What Is Lead Scoring? (Including Types and Models)

By Indeed Editorial Team

Published June 17, 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Lead scoring is the process of ranking sales leads to identify which prospective customers are most likely to make a purchase. This method can help an organization allocate its time and resources and ultimately increase its overall sales. If you're a marketing or sales professional, you can benefit from learning more about this process and how to implement it to drive sales and increase revenue. In this article, we define lead scoring, provide the benefits, highlight two main types, share various models, and explain how to calculate lead scores.

What is lead scoring?

Lead scoring involves assigning a value to a lead when they engage with an organization. You can give points to leads based on different attributes. When a lead gets a predetermined score, sales and marketing professionals consider them ready to approach for a sale.

Every organization has a different method for scoring leads. The most common approach is to create a value system using data from former leads. Here's an overview of how this process works:

  1. Prospective customers, or leads, perform different actions within the sales funnel.

  2. As each action has an associated point value, leads accumulate points based on their behaviour.

  3. Once the lead reaches a certain number of points, they're considered a hot prospect, and the marketing team refers them to the sales team.

Benefits of lead scoring

Certain benefits become evident when an organization's sales and marketing teams apply scoring methods and know how to use their time effectively. Here are some benefits of this method:

Improved sales and marketing alignment

This method can improve collaborative efforts between sales and marketing teams, requiring the two groups to work together. First, both teams define profiles for sales-ready leads and identify which types of prospects they might convert. Then, the marketing team creates programs targeted at these prospects. Next, when the consumers are ready to purchase, the sales team tries to sell to the customer. This process requires feedback and communication between both teams to determine if the leads are converting to sales. If not, the two groups may reevaluate and alter the process until it's effective.

Read more: 10 Types of Marketing to Explore (With Tips and FAQs)

Increased marketing effectiveness

As this method allows you to measure the return on investment (ROI) accurately, you can increase marketing effectiveness. Use this process to identify the channels that produce leads to help you decide how to invest in the future. Using this process might also help you improve lead nurturing, as you can identify which stage consumers are at in the buying process and share targeted content accordingly. Providing consumers with relevant content helps establish trust with the organization and can lead to future sales.

Read more: Creative Marketing Strategies To Consider (With Tips)

Increased revenue

Using this process, you can increase revenue by identifying which marketing efforts drive leads, communicating with leads who are ready to purchase, and improving time management. Knowing whether customers want to buy can help the sales team avoid wasting time contacting customers who aren't. By avoiding contacting consumers who aren't ready to convert to customers, you can improve their overall experience, as they don't feel like the sales team is overly eager to sell. Providing a quality customer experience can build trust with consumers and increase their likelihood of purchasing in the future.

Read more: What Is Revenue? (With Definition, Types, and Examples)

Increased sales efficiency

As this method can give you insight into a customer's willingness to purchase a product or service, the intel can lead to increased sales efficiency. Instead of providing too much information and overwhelming a potential customer who's not yet willing to purchase, this process can inform you when to continue nurturing a lead. Conversely, it can also inform you when it's the right time to contact the customer to sell. For example, using this method, you might uncover that a customer is ready to make a purchase, so you contact them with a promotional offer.

Read more: Developing a Sustainable Sales Process to Close Deals Faster

Two main types of lead scoring

There are two main types of scoring which include:

Rule-based scoring

This type of scoring involves setting up rules based on desired or undesired behaviours or characteristics, such as demographic or organization information. When a new lead triggers one of these rules, you update the lead score accordingly. You can then set up workflows based on lead scores. For example, you may create a system where if one of your leads accumulates a total lead score of 50, the marketing team sends them to the sales team for a follow-up.

Predictive scoring

This scoring type uses software to score your leads based on sales and marketing data automatically. It employs algorithms to analyze past and current customer data to predict likely outcomes and remove the possibility of human error in the scoring process.

Models for lead scoring

Here are the most common models:

Organization information

Specific organization characteristics may make some leads more likely to purchase from one organization instead of others. Once you identify the particular characteristics that make someone your target customer, determine whether there are specific organization attributes that attract a lead and qualify them for a higher score. For example, there may be a certain industry, organization size, or business type that you can associate with a higher lead score.

Demographic information

Demographic information may include age, income level, marital status, educational background, and geographic location. By obtaining this information about your leads, you can determine whether they fit within your ideal target audience. You might also use this information to remove outliers. For example, if you only sell to clients in a specific geographic area, and if you get a lead from outside that area, then they receive a negative lead score.

E-mail engagement

By examining how people on your e-mail list engage with your e-mails, you can associate certain behaviours with a higher or lower lead score. For example, you might note the number of times different people open your e-mails and see who is clicking through to your website. You might also want to give higher lead scores to people who clicked on high-value e-mails, such as trial or demo offers.

Online behaviour

The way someone engages with an organization online can give you a lot of information about how likely they might be to purchase from it. For example, leads who visit a lot of pages on the website or who download a lot of free offers may be highly likely to convert to customers. Also, consider giving higher lead scores to leads who request demos.

Social engagement

The level with which someone engages with an organization can tell you a lot about how likely they are to purchase from it in the future. The more they engage, the more likely they are to make a purchase. For example, if they repeatedly share the organization's social media posts and engage with its accounts, consider giving them a higher lead score.

How to calculate lead scores

There are various ways to calculate a lead score, although manual scoring is one of the most straightforward approaches. Follow these four steps to calculate lead scores manually:

1. Determine the rate for lead-to-customer conversation

First, determine what percentage of leads convert into customers. This figure is the lead-to-customer conversion rate. To calculate this rate, divide the number of new customers you gained in a specific amount of time by the total number of leads you generated during that same period.

Read more: What Is the Consumer Decision-making Process? (A Guide)

2. Select attributes

Next, you can select attributes for your leads. These attributes might be organizations with 20-50 employees, customers who are in a specific industry, or those who requested a free trial. Make use of the most common scoring model. Talk to your sales team to determine which data is the most valuable or is the strongest indicator of a future sale. Uncover which pieces of marketing collateral they typically send their sales leads.

3. Calculate the close rate for each attribute

The next step is to determine the close rate for each of the attributes by calculating the percentage of people with each attribute that eventually became a customer. You can accomplish this by assigning attributes to each of your customers. Then, determine the percentage of total customers who have each attribute.

4. Contrast close rates

The last step is to compare the close rates for each individual attribute with the total close rate, which is the figure you determined in the first step. For example, you may notice that the close rate for customers who request a free trial is 20%, while the overall close rate might be 5%.

Based on this figure, you can see that your close rate for people who request a free trial is four times higher than your overall close rate. With this knowledge, consider awarding four points to customers with that attribute. Ultimately, you can assign whatever score you like to the different attributes as long as it's consistent and based on the close rate.

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