures out the contact information for each of those homes and businesses.
  3. Geosemble then sells that information to pool maintenance companies, roof repairmen, concrete specialists, et cetera.

[source: gizmag]

As more and more personal consumer information is added to digital databases, more of our purchases are tracked and tagged (think next-generation RFID tags), and more and more of our private lives are lived online, there's a greater capacity for marketers and salespeople to mine this data for prospective sales leads [source: Pew Internet & American Life Project].

Data mining is the practice of using analysis software to discover hidden patterns and relationships within large data sets, such as figuring out which consumers are most likely to buy a car in the next year. In the future, consumers, retailers and government regulators will have to decide how much personal privacy we're willing to sacrifice for the convenience of targeted sales promotions and free access to online resources [source: Pew Internet & American Life Project].

For more information about sales leads and related topics, check out the links on the next page.