What is the process of identifying potential customers or prospects called?

The term prospecting has its origins in the California Gold Rush. Forty-niners (named for the year these fortune seekers began to arrive in droves) would sift through rocks and dirt, keeping their eyes peeled for the shimmer of precious metals.

Over 170 years later, most of the “prospectors” in San Francisco rely more on their laptops than on their pickaxes. But the sales prospecting methods they engage in today are still aimed at uncovering golden opportunities.

Of course, many of their prospecting efforts simply don’t “pan out.” But if you develop a deep understanding of the process, sales prospecting is still one of the best ways to produce valuable, lifelong customers who will help your business grow.

In this comprehensive guide, we’ll cover:

• What is prospecting?
• The difference between leads and prospects
• The difference between sales prospecting and lead generation
• When sales prospecting takes place
• The importance of sales prospecting
• Inbound vs. outbound sales prospecting
• B2B vs. B2C prospecting
• Who’s responsible for sales prospecting?
• How to prospect
• Tools

What is prospecting?

Sales prospecting definition: the process of identifying and contacting potential customers in order to generate new business.

Prospecting is the way sales reps find and engage with prospects (leads that are qualified) and set the sales process in motion. Sales prospecting can take the form of a cold email sent to someone who fits your buyer persona, a cold call to a consumer in your target demographic, or a message to a qualified lead found on LinkedIn.

The basic steps of the sales prospecting process include:

• Research: Find out everything you can about a potential customer. Specifically, you want to learn how good a fit they are for what you’re selling and how you can craft a personalized message. In the B2B world, research is often done by looking at a lead’s LinkedIn page and social media accounts and reading about their company.
• Qualification: Determine whether a consumer is worth pursuing, and if so, how to prioritize them. Prospective buyers are usually ranked by their likelihood of becoming a customer and/or their potential value to your business. These qualities are typically assessed through lead scoring.
• Outreach: Spend time crafting a personalized pitch for each prospect. This doesn’t need to be a hard sell—you may just send them a helpful resource or informational article, for example. Contact them via the channel you believe they prefer, whether that’s email, phone, or social media.

What’s the difference between leads and prospects?

Though the two terms are often used interchangeably, there’s a subtle yet important distinction between leads and prospects.

The easiest takeaway for understanding the difference? All prospects are leads, but not all leads are prospects.

Prospect vs. lead

Lead definition: any person who may or may not be a good fit for your business.

Prospect definition: any person who has been qualified as a good fit for your business and would consider making a purchase.

Leads are often people who’ve expressed some interest in your brand, services, or products. Perhaps by visiting your website or engaging with some marketing materials, they’ve been identified as potential customers. They fall into the early stages of the sales cycle.

Prospects are people who’ve been qualified as leads worth pursuing. They may have shown a level of interest in your business that automatically qualifies them, like signing up for a free trial or demo. Prospects can also be people who haven’t shown any interest but are still qualified because of who they are, such as an executive at a company in the market for your services.

Though leads and prospects are categorized and prioritized differently, the ultimate goal is the same for both: to nurture them until they convert into a paying customer.

What’s the difference between sales prospecting and lead generation?

Most organizations use a combination of lead gen and prospecting strategies. However, they are still two distinct practices and are traditionally led by two different departments.

Lead generation is largely the responsibility of the marketing department. It’s their job to create content and web experiences that attract leads—such as blog posts, advertisements, videos, webinars, and gated content.

For example, a B2B company’s marketing team might create an ebook or white paper for industry professionals. To access the content, website visitors have to fill out a contact form that asks for their name, job title, company, and email. Using a lead-scoring model, marketing will qualify the lead (which is to say, determine if the lead is worth pursuing). Marketing-qualified leads are then handed over to the sales department as prospects for reps to contact.

This process is largely automated. Many businesses use a CRM to capture and score leads. Each lead is assigned a numerical value based on variables connected to their likelihood to convert. Points are often based on a lead’s status in a company or their website activity (such as whether they visited a pricing page).

Sales prospecting, by contrast, is primarily the responsibility of the sales department. It’s also a much more manual process. For example, a salesperson might find a qualified lead on LinkedIn and then message, email, or call them directly.

That type of one-to-one engagement can be more time- and labor-intensive than the one-to-many approach of lead generation. But it’s also more targeted and personalized, meaning it often reaps more meaningful (and profitable) customer relationships.

When does prospecting take place in the sales process?

Lead generation and sales prospecting both occur at the start of the sales process. A company needs to discover, qualify, and contact leads in order to begin the journey of converting them into lifelong customers.

After prospecting, sales reps move on to the next steps of the sales process:

• Presenting: A sales rep delivers a personalized sales pitch to the prospect (and possibly other key decision-makers) in a sales call or meeting context. The rep must have a deep understanding of the prospect’s pain points and be able to articulate how their product or service will address them.
• Quotation: The rep discusses the terms and prices with prospects who wish to move forward with the deal. After addressing issues like contract length, payment terms, and available features, the rep sends a quote to the prospect. The quote serves as a starting point for negotiations.
• Closing: At this stage, the goal is to persuade the prospect to officially sign a contract. The sales rep may need to attend to last-minute concerns, like adjusting pricing or other details.
• Won/lost: The sales rep has officially closed the deal…or not. Reps who successfully win a sale should keep in touch with the customer and develop a long-term relationship that could lead to upsells or referrals later on. Reps who lose a deal should evaluate what went wrong and work on their lead nurturing tactics.

Why is sales prospecting important?

As the first stage of the sales process, prospecting is fundamental to success. You won’t win over many customers if you don’t have qualified leads to contact.

The more you master the art of prospecting, the more opportunities you’ll have to close deals. According to a RAIN Group study, top performers in sales prospecting secured 52 sales meetings per 100 target contacts. Other sellers generated only 19 meetings per 100 contacts. Additionally, nearly 50 percent of the top performers met or exceeded their individual sales goals, compared to 27 percent of other sellers.

The more you master the art of prospecting, the more opportunities you’ll have to close deals.

Sales prospecting is actually fairly popular with customers as well. The same study showed that over 70 percent of buyers want to hear from sellers early in the sales process.

Of course, it may not feel like that to salespeople. Gartner found that it takes an average of 18 dials to get a prospect on the phone, and only about a quarter of all sales emails are ever opened.

It’s easy to get discouraged, but considering the importance of prospecting, it’s critical for reps to remain persistent.

Inbound vs. outbound sales prospecting

There are two ways to generate prospects. You can take the outbound approach by proactively contacting potential customers to tell them about your product or service. Or, you can adopt the inbound approach by creating and promoting content that will entice buyers to visit your website or reach out to you.

Most lead generation strategies involve inbound marketing, while sales prospecting typically entails outbound sales methods. However, there are both inbound and outbound prospecting strategies reps can use to engage leads.

Outbound sales prospecting

• Cold calling: making an unsolicited call to a prospect in an attempt to sell them on a product or service. This tactic is one of the oldest forms of sales prospecting.
• Cold emailing: sending an unsolicited sales email to a potential customer in order to sell them a product or service or initiate a conversation. Sales emails are extremely common, and reps use a variety of strategies to make their email subject lines and messages stand out.
• Social media prospecting: using social media platforms to research and contact a prospective buyer. People often share personal details and opinions on social media that help reps research and qualify them as prospects. For example, if a lead is promoted to a decision-making role, they might post about it on LinkedIn. Seeing that, a rep might initiate contact with the prospect by reaching out to congratulate them on the new job.

Inbound sales prospecting

• Warm emailing: sending a sales email to a potential customer who’s interacted with your business. The interaction could be as direct as signing up for a product demo or as indirect as spending time on your website’s pricing page. Any interaction that signals some level of interest gives reps a pretext to send a warm email.
• Social selling: using social media to message a prospect who’s engaged with your social media channels. For instance, you might respond to someone who comments on a post or asks a question about your product on Facebook, Twitter, or LinkedIn.

B2B vs. B2C prospecting

Sales teams usually decide how to prospect for sales based on the nature of their business and its customer base.

For example, in the B2C world, cold calling has a bad reputation. Telemarketers have never been particularly well-liked, and phone scammers have made people even more reluctant to talk to strangers. In 2021, a lost mountain climber made headlines when he ignored a rescue team’s calls for over 24 hours because they came from an unknown number.

In the B2B world, however, cold calls are more commonly accepted. Buyers are accustomed to sellers contacting them out of the blue and don’t seem to mind it—over 80 percent say they’ve taken meetings with reps who first contacted them through cold calls.

Generally speaking, outbound sales prospecting techniques are favored by direct sellers from B2B brands. Meanwhile, B2C companies usually experience more success with inbound strategies, including lead generation. But there are a few big-ticket B2C industries—such as insurance, financial services, and real estate—where outbound sales prospecting can be worthwhile.

Who’s responsible for sales prospecting?

The type and number of employees tasked with prospecting depends on the size and budget of the business.

At a young startup without a dedicated sales team, the founder often does everything. That includes lead generation, sales prospecting, nurturing, and closing.

At an SMB, there may be a team of sales pros who do their own prospecting. They might receive qualified leads from marketing, but they’re also expected to research and contact some of their own prospects. They’re responsible for guiding their prospects all the way through the sales process, too.

Large organizations often have entire sales teams devoted to prospecting. Individuals have different roles to play in the process, depending on their job title.

• Sales development representatives: SDRs are typically tasked with generating new leads and prospects through outbound prospecting methods, like cold calling and cold emailing.
• Business development representatives: BDRs usually focus on inbound sales prospecting. They partner with marketing to qualify inbound leads as prospects worth pursuing.
• Account executives: AEs act as the “closers” who actually connect with prospects, make sales presentations, and conduct demos. These reps guide prospects through the final stages of the sales process, answering their questions and concerns and (hopefully) converting them into customers.

Meanwhile, managers must know how many prospects are in the sales pipeline at any given moment. Sales pipeline management allows leaders to track the progress of active deals, see how many qualified leads convert, and forecast future sales. When a sales manager notices a shortage of prospects in the pipeline, they can direct reps to pursue new leads.

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What is the process of identifying potential customers?

Segmenting your customers is the first step in identifying and understanding your potential customer base. Customer segmentation means segmenting your customers into groups on the basis of demographic, geographic, psychographic, and behavioristic traits.

What is a potential customer called?

A company's potential customer is usually referred to as a prospect . It is a person who has the potential to be interested in the services and products that are offered by the company but has not yet purchased.

Which step in sales process means identifying potential customers?

Prospecting The first step in the sales process is prospecting. In this stage, you find potential customers and determine whether they have a need for your product or service—and whether they can afford what you offer.