Cold Leads have low Conversion Rates, but Qualified Leads Improve Sales

Marketing is a complex science, based distinctly on analyzing human behavior. There's a large body of research, as well as plenty of anecdotal evidence, that suggests that buyers don't like being cold-called for advertising purposes. Combine that with the legal landmines of unsolicited phone calls that exist under US federal law, and you'll find that cold leads are far more costly and frustrating for everyone involved, with a return on investment that quite often isn't worth it.

Meanwhile, qualified leads can vastly improve sales. Your business will find a greater amount of success when you work from a list of prospects who have already shown an interest in your products or services.

The comparative weakness of cold leads and the strength of qualified leads is self-evident when you look at the breadth of marketing data. Cold leads have poor conversion rates, while qualified leads result in vastly improved conversions.

Types of Leads: Warm, Cold and Qualified (Hot)

There's a surprising amount of disagreement about what exactly constitutes a lead level. However, here are a few basic definitions to help you get a broad understanding of what type of leads you may be looking at as you develop your marketing strategy.

Cold leads

Any prospect who has never engaged with your company is considered a “cold lead”. These are prospects you may have obtained the contact information for through various indirect means, such as purchasing a lead database, or who you're targeting using carpet-bombing or shotgun marketing techniques.

When you make calls to these leads, they're going to be cold at the outset. After all, the lead may have never heard of your business, and you may not even be fully sure that the lead is particularly interested in your services.

Some marketers will also describe cold leads as those who have engaged with your product or service in the past but haven't had any meaningful interactions, such as filling liking or commenting on social media posts, or filling out contact forms.

This is a bit of a tenuous definition, however, as someone who has Googled a search term and landed on your website is certainly not “cold”. That person has been thinking about your product or service, or something similar to it.

A cold lead should be considered any prospect who has never taken an action that brings them to you; instead, cold leads are those you've discovered using outbound, rather than inbound marketing efforts.

Warm Leads

Warm leads are those who have interacted with your business in various ways. They may have liked and followed your social media accounts, or even found you by clicking on an advertisement.

When you engage with a warm lead, you're engaging with someone who has shown at least a marginal amount of interest in your products or services. When viewed through the lens of persuasion theory, your warm leads are far more likely to be receptive or at least neutral audiences than they are to be hostile ones.

By contrast, purely cold leads may be receptive, neutral, or hostile, but there's simply no way to know. You're more likely to encounter leads that turn negative based purely on your marketing methods when you engage in cold lead generation.

Qualified (Hot) Leads

The best leads are those from individuals who have had more than just an indirect interaction with your business. They haven't converted quite yet, but they've actively and often independently sought information about your company or similar companies. They may have commented on your social media posts, and are verified to have performed online searches for topics that led them directly to your landing pages.

These are the prospects who may have spent a significant amount of time on your website and may have clicked several internal links on your website as they gather more information about what you provide.

Qualified leads are “hot”, as they're often the leads that have found you through your inbound marketing efforts. They're distinctly interested, bottom-of-the-funnel prospects who could just need just a small push toward conversion.

Conversion Rates Tell the Story

The data tells a compelling story about whether you should be focusing your marketing efforts on cold, warm, or qualified leads.

Cold lead conversion rates are abysmally low, at around 1-3%. You'll have a difficult time finding anyone willing to admit their cold lead conversion rates as well. They're so low as to be an embarrassing bit of data to share. While there's certainly room for cold lead generation, it's not the most efficient marketing method. The numbers simply don't pan out well for cold leads for the vast majority of industries.

Warm leads have conversion rates that can exceed 14%. There are numerous strategies to generate warm leads, which notably include SEO-driven inbound marketing strategies. Driving traffic to your website and generating interest on social media is important, as those leads are far more valuable rely much less on guesswork.

Qualified leads can result in conversion rates around 60%. There are no two ways about it. When leads have shown a clear interest in our product or service, they're far more likely to convert with the right messaging and techniques. The most valuable qualified leads are gathered heavily through inbound marketing strategies, or generated through trustworthy referrals.

How to Find Qualified Leads

All leads are cold at some point in their journey with you. But spending vast resources to market to them while they're still cold means you're casting a wide net in a large school of fish, hoping to get the rarest one, but relying mostly on luck.

Instead, focus your marketing strategy on leads that you know already have an interest in your produce or service. The biggest hurdle you may face is finding those qualified leads. If they aren't filling out contact forms, you may not be able to know who they are at all.

Your traffic data is the best source of qualified lead generation. Raek employs an AI-generated lead generation tool across your site to help you easily identify site visitors. While traffic data is often anonymous, Raek's simple code can match your website visitors with verified full names, email addresses, and mailing addresses. You can then retarget those leads and experience vastly improved sales over cold lead generation.