Understanding leads, accounts, opportunities and contacts in CRM world

If you are new to the CRM (Customer Relationship Management) world, it is entirely possible that you get confused in the soup of terminology presented to you. How is a lead different from an opportunity? What is the relationship between an account and a contact? In this post, I will try to shed some light on the important concepts in CRM using examples.

Lead

If you got a business card at a conference or a trade show, and want to follow up with the person on a future sale, that person is called a lead. This is an unqualified contact, since that person has not yet explicitly showed an intention to purchase your product/service. Such leads could come through  various sources – website signups, Facebook ads, purchasing a email list etc. It is important to track the lead source in the CRM, to measure the effectiveness of your various ad campaigns. A lead becomes a contact associated with an opportunity when it has a high possibility of getting through. Depending on your industry, you can set the criteria to advance the lead. For instance, you could set the criteria as promote a lead when the person returns your call and conveys that s/he is in the market for the product.

Leads can be classified into cold, warm and hot leads based on the probability of the lead converting into a future sale. A cold lead is a person you have randomly picked from a phone book. It is quite unlikely that this person will buy from you and you have to pursue many cold leads before you find an opportunity. Warm lead could be someone who has attended your webinar or subscribed to your newsletter. You have to do some work to complete a sale. A hot lead is somebody who is on market for your product and has very high probability of becoming an opportunity.

Account

An account is an entity (individual or an enterprise) with whom you have an existing business relationship. The relationship could be a channel partner, supplier, customer, re-seller etc. Most CRM tools let you track the type of account and also let you segment them into different categories (poor customer, great customer, average customer, etc). It is very important to track all the interactions with the accounts, as a part of customer service management.

Contact

Contact is an individual who is associated with an account or an opportunity. So, how is a contact different from an account? Here is an example. If you are selling goods to Target Inc, then you add Target as your account, while the manager at the purchase department and the VP of marketing can be added to your contacts. Contact always reaches a real individual, while account could be a business entity. Typically there are 1 or more contacts that are tied to an account.

Opportunity

An opportunity could be associated with a contact, when it has a strong prospect of completing the sale. If your accounts purchase from you repeatedly, you can also associate them with an opportunity as they have a high chance of buying from you in the future. Opportunity records tracks the size of the deal (in terms of revenue), probability of closing the deal, followup activity you need to do etc. You can also record the deals that are won, lost and open.

Tracking the opportunities will help you better forecast your financial future and track what went wrong when a deal falls through. For instance, if you are in talks with a local financial provider for selling your analytics software, you can track the probability of closing the deal and other aspects of the deal at various stages of the talks. This can become a template for your future deals.

Balaji Viswanathan

Balaji Viswanathan is the founder of Agni Innovation Labs that helps startups and small businesses with their marketing and management strategy. He has been blogging for the past 8 years on technology, finance and business related topics.

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