What is the difference between prospecting and lead generation?

Is prospecting different than lead generation? What is the difference? -Thomas

Prospecting is a term we use on the sales side when we seek to find qualified prospects whom we hope to turn into client. Activities such as networking, cold calling, referral generation fit here.

Lead generation is a term that comes from the marketing side of the business. Technically, lead generation activities are the marketing department efforts to generate leads for the sales force. Things such as advertising, direct mail, publishing white papers, pay per click, etc.

Most salespeople use the terms interchangeably since on a very small scale we engage in both and most salespeople don't distinguish between the various activities. In reality, for salespeople prospecting, marketing, lead generation mean basically the same thing. The only time you really have to worry about the technical definition of lead generation is when you're speaking someone from marketing. -pmccord

What the salesperson does is prospecting and what the company does is lead generation? That's not exactly what you said but is that the same thing? -Thomas

Basically, the answer is yes because of scale.

When you send out a direct mail piece to 1,500 people, you're engaged in a traditional lead generation process, but on a tiny scale. When the company sends out 10,000,000 pieces, that's lead generation as marketing sees it.

When you send out your small mailing you're looking for leads for yourself, you're prospecting for your next prospect. When the company sends out their huge mailing, they're looking company wide, for the entire sales force.

But cold calling can be corporate lead generation also. When you cold call, you're looking to set an appointment for yourself. You're prospecting for your prospects. If your company has a cold call center where people are cold calling setting up appointments to be worked by the sales force, that's lead generation.

Your activities are geared towared your personal sales. The company is getting leads for anyone who will work them--or for the house in some cases, cutting the commissioned sales force out the loop. -pmccord

I hope that wasn't too ignorant of a question but some books say prospecting and some say lead generation and some say prospect and lead generation. Another mystery solved. thmbp2; -Thomas

Excellent thread.

Chuck -Sales Pro 1000

Not an ignorant question at all. The sales side of the business doesn't have a lot of well defined terms like the marketing side does. We tend to use words imprecisely, which is fine most of the time. So, we use marketing, lead generation, and prospecting interchangeable. The books you are reading probably are doing the same. The only time you have to think of the marketing meaning of the word is when you're reading something written by someone from marketing--then, just think big picture, not individual. -pmccord

In my humble opinion, Lead Generation is a practice that results in barely to highly qualified leads, depending on the approach. While prospecting qualifies at the same time.

A big challenge facing companies right now is that the marketing department is so hung up on lead-generation metrics, that they often deliver poorly qualified leads, which in turn costs a lot more than whatever price tag came with that lead.

It's difficult (but crucial) to measure the success rate of lead sources to determine if money is being spent in the right places. Even the largest sales organizations have a hard time doing that.

I'm on a tangent now, but I think if salespeople will actively let the marketing department know what is working and what isn't, they will find a much more successful relationship.

Justyn -Justyn

Justyn,

You are certainly correct that marketing is hung up on ROI without taking into consideration the quality of the leads--metrics are the only things that matter for some in marketing. It's what they get paid on--and they can always shift closing issues to sales, which they do. They argue that they get the leads and the damn sales department doesn't know how to close them.

The problem with having sales let the marketing department know what is working--or what will work, is that many in marketing make the assumption that sales doesn't know what it is talking about. After all, they reason, who has the MBA? It's the traditional squabble between marketing and sales. The problem is that many in marketing still haven't figured out that salespeople are far closer to the prospect and client than marketing and because of that, they just might have an inkling of what works.

Fortunately, some companies are really beginning to get the two departments together, with great success in their numbers, including marketing metrics.

Traditional marketing dept vs. sales dept companies would be much more successful if they found a way to get the two of them to cooperate instead of fighting one another.

Wow, the above sounds like I'm anti marketing department. I'm not. But the reality is that when marketing is paid on ROI for the lead, not the converstion of the lead, their only concern is getting numbers, not quality. Compensating marketing and sales both based on lead conversion might make sense for many companies. -pmccord

Excellent points!

Seth Godin has a great post on his blog titled "Nine things marketers should know about salespeople". It's great to see a 'marketer' of his stature addressing the issue.

I don't think I can post a link, so I'll just paste the article. I'm pretty sure Seth will forgive me, just be sure to visit his blog!

[Copyrighted material removed by Moderator] -Justyn

If I'm sending out direct mail and the company is sending out direct mail how would I be qualifying and the company isn't? :cu -Thomas

I would consider sending direct mail to unqualified targets 'lead generation'. I consider prospecting to be a two-way interaction, but that's just my interpretation. Probably has a lot to do with my surroundings ;sm -Justyn

Would direct mail to qualified targets be prospecting? What did you mean by two-way interaction? -Thomas

I think I would consider direct mail to qualified targets prospecting. Depending on how they were qualified. I think it comes down to my version of symantics on prospect vs. target. I consider a target to be someone who fits my general demographic, and a prospect to be someone who has expressed an interest/need for what I am selling (either by thier own accord, or through my companies lead generating efforts). In my opinion, once they have shown interest, they become a prospect. We have extended a message, and they have responded (two-way interaction).

It really is symantics though, so I don't stand by my interpretation with any vigor.

Justyn -Justyn

Direct mail to a target would be lead generation and direct mail to a prospect would be prospecting? -Thomas

It could be, assuming the message to the prospect was tailored to the interest they have expressed. A general message to prospect would be marketing, brand awareness, top-of-mind marketing.

In my world, my marketing department would handle direct mail to a prospect (or target), I would interact via phone, personalized email or in person. I have thousands of targets, and only a few dozen prospects at any given times.

I think the difference between lead generation and prospecting has a lot to do with how your company views each activity, and defines a 'prospect'. -Justyn

I view one as generating leads and the other as sifting through the leads generated. ;co -Houston

I look at lead generation as approaching "suspects" in some manner. If they show an interest, they become prospects because they're willing to participate in the sales process to some degree. -rogerbauer

I would call it a moronic practice. If I knew that the people I'm sending the letters to are unqualified, I would be an idiot to send the letter.

Thoughts? -Bald Dog

shds; Sending letters to unqualified recipients is very similar to traditional advertising where you're blasting out a "message" in hopes that someone pays enough attention to take action. While I wouldn't call that practice "moronic" per se, there are better ways to spend your time and money when prospecting. -rogerbauer

Finding qualified prospects by sending sales letters to people you have reason to believe will become clients doesn't sound moronic to me. -Jolly Roger

This is good. This is not indiscriminate letter-blasting but selection based on pre-defined criteria. -Bald Dog

Until I know that these prospects are ready, willing and able to buy from me now these are still unqualified targets. -Jolly Roger

That is not "moronic" by any stretch of the imagination. As long as there is a pre-qualification process, it's not a blind shot in the dark which means you have a fighting chance at turning them into a customer at some point.

What kinds of hit rates are you seeing from your direct mailings? How many people are you targeting per mailing? Are you targeting multiple people within the same company by chance? -rogerbauer

With a good letter I can hit 25% plus response rate. It's high because I'm not prospecting for instant purchase. My first contact is a white paper and it revolves around a specific "trigger event" about the company I've read in the paper or seen on TV.

Then I contact multiple people at the company but at CXO level. I avoid procurement because I never bid.

Yes, but I customise the message from each of their perspectives. The CTO's letter talks about technical problems. The CEO's letter talks about dropping stock prices. So, upon reading my letter, each CXO can understand the problem from their own standpoints. It's pretty neat. -Bald Dog