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Introduction
Business origination or lead generation is an essential element of every organization that sells products or services, whether those leads come from new prospects or existing customers. Inevitably, some leads are better than others in that they eventually convert to bookings. Most sales managers believe that they understand the key observable lead characteristics (e.g. whether or not there is an approved project, whether or not the project is funded, presence or absence of competition, urgency) that determine whether or not a lead will convert; however, few sales managers validate their assumptions or use quantitative tools to determine conversion probability of individual or aggregate leads. Further, there is no strong literature consensus or generally accepted lead conversion theory that can be used for guidance. Thus, determining which characteristics are important is usually an educated guess based upon the sales manager's personal experience, gut feel, and the sales literature he/she has recently read ([15] Hornstein, 2005; [18] Jolson, 1988; [2] Beam, 2006). These guesses are sometimes right and sometimes wrong. Errors in lead quality assessments cause sales and marketing managers to misforecast bookings, focus resources on the wrong leads, and suboptimally structure marketing and promotion efforts. It would be beneficial if there were both a reasonable lead conversion theory and an easy-to-use quantitative modeling tool that accurately predicts the probability that a lead will convert to a booking based on observable lead characteristics.
In this paper, weaknesses and gaps in past lead characterization models are identified, as well as generally accepted guidelines that are shared by most of them. Then a literature-based integrated theory of customer purchase behavior is used to develop a fundamental theory of lead characterization and qualification. The results should prove useful to sales and marketing practitioners who would like to improve the accuracy of sales forecasts, determine how many resources to apply to specific sales opportunities, and develop strategic sales and marketing plans. The theory may also be used as the basis for the development of quantitative lead characterization models, which is planned for future work.
Lead characterization modeling - review of the literature
For present purposes, a lead is defined as "a recorded expressed interest in the company's goods or services", irrespective of whether that interest is from a new prospect...