A Checklist: How to Measure Lead Quality

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Turning down poor-quality leads isn’t a crime. It’s a smart and strategic decision that can prevent you from having higher customer acquisition costs (CAC), dealing with predatory customers, missing lucrative opportunities, and more.


Discover what high-quality leads entail, their impact on your business, and how to define them.

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Why Lead Quality is Important

Lead quality is something that’s preached consistently in sales. Everyone knows that lead quality is important, but that fails to make a measurable impact when crunch time hits. When a negative triggering event occurs, lead discipline goes out the window.


Crises that impact lead quality:


  • External pressure: An economic crisis – deflation, recession, crash, or depression, alters customer behavior. Customers spend less, conserve resources, and are less willing to commit. As a result, sales teams are starved for leads over time. 
  • Internal crisis: Corporate bankruptcy, restructuring, mergers, acquisitions, etc., disrupt sales flows. Sales teams are forced to reorganize and restructure themselves. Leads can be lost, ignored, or change hands; what one sales team views as ‘qualified’ may be viewed as poor by the new team.  
  • Poor market fit: Many organizations treat market fit as a static target. They assume that customers who are satisfied today will be happy tomorrow, but this is inaccurate. If customer expectations drift, but your organization fails to follow, your high-quality leads become poor-quality leads. 
  • Poor sales process: Customers expect a rapid response when they reach out to your organization. They use these response times to evaluate your company. Poor sales processes mean leads go stale. What started as a marketing-qualified lead becomes a stale and unqualified lead due to slow response times. 
These crises are subtle, but the impact is devastating. This can’t be overstated; poor lead quality has a (negative) compounding effect on businesses. 


The consequences of poor lead quality include: 


  • A loss of revenue: 97% of your leads are not yet ready to buy, and poor quality leads divert your attention away from the 3% of active buyers who are eager and ready to buy.
  • Increased customer acquisition costs (CAC): Unqualified, poor-quality leads decrease ROI,  forcing you to spend more to acquire a single customer.   
  • A loss of qualified leads: Time wasted on poor, unqualified leads means your sales team spends less time with the 3% of buyers who are ready, willing, and able to buy. This means that good leads will probably be missed or ignored. 
  • More predatory customers: Organizations with a strong brand identity get the prices they ask for. Poor lead quality changes that; with low-quality leads, you get customers who demand discounts, push for concessions, and set unreasonable expectations. These incentives erode profit margins further, making it harder for companies to grow.
  • A growing inability to compete: Imagine that each lead you receive costs you $64 however, your competitors per lead cost is $16. This means your competitor can generate 4x as many leads as your company. How long can you keep up with competitors like these?

High-quality leads aren’t nice-to-haves; They’re an essential component of the sales pipeline.  The more you prioritize this, the easier it is to convert quality leads into well-paying customers.


What is Lead Quality?

A quality lead is a qualified leadLead quality is an indicator; it answers the following questions.


“Is this prospect likely to become a customer? What’s the likelihood they’ll make a purchase?” When it comes to qualified leads, it’s all about degrees. 


This is a general overview of contacts in your pipeline, but it’s a necessary place to start. 


At the macro level, qualified leads are prospects who are willing, able, and ready to buy. These prospects display many of the characteristics that are present in an ideal customer. They’ve shared their contact information with your company, requested information, and expressed an appropriate level of interest in getting the relationship started. 


At the meso level, we have marketing qualified leads (MQLs). These prospects have provided the appropriate behavioral cues and outcome markers. These cues and markers signal intent showing marketing teams that they want to purchase. These cues and markers include actions that signal conversion intent: 


  • Adding products to the shopping cart
  • Signing up for a free trial
  • Requesting a product demo
  • Downloading lead magnets 

MQLs are a great indicator of lead quality because they’re based on action.


At the micro level, we have sales qualified leads (SQLs)


Gartner describes SQLs as “a prospective customer who has moved through the sales pipeline – from marketing-qualified lead through sales-accepted lead – to a position where the sales team can now work on converting them into an active customer.”

What does this mean? 


Your customer has signaled that they’re interested in making a purchase, and they’re ready to negotiate with a member of the sales team. If your leads have undergone this three-step qualification process, they’ve self-identified.


They’ve stated, via behavioral cues and outcome markers, that they’re a high-quality candidate. 


This is what you need. 


If your leads make it to this point, it’s safe to say that you have a quality lead. 


But why?


What specifically is a quality lead? How do you define or measure that quality?


How to Define Lead Quality

It’s about identifying your lead sweet spot.

Remember how we approached this from the macro, meso, and micro levels? That’s the same approach we’ll need to take here. To define a quality lead, we’ll start by asking four questions.

  • Who do you want as a customer?
  • What are you willing to spend to attract/close them? 
  • What do these customers want/expect from you?
  • How urgent is their need?

These questions are intentionally broad. 


They’re designed to create an internal conversation about the kinds of criteria your MQLs and SQLs need to meet consistently. Let’s take a more in-depth look at these questions.


1. Who do you want as a customer?

Marketing should have a clear sense of the demographics, psychographics, firmographics, and ethnographics of a prospect who’s willing, able, and ready to buy. Sales should have a clear sense of the steps customers need to take to earn their place in the sales pipeline. 

Both groups should be able to identify important red flags (e.g., knowledge vampires, tire kickers, discount/price shoppers).


2. What are you willing to spend to attract/close them?

You should have a clear idea of your breakeven cost-per-lead. If your monthly marketing budget is $5,000 and you receive 100 leads, your cost-per-lead is $50. If you’re selling a product that’s $150, that’s probably pretty affordable. 

What if you’re selling a product that’s $45? 

Well, that’s obviously not going to work now, is it? Your sales and marketing teams need to know what your breakeven cost-per-lead is.

Here’s why.

Assessing lead quality is straightforward when you know your breakeven cost-per-lead. If your breakeven cost-per-lead is $50, your product retails for $60, but your customer is demanding a 50% discount, you don’t have a quality lead.


3. What do these customers want/expect from you?

Your prospects have specific expectations from you. These expectations come in five distinct categories. 

  • Competency expectations: Your company should be an expert in your field, your employees should be masters of their craft, and your product knowledge should exceed expectations. You should have answers to their questions and solutions to their problems. 
  • Support expectations: Everyone on your team, from your salespeople to your support team, should be available, attentive, and engaged. They should be fully invested in the customer/provider relationship and eager to assist customers with their questions, concerns, or problems. 
  • Performance expectations: Your product or service should exceed their expectations. You know, the usual stuff – under-promise and over-deliver, on-time, under-budget delivery with consistent results. Your content should set a high bar that you continue to meet. 
  • Fulfillment expectations: Your product or service should be delivered as promised, within the expected timeframe, and at the expected price. 
  • Service expectations: When something goes wrong or your customers need help, they expect you to be ready to solve service-related problems. Maybe the service wasn’t as expected, something went wrong, or someone wasn’t performing as expected. They expect you to come running, tools in hand. 

These are the expectations customers have. 

The better you are at clarifying these expectations upfront during the sales process, the easier it will be to attract and convert new customers.


4. How urgent is their need? 

Remember the 3% rule? 

In a previous blog post, we mentioned that only 3% of your customers are ready to buy. 

This means 97% percent of your customers are not ready to buy. Here’s a quick recap of the 3% rule.


quick recap of the 3% rule


The 3% Rule shows you how to spend your sales team’s attention and time. 

Here’s a breakdown you can use to quickly assess lead quality. 

  • 3% active buyers: Your sales team should spend most of their time with these prospects. These prospects are SQL; they’re interested and ready to move forward, displaying an appropriate sense of urgency. These prospects are actively engaged, so your sales team should engage with manual follow-up
  • 7% intend to change: These prospects aren’t quite ready to begin the negotiation process. They’ve expressed their desire to make a change, but they’re still in the early stages. Your sales team should nurture these leads, sharing content that teaches them how to find the right provider (you). This means automated and semi-automated follow-up until they earn their place on the 3% list
  • 30% have a need, not ready to act: These prospects should be sent back to marketing for nurturing. These prospects need consistent content that’s focused entirely on their needs and the problems they’re trying to solve. It’s not a time for sales pitches or offers, the primary focus should be education. 
  • 60% who don’t have a need or are not interested: These prospects should be added to your do not disturb list if they show infrequent engagement or removed from your list if they’re completely disinterested. This list includes disgruntled customers, competitors, suppliers, and pundits. Follow-up with unqualified prospects who are not interested is a waste of time.   

What does this mean, then?

It means that, on average, 40% of your prospects are interested in making a purchase decision at some point. Using this response protocol, we see that most of your leads will require consistent nurturing/follow-up.


What About Lead Quality Measurement?

When it comes to measuring lead quality, there are a few ways to measure it. Here are some steps you can take to measure the quality of your leads. 


  • Vet your MQLs: You’ll want to make sure that the leads you receive from marketing fit the predetermined parameters you’ve laid out. You’ll want to screen your leads ahead of time so your team doesn’t end up with a large batch of poor-quality leads. 
  • Set parameters for SQLs: These are the minimum parameters your prospects must meet to qualify as a high-quality lead. If you’re running a manufacturing company, your parameters could be small ecommerce clients in the outdoor space, with a first-run budget of $75,000 and direct access to the owner or C-level executive
  • Track win/loss ratios: Use a CRM system to track your win/loss ratios. You’ll want to see that your prospects meet or exceed your set parameters. You’re on the right track if most of your prospects are close to your parameters. To calculate your win/loss ratio, simply divide your wins by your losses. 
  • Track conversions by medium: Identify the medium that works best and relay that to your sales and marketing teams. This could be paid search, organic search, direct mail, social media advertising, email marketing, etc. You’ll want to identify the medium that produces the greatest return at the lowest possible cost. 
  • Track conversions by source: Use your CRM to track win/loss rates and conversions by lead source. You’ll want to share this information with your sales and marketing teams, doing what you can to identify your best-performing lead sources. 
  • Track revenue by customer: This is a tally of the total revenue earned (grouped by customer) in a given period. This enables you to identify your most profitable customers. This is valuable intel, especially when combined with your most profitable lead sources.  
  • Track average order values: This is the average amount your customer spends with each order. As a general rule, the more customers spend, the better. Divide your total revenue by the number of orders to calculate your AoV. 


Can you see what’s happening? 


Measuring lead quality enables you to look forward and reason backward. You can identify the lead criteria you need to generate revenue and growth for your company.


Poor Lead Quality is Optional

High-quality leads aren’t simply a nice-to-have; it’s an essential component of the sales pipeline. 

The more you prioritize this, the easier it is to convert quality leads into well-paying customers. 

As we’ve seen, 40% of leads are poor-quality leads. These leads create revenue leaks, stealing revenue and opportunities from your business. Most businesses are starved for lead and find it difficult to turn down a bad lead.

Use this guide to measure lead quality and boost sales by 15-50%.

Pipeline helps 18,000+ companies like yours decrease time-to-close, increase productivity by 50% or more, and 10x sales. Let us show you how Pipeline can help you win more customers and deals. 

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