Marketing Intelligence & Planning

Industrial sales lead conversion modeling

Jamie P. Monat
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Jamie P. Monat, (2011),"Industrial sales lead conversion modeling", Marketing Intelligence & Planning, Vol.
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MIP
29,2
178
Received November 2009
Revised February 2010,
April 2010
Accepted November 2010
Downloaded by Chinese University of Hong Kong At 10:48 21 March 2016 (PT)
Marketing Intelligence & Planning
Vol. 29 No. 2, 2011
pp. 178-194
q Emerald Group Publishing Limited
0263-4503
DOI 10.1108/02634501111117610
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/0263-4503.htm
Industrial sales lead
conversion modeling
Jamie P. Monat
Department of Corporate and Professional Education,
Worcester Polytechnic Institute, Worcester, Massachusetts, USA
Abstract
Purpose – This paper seeks to develop a theory and a practical qualitative modeling tool that
accurately predicts the probability that an industrial sales lead will convert to a booking based on
observable lead characteristics and one that can be used by a typical sales manager.
Design/methodology/approach – Past lead characterization models were reviewed and gaps and
weaknesses examined. A qualitative model of lead characterization and qualification was then
developed based upon the determinants of customer purchase decisions.
Findings – In total, 16 commonly available lead characteristics that represent proxies for the eight
determinants of industrial customer purchase decisions were identified. These were adapted to a scoring
model that enables sales and marketing personnel to assess the probability that a lead will convert to a
booking.
Research limitations/implications – Different companies use different criteria and different
weighting factors for making purchase decisions; therefore, no single quantitative lead characterization
model will be accurate for all companies. The proposed model has not yet been formally field validated,
but that is planned for future work.
Practical implications – The qualitative model proposed herein is more comprehensive than
previous models and should thus prove more accurate. This should prove useful to sales and marketing
managers, who need to forecast bookings and sales, optimally allocate resources, and structure
marketing and promotion efforts for maximum return.
Originality/value – Several lead characterization models have been proposed in the past, but none are
based upon sound theory and none have been field validated. Use of this work should significantly
increase selling effectiveness as well as the accuracy of sales projections.
Keywords Sales, Sales forecasting, Consumer behaviour, Buying behaviour, Industrial services
Paper type Research paper
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 (Hornstein, 2005;
Jolson, 1988; Beam, 2006). These guesses are sometimes right and sometimes wrong.
 Errors in lead quality assessments cause sales and marketing managers to misforecast Sales lead
bookings, focus resources on the wrong leads, and suboptimally structure marketing conversion
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 modeling
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, 179
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,
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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 or from an
existing customer. The essence of a lead characterization theory is the determination of
which independent observable lead characteristics have a significant impact on the
probability of lead conversion to a booking, and why.
Although there is extensive literature on customer buying behavior, there is a surprising
paucity of literature regarding the characterization of sales leads, and no predominant
unifying theory has emerged. Furthermore, corroborative data are almost non-existent. But
the buying behavior literature does provide some useful information on the “determinants
of customer purchase decisions” which may, in turn, be useful for lead conversion
modeling. First, the extensive literature on customer buying behavior is reviewed;
subsequently the much more limited literature on lead characterization is reviewed.
Among the customer buying behavior theories are Robinson et al.’s (1967) “buy class”
model which suggested that there are different types of purchase situations: straight
rebuy, modified rebuy, and new product purchase, and that industrial purchasing
is a process that goes through several phases such as need identification, alternative
solution identification, alternative solution evaluation, and finally a purchase decision.
This and similar transaction-based theories focused on “task variables” such as price,
quantity, quality, service, and delivery, and argued that the purchase decision was
based on logical analysis of the task variables (Bonoma et al., 1977). But some
researchers realized that there was more to purchase decisions than pure logic and that
organizational, psychological, and social factors must be considered along with task
variables (Webster and Wind, 1972; Sheth, 1973; Qualls and Puto, 1989; Anderson and
Chambers, 1985; Quigley et al., 1993; Davis, 2000). These theories introduced the concept
of a decision-making unit (dmu) in which the purchasing decisions were shared among
several factions (such as purchasing, R&D, and accounting). Webster and Wind (1972)
discuss the specific roles of users, influencers, deciders, buyers, and gatekeepers as
constituents of a typical dmu. Sheth emphasized the conflict-resolution aspect of
joint decision making for industrial purchases. These modifications yielded some
improvement in the ability to model purchasing behavior; however, the resulting
 MIP increase in complexity made use of these results cumbersome, and still did not provide
29,2 an accurate, practical model.
In the 1990s and 2000s, researchers started to de-emphasize transaction-based selling
models and emphasize instead relationship-based models. These contemporary models
explore customer lifetime value and add strategic relationship variables such as trust,
commitment, loyalty, and customer satisfaction to the list of important variables
180 (Sharma, 1997; Tanner, 1999; Reinartz and Kumar, 2003; Venkatesan and Kumar, 2004;
Landry et al., 2005; Dickson et al., 2009).
In addition to those already mentioned, there are other theories of industrial customer
purchase decision making, including the reward/measurement model (Anderson and
Chambers, 1985), the participation-influence model (McQuiston and Dickson, 1991),
prospect theory-based models (Qualls and Puto, 1989), role theory models ( Johnston and
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Bonoma, 1981), organizational buyer choice theory models (Tanner, 1999), and selling
formula theories. There is both substantial disagreement and substantial overlap among
the many theories (Tanner, 1999; Johnston and Lewin, 1996; Harmon et al., 1997).
The large body of often discrepant literature may appear confusing to a practitioner who
is trying to make good decisions about qualifying sales leads. However, despite the
large number of different theories and the difficulty in selecting the “right” one, there are
widely agreed-upon “customer purchase determinants” that are common to many
of them, even though the theories themselves differ. Those common determinants may
prove useful to practitioners as a basis for sales lead qualification. Fortunately, the
analysis and identification of eight key industrial customer purchase determinants is
described fully by Monat (2009).
Despite the extensive literature on customer buying behavior, there are very
few articles regarding the characterization or quantitative qualification of sales leads.
Of the few sales lead conversion models reported in the literature, most identify lead
characteristics thought to be important and then require that each characteristic be
assigned a grade or rating. These ratings are then typically integrated into a final score
that indicates probability of lead conversion to a booking.
In one of the earliest attempts at sales lead modeling, Kestnbaum and Hsieh (1983)
argued that timing, number of previous purchases, previous inquiry history, previous
experience with the company and the company’s products, previous purchase experience
with competitors, company size, appropriateness of the product for the intended
application, importance to the prospect, and whether or not the prospect requests
a demonstration are important independent lead characteristics or variables. They ran
a linear regression analysis using the ten independent variables noted above to determine
the coefficients in an equation that provides the probability of lead conversion to a
booking. Kestnbaum and Hsieh do not provide references, supporting data, or any
measure of goodness-of-fit; in addition, linear regression is inappropriate for this
application inasmuch as it can yield conversion probabilities greater than 100 percent and
less than zero. The accuracy and utility of the model have thus not been demonstrated.
Still, the model is an attempt to identify which independent lead characteristics contribute
to or detract from the probability of conversion in a quantitative way.
Jolson (1988) defined a “qualified” sales lead as one for which the product or service
can satisfy the prospect’s needs or desires, the prospect is willing to buy, and the
prospect has the ability to buy. He subdivided this taxonomy into independent lead
characteristics: lead source (print ad, referral, telemarketing campaign, etc.) whether the
 lead was company initiated or prospect initiated; seller’s knowledge of the prospect’s Sales lead
level of desire (ready to buy, the preferred source, an alternative source, needs are latent, conversion
needs or interest are unknown, no needs or interest) and prospect receptivity (resistant,
low, medium, or high). Jolson did not develop a formal predictive model and provided no modeling
corroborative data.
Garafola (1992) surveyed 53 foodservice brokers to determine which lead
characteristics or “descriptors” are important to them in qualifying sales leads. 181
Each descriptor was rated on a scale from 1 (not important) to 5 (very important). The
results are given in Table I.
Although Table I is interesting in its elucidation of the perceived importance of
various lead characteristics, it does not explain how the brokers integrated the results to
determine probability of lead conversion to a sale, nor were any data obtained to indicate
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whether the brokers’ assessments were valid or based on anything other than gut feel.
It is also highly specific to the foodservice industry.
Jolson and Wotruba (1992) discuss the sales pipeline beginning with suspects and then
progressing through prospects to qualified leads. They examine various lead-generation
activities including direct mail, print advertising, and telemarketing and categorize leads
as “prospect initiated” vs “salesperson initiated.” They argue that a qualified prospect has
needs that would be met by the product, has funds and the authority to spend them, and is
receptive to a salesperson. They develop a model of prospecting relationships which
affords insights, but no quantitative tools to assess lead quality.
Donath et al. (1995) and Donath (1999) got into substantial detail in assessing lead
quality and have written a widely used book on the subject. They argue that there are
five principal determinants of lead quality: the prospect’s desire (has he decided to buy,
and from whom?, does he seek general or specific information and has he requested
a quote?, what is the customer’s urgency?, and does the prospect want to speak

Average importance
Descriptor rating

1 The food service product(s) and/or services for which information

was requested 4.64
2 Whether or not product specification and/or purchasing is done from
this location 4.49
3 The contact’s primary distributor 4.35
4 The title of the contact 4.33
5 The date the prospect initially requested information (how old the lead is) 3.95
6 What competitive products are currently purchased by the prospect 3.93
7 The type of operation, i.e. restaurant, cafeteria, etc. 3.84
8 The potential volume for these product(s) 3.75
9 The type of food served at the establishment, i.e. Italian, Chinese,
fast food, etc. 3.55
10 Whether or not this is a contract feeder 3.55
11 The quantity of meals served, by category, i.e. breakfast, lunch, or dinner 3.24
12 The type of equipment, as it relates to the products or services, at this
location 3.11
13 The total sales volume of the establishment 2.93 Table I.
14 The source of the sales lead, i.e. magazine ad, trade show, special Important lead
promotion, etc. 2.89 descriptors
 MIP to a salesperson?); need (does he need only information or does he really need the
29,2 product or service?, what is the prospect company’s size?, what complementary and
competitive products are already present?, what alternatives is the prospect
considering?, and what is the prospect’s technical ability to use the product?);
resources (does the prospect have cash available? and what are his growth trends?);
timing (how urgent is the need?); and decision authority (what is the prospect’s title,
182 function, and authority? and what is the prospect company’s decision-making process?).
They also include several secondary criteria: prospect’s accessibility, whether or not he
has done business with the company before, whether he has a multi-sourcing policy,
whether the prospect fits the profile for a key account, and whether the prospect already
is a customer of the company or the company’s distributors. Donath et al. have
developed a “power profile question template” to help companies assess these factors
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(see the Appendix).

They suggest that upon completion of this questionnaire leads be coded as to
likely value, using letters A-E or combinations of letters and numbers to indicate
both probability of conversion and dollar value. Unfortunately, no quantitative means is
provided for translating the results of the power profile to the appropriate code; this is
left to the judgment of the sales manager. No experimental results or corroborating data
indicating the validity of their model are provided.
Graham (1996) claims that relevant independent variables include the prospect’s
readiness to do business and eagerness to meet, his recognition that your company is the
right one, his confidence in the company’s capabilities, and his desire to buy from you.
He does not provide references or supporting data.
Hornstein (2005) rates leads by assigning one to three points for source (cold, referral,
a trusted list, or unknown), need (customer’s reason for responding), timing (immediate,
three to six months, beyond six months), and budget (approved budget, budget
requested but not approved, budget not requested). He then develops a simple linear
model by combining points from the four factors. Thus, the maximum score a lead could
receive is 12 and the minimum four points. Hornstein then prescribes specific follow-up
activities (worth immediate field follow-up, do nothing but enter into database, etc.)
depending upon the net score. He argues that his choice of independent variables is
dictated by experience. The model was not tested and no goodness-of-fit, supportive
data, or references are provided.
Grandy (2005) examined leads generated for the replacement of heating and cooling
equipment. He argues that equipment age and prospect’s desire to talk to a sales
“consultant” are the key determinants of lead quality. Again, he provides no references
or supportive data.
Coe (2007) believes that the prospect’s need and pain or discomfort level, timing,
authority to make the purchase decision, and whether there is an approved budget or a
submitted request for a budget are key determinants of lead quality. Again, Coe provides
neither data nor references.
A recent online article by Brown (2009) extols the virtues of scoring and then
segmenting business-to-business sales leads, but does not explain how it should be done.
References and data are not provided.
Thus, although there are several models purported to characterize sales leads, none
has been validated, perhaps due to the lack of a good analytical tool. Furthermore, none
of the lead characterization models reviewed appears to have a theoretical basis.
 However, there does appear to be a weak consensus that the lead characteristics shown Sales lead
in Table II are important. conversion
Each item on this list is cited by at least two references; however, no reference cites them
all and the various references assign different levels of importance to each characteristic. modeling
It is not surprising that there is only a weak consensus regarding the characteristics of
“good” leads, for exactly which lead characteristics influence lead conversion probability
varies from company to company. While some characteristics (such as urgency) are 183
generally agreed upon to indicate serious, pressing need, a prospect expressing great time
urgency may in fact only be urgently collecting literature. For a new company that is
marketing a totally new product into a new application, the presence (or lack) of an existing
product or service that is inadequate in some respect is unlikely to be relevant, while this is
not the case for an established company selling mature products into a highly competitive
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market. Similarly, “willingness of the prospect to provide detailed information” may be an

indicator of a prospect’s interest in the vending company and desire to reach agreement;
on the other hand, the prospect company’s policies or industry style may prohibit the
provision of such information and so this may not be a good indicator at all. Thus, exactly
which independent lead characteristics are good conversion predictors varies from
industry to industry and from company to company within industries. This underscores
the probability that no single set of independent lead characteristics is likely to serve all
companies or industries; and since none of the lead characteristics purported to be
important has been field validated, the literature thus guides us only insofar as which
independent variables may be important. Clearly, there is a need to develop a theory and
model that acknowledge this and that can be widely applied and tested.

Proposed lead characterization theory

Principal weaknesses of existing lead characterization models are that they are not
based upon sound theoretical underpinnings and they have not been validated. The
former weakness is addressed in this study by proposing a lead characterization model
that is theoretically based (a preliminary field validation is presented below; however,
a rigorous, formal field validation will be addressed in future work).
Inasmuch as leads represent prospect interest in a company’s goods or services, they
contain information that may help determine the probability that the prospect will
eventually buy. For example, here is a real lead (communicated by e-mail from an inside
sales representative to a sales engineer) from a company that sells hardware and
software to call centers (names and dates have been changed for confidentiality):
I have a warm lead for you! This lead came in through the Hotline. Fred is working on an RFP
for the Marshfield account in the Chicago area. This owner of this account had in the recent past

Existence of a well-defined project or need

Whether the project is funded
Presence of an existing product or service, that is inadequate
Urgency
Familiarity with the vendor
Willingness of the prospect to provide information Table II.
Extent of competition Commonly used lead
Authority of the prospect’s contact person characteristics from the
Source of lead literature
 MIP owned a very large call center and sold it only to miss it and has decided to open another one.
There is no hardware in place at this time. He will start with 30 agents and 4 supervisors,
29,2 growing to 60 agents in a short amount of time. This customer wants scripting, reporting,
scheduled call backs, the ability to modify campaigns on the fly, recycle lists, and full
monitoring. The firm proposal is due 6/11 and they expect to make the selection by 6/18. They
wish to be up and running by the end of July. He wants to speak with someone ASAP and you
may call him at home if you can’t reach him at the office.
184
And here is another lead sent via e-mail from the VP of sales to a regional sales manager
of an industrial filtration company:
Hi Joe. I just got a call from Rashid Mehta of Midwest Grains. He and I have had a good
relationship for years, ever since we started working with Midwest. He told me that they are
building a new plant in Oakdale, Missouri and that they need a new filtration system for it.
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Since they have our systems in their other 7 plants, they’d like to maintain consistency. Would
you please call the Oakdale plant manager to discuss?
Finally, here is a real lead sent via e-mail to the general mailbox of a medical device
company from the equipment department of a large California hospital:
Dear sir or madam: Would you please quote on quantity 100 syringe pumps similar to
New Era Model 1000 with capacity of 0.73 ml/hour – 2100 ml/hour. Quote must be received by
15 November to be considered.
These leads contain information with varying degrees of quantity and quality. At first
glance, one might subjectively argue that the first two leads are likely to lead to
bookings, but the third is not. The first lead suggests that there is a real, funded project
with time urgency and that someone is going to win the contract. There is much technical
information provided. However, it is clear that there will be competition. The second lead
looks even more promising. Not only is there a real project, but substantial past
experience with the vendor’s company and products have lead to significant trust. The
third lead does not look so good. It appears to be a boilerplate solicitation that is likely to
be submitted to many vendors and it seems that the decision will be made largely on the
basis of price. But these conclusions are subjective. A good model should remove the
subjectivity and base conclusions on theory and fact. The basic questions are “What
useful, predictive information does each lead contain?” and “How may this information
be used to determine the probability that the lead will convert to a booking?”
The customer buying behavior literature may be useful in developing a lead
qualification model. One should be able to predict whether a lead will convert to a
booking if the lead contains sufficient information related to the factors that prospects
consider when making purchase decisions. If one can identify and procure lead
characteristics that are good indicators of (or proxies for) validated “determinants of
customer purchase decisions”, one should then be able to characterize leads with respect
to their probability of conversion (Figure 1).

Figure 1.
Factors
Leads often contain influencing Manifestation
Probability of
information regarding the costomer's as lead
lead
determinants of customer converting to a
purchase characteristics
purchase decisions booking
decision
 Fortunately, substantial work has already been done to determine the principal Sales lead
determinants of industrial customer purchase decisions. The proposed lead conversion
characterization theory is based on the work of Monat (2009) who studied industrial
customer purchase decision literature. He found that there are several discrepant theories modeling
regarding how customers make purchase decisions and there is no consensus with respect
to which is best. Monat did determine, however, that despite the discrepant theories there
are eight major determinants of customer purchase decisions that appear repeatedly in the 185
literature. These are shown in Table III: the customer’s perception of risk, need/desire,
urgency, competition, service, quality, value, and ability to purchase. Monat determined
that many industrial customers use these eight determinants in various combinations and
with various weights to make the majority of their purchase decisions.
The eight determinants may be manifested to various degrees and in various ways as
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lead characteristics or information that is contained within a lead. The challenge is to

determine how these determinants are communicated within leads; that is, which lead
characteristics are both available in typical industrial leads and likely to be good
indicators of the prospect’s purchase decision determinant. For example, one of the eight
key determinants of a customer’s decision to purchase is his perceived risk in making the
purchase. Several referenced lead characteristics may be good indicators of the
customer’s perception of risk: previous experience with the vendor, vendor reputation,
whether the lead came from a different satisfied customer, and the customer’s familiarity
with the vendor. Similarly, the customer’s articulated timeframe for making the
purchase, whether the inquiry came from an urgent telephone call or from some other
source, and whether the prospect contacted the vendor or vice-versa may all be indicators
of the customer’s urgency (which is another key purchase decision determinant).
Table IV shows 16 lead characteristics that are often recorded in sales leads and that are
potential indicators of each of the eight purchase decision determinants, along with
references supporting the selection of most of those lead characteristics (no references
were found for lead characteristics that might indicate the prospect’s perception of
quality or service although these lead characteristics certainly exist).
The 16 lead characteristics listed in the middle column of Table IV, thus represent
proxies for the eight determinants of industrial customer purchase decisions. There is
some potential redundancy in the suggested independent lead characteristics listed in
Table IV. For example, there are four different lead characteristics listed to address the
purchase decision determinant “prospect’s perception of risk/trust and confidence
in vendor”, and in fact most of the eight key determinants are represented by multiple lead
characteristics. This multiplicity is desirable in that various leads may indicate the

Determinants
Prospect’s perception of risk
Prospect’s perception of value/price
Prospect’s perception of his company’s urgency and ability of the vendor to comply
Availability to prospect of a better deal (competition)
Prospect’s perception of his company’s need and desire
Prospect’s perception of quality
Prospect’s perception of service Table III.
Prospect’s ability to purchase Principal determinants
of industrial customer
Source: Monat (2009) purchase decisions
 MIP
Determinant of
29,2 customer purchase Supportive lead characterization
decisiona Manifestation as lead characteristic literature reference

Prospect’s perception Is there an approved project? Donath et al. (1995), Donath (1999),
of his company’s need Hornstein (2005) and Coe (2007)
186 and desire
Is there a current product or service Kestnbaum and Hsieh (1983), Donath
with which you are dissatisfied? et al. (1995), Donath (1999), Hornstein
(2005) and Coe (2007)
Source of the lead Hornstein (2005) and Jolson (1988)
Whether prospect contacted vendor Jolson (1988)
or vendor contacted prospect
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Prospect’s perception Timeframe? Kestnbaum and Hsieh (1983), Donath

of his company’s et al. (1995), Donath (1999), Hornstein
urgency (2005), Coe (2007) and Graham (1996)
Source of the lead Hornstein (2005) and Jolson (1988)
Whether prospect contacted vendor Jolson (1988)
or vendor contacted prospect
Prospect’s ability to Is the project funded? Donath et al. (1995), Donath (1999),
purchase Hornstein (2005), Coe (2007), Jolson
(1988)
Decision authority of the contact Donath et al. (1995), Donath (1999)
Are we dealing with the CEO? and Coe (2007)
Prospect’s perception Familiarity with the vending Kestnbaum and Hsieh (1983), Donath
of risk/trust and company et al. (1995), Donath (1999) and
confidence in vendor Graham (1996)
Current or past customer? Kestnbaum and Hsieh (1983), Donath
et al. (1995) and Donath (1999)
Prospect’s willingness to provide Grandy (2005), Donath et al. (1995)
information (extent of knowledge and Donath (1999)
about the prospect’s situation)
Source of lead: referral Hornstein (2005) and Jolson (1988)
Availability to Extent of competition Kestnbaum and Hsieh (1983), Donath
prospect of a better et al. (1995), Donath (1999), Jolson
deal (1988) and Simonson (1993)
Prospect’s perception Return on investment (ROI), simple None
of value payback, internal rate of return (IRR),
discounted cash flow (DCF), or other
value calculations
Importance Kestnbaum and Hsieh (1983)
Prospect’s perception Prospect’s statements about relative None
of quality quality of vendor’s product or service
Table IV. Prospect’s perception Prospect’s statements about vendor’s None
Determinants of purchase of service service
decisions manifested
as lead characteristics Source: aAdapted from Monat (2009)

prospect’s perception of risk in various ways. By using several different proxies for a
purchase determinant, one maximizes the probability of capturing the required purchase
determinant information. However, it is important that a good analytical model not
over-weight sales decision determinants because of redundancies in their associated lead
characteristics.
 Certainly, there are alternative or equivalent manifestations that may be good Sales lead
indicators of the determinants of customer purchase decisions. Geographic proximity, conversion
for example, may speak to a prospect’s level of trust in the vendor and mitigation of risk.
Similarly, a lead notation indicating that the vendor’s product is vital to the customer’s modeling
process (and hence profitability) may be an excellent indicator of the prospect’s
perception of value. If available, the prospect’s credit rating or solvency may be viable
alternatives to “Is the project funded” indicating the prospect’s ability to purchase. 187
A good theory must allow for these alternative manifestations. It is not important that
each of the 16 lead characteristics shown in Table IV be captured; what is important is
that as many of the eight determinants of customer purchase decisions as possible be
represented by at least one lead characteristic that is either listed in Table V or is an
alternate proxy for the determinant. But the 16 independent lead characteristics
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presented in Table IV (and reproduced in Table V) represent a good starting point for
lead characterization modeling inasmuch as they are both soundly based upon
industrial purchase decision theory and they are often available.
In addition to the identification of the 16 key lead characteristics, the proposed
theory further contends:
.
Inasmuch as different companies weight differently the eight determinants of
customer purchase decisions, there is no single set of independent lead characteristics
that will be correct for all companies. Even though Table V represents a good starting
point regarding which lead characteristics are important, the importance or weight of
each characteristic will vary from industry to industry and from company to
company.
.
Alternative independent lead characteristics (such as geographic location of the
prospect) may be important for a particular company insofar as they are
alternative indicators of purchasing decision determinants for that company. For
accurate modeling, it is important that each of the eight determinants of customer
purchase decisions be represented by one or more lead characteristics that are
proxies for or indicators of the purchase decision determinant; but there may be
good alternatives to those lead characteristics shown in Table IV.

Is there an approved project?

Is there a current product or service with which you are dissatisfied?
Source of the lead?
Whether prospect contacted vendor or vendor contacted prospect
Timeframe?
Is the project funded?
Decision authority of the contact?
Are we dealing with the CEO?
Familiarity with the vending company?
Current or past customer?
Prospect’s willingness to provide information (extent of knowledge about the prospect’s situation)
Extent of competition?
ROI, simple payback, IRR, DCF, or other value calculations
Importance? Table V.
Prospect’s statements about relative quality of vendor’s product or service Key industrial lead
Prospect’s statements about vendor’s service characteristics
 MIP .
In the real business environment (and especially in a posteriori situations where
29,2 sales agents did not know what lead data to collect) not all leads will have
information relating to all eight purchase decision determinants. Clearly, the
accuracy of any predictive model diminishes along with the number of purchase
decision determinants that are represented.

188 Table V indicates reasonable consistency between the present model and previous
models such as those of Donath et al. (1995), Kestnbaum and Hsieh (1983) and Jolson
(1988) (Table II). However, unlike the others, the current model has a strong theoretical
basis in the determinants of customer purchase decisions (Monat, 2009) and includes
several important lead characteristics that are not mentioned in the literature (namely,
prospect’s statements about relative quality of vendor’s product, prospect’s statements
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about vendor’s service, and prospect’s perception of value as indicated by financial

calculations). These additions are significant and should yield greater accuracy in
predicting which leads will convert to bookings.

Discussion and applications

With the determination of important lead characteristics as indicated in Tables IV and V,
developing lead characterization models is straightforward. An appropriate generic
modeling methodology would be:
.
As described herein, identify validated determinants of customer purchase
decisions (Table III).
.
As described herein, determine how those determinants manifest themselves as
sales lead characteristics (Table IV).
.
For a particular company or organization, collect a sample of historical leads that
includes substantial information regarding the important lead characteristics
and the ultimate disposition of each lead.
.
Analyze each sales lead from the sample by rating each lead characteristic as
positive, negative, neutral, or unknown.
.
For each lead, calculate a score for each of the eight purchase determinants based
on whether the constituent lead characteristics are positive, negative, neutral, or
unknown.
.
Integrate the eight purchase determinant scores to come up with a net score for
each lead.
.
Analyze the net scores (in conjunction with knowledge of the ultimate disposition
of each lead) to determine if it is possible to use them to discriminate between
those leads that did convert to bookings and those leads that did not convert.
.
From the net score analysis, extract a qualitative net score threshold or cutoff
value that may be used to predict conversion of individual future leads.

The resultant models may be qualitative or quantitative with varying degrees of

complexity. A simple qualitative model would use Table IV as the basis for an
evaluative scorecard that could be used by a salesperson to assess a particular sales lead,
as shown in Table VI, where “lead characteristic assessment” may take on values of
positive, negative, neutral, or unknown.
 Sales lead
Lead characteristic
assessment conversion
Determinant of customer (positive, negative, modeling
purchase decision Manifestation as lead characteristic neutral, or unknown)

Prospect’s perception of his Is there an approved project?

company’s need and desire
Prospect’s perception of his
company’s urgency
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Is there a current product or service with 189
which you are dissatisfied?
Source of the lead
Whether prospect contacted vendor or vendor
contacted prospect
Timeframe?
Source of the lead

Whether prospect contacted vendor or vendor

contacted prospect
Prospect’s ability to purchase Is the project funded?
Decision authority of the contact
Are we dealing with the CEO?
Prospect’s perception of risk/ Familiarity with the vending company
trust and confidence in vendor Current or past customer?
Prospect’s willingness to provide information
(extent of knowledge about the prospect’s
situation)
Source of lead: referral
Availability to prospect of a Extent of competition
better deal
Prospect’s perception of value ROI, simple payback, IRR, DCF, or other
value calculations
Importance
Prospect’s perception of quality Prospect’s statements about relative quality Table VI.
of vendor’s product or service Sales lead evaluation
Prospect’s perception of service Prospect’s statements about vendor’s service scorecard

For example, suppose Company Q sells chemical and abrasion-resistant progressive

cavity pumps. A sales rep has received an inquiry by telephone from a former customer
who was very pleased with Company Q’s products, quality, and service but is currently
having problems with a competitor’s pump. The sales rep uses Table VI as a guide
to gather information from the caller. Following down the list of important lead
characteristics, the sales rep determines that:
.
the customer (C) needs ten new pumps within three weeks and has not contacted
any of Q’s competitors;
.
C has full funding for the replacement pumps which are critical to his
manufacturing operation (which generates $90,000 per day in profit);
.
C is not the CEO of his company but has been instructed by the CEO to get
reliable replacement pumps as soon as possible;
.
C is very talkative on the phone and is happy to answer all of the sales rep’s
questions; and
.
C believes that Company Q’s product quality and service are the best in the business.
 MIP Most of the lead characteristics in Table VI are thus given a positive assessment and the
29,2 sales rep justifiably concludes that this lead is very likely to convert to a booking within
one month.
Of course, in the real world, leads are usually not so clear-cut: some of the
characteristics will be assessed as positive, some as negative, and some will be missing. In
those cases, it is important to determine the customer’s perceived importance for each sales
190 purchase determinant, to garner more information, and to convert the negatives to
positives. However, in any case, Table VI guides the sales rep regarding the proper
questions to ask to determine the likelihood of a booking and may be useful as a training
tool for new sales people. Furthermore, computer-based versions of Table VI are easy to
develop.
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Experimental
An experiment was conducted to determine if Table VI, in conjunction with the lead
qualification modeling methodology described above, could produce useful lead
conversion predictions for a typical company. For this study, 324 non-current sales
leads were analyzed from a 23-year-old US company (annual sales ,$100 million) that
sells computer hardware and software, covering the time period 2003-2005. Principal
customers of this company are mid-large companies who telemarket extensively and have
large telemarketing staffs. Substantial sales derive from both new customers and existing
customers who purchase upgrades, revisions, new versions of hardware and software, and
maintenance agreements. The company has several major competitors but is widely
regarded as the industry technology leader, and it has acquired several complementary
companies over the past ten years.
Of the 324 leads analyzed, 58 (17.9 percent) eventually converted to bookings while 266
did not. Data compilation for lead analysis was somewhat tedious but was facilitated by
the fact that some relevant data for each lead had been recorded and archived in the form of
e-mails sent by account reps to the sales manager. The e-mails were in fact the only
available source of archived lead data from that period (which is not uncommon). The 324
leads analyzed were selected at random from a total of ,750 leads that had been
developed by the company during that period. Leads came from both existing customers
and from new prospects. In this company, all sales leads were documented in the form of
descriptive e-mails that had been sent to the sales manager by nine different salespeople.
To compile the data, a single analyst scrutinized the archived e-mails, which had been
consolidated into one e-mail file folder.
Table VI was applied to each of the 324 leads. A very crude type of scoring
model/discriminant analysis was then applied. If a lead characteristic was positive,
it was assigned a score of 1. If it was negative, it was assigned a score of 2 1, and if it was
neutral or unknown it was assigned a score of 0. Where multiple lead characteristics
were available for a single customer purchase determinant, their scores were averaged.
Unfortunately, no data were available from the archived leads for any lead for the last
three purchase determinants (perception of value, quality, and service); data are often
missing in a posteriori studies (had the sales agents had Table VI before the leads
were developed, more comprehensive data could have been acquired). Thus, for each
lead, an average score was determined for five of the eight customer purchase decision
determinants listed in Table VI. The average scores for the five determinants were then
summed to yield a net score for each lead, using a weighting factor of 1.0 for each of the
 five determinants (it is highly probable that accuracy can be improved by adjusting the Sales lead
weighting factors; this will be explored in future work). conversion
These net scores averaged þ0.47 for the 58 leads that converted to bookings and 20.37
for those 264 leads that did not convert and they had reasonably small variances, modeling
indicating good potential for discrimination. By experimentation, a cutoff score of 20.1
was determined to be optimal in distinguishing “good” leads from “bad”: using this cutoff
and assuming that leads with a net score greater than 20.1 would convert while those 191
with a net score less than 20.1 would not convert yielded the following results (Table VII).
Despite its simplicity, this crude model indicates that ,65 percent of the leads from this
company could be properly categorized with respect to probability of sales conversion,
indicating that the proposed theory and scoring model methodology have significant
potential.
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The model must be refined and formalized; rigorous statistical methods must be
applied. A more sophisticated modeling approach would require that the sales rep
determine the prospect’s weighting factors (importance) for each of the eight key
purchase decision determinants and that he then rate each of the lead characteristic
values on a scale of one to ten using the SMART technique (Edwards and Barron, 1994).
After multiplying the weights by the values and summing, a net score would be obtained
and the higher the score, the higher the probability of a sale. Even more sophisticated
quantitative models can be developed, but they require substantial data acquisition and
statistical analysis. Formal discriminant analysis or logistic regression appear to be
viable statistical tools to use in the development of such a model and are topics of future
work. It is important that such quantitative models be developed not only to quantify
sales probabilities, but also so that the proposed theory may be tested with real data.

Limitations and future work

The crude scoring model/discriminant analysis used was only intended to test the
potential of the theory. It did not test for distribution normality or for heteroscedacity.
It did not use hold-out samples for validation, it did not allow for varying weights for
each purchase decision determinant, and no tests of statistical significance were
performed, all of which must be done for accuracy in a formal model and all of which are
planned for future work.
Different companies use different criteria and different weighting factors for making
purchase decisions; therefore, no single quantitative lead characterization model will be
accurate for all companies. However, the general qualitative modeling procedure developed
herein should represent a good starting point for developing specific quantitative models
that apply to individual companies. The proposed model has only been informally field
validated, formal validation is planned for future work in which, we will analyze historic
leads and develop a quantitative predictive equation based on discriminant analysis or
logistic regression in conjunction with sound statistical procedures.

Actual Predicted Accuracy (%)

Number of leads that developed into sales 58 38 66 Table VII.

Number of leads that never developed into sales 266 171 64 Experimental results
 MIP Conclusions
29,2 Sales leads are the lifeblood of industrial companies, yet determining which leads are
likely to convert to bookings is often based upon guesswork or intuition. This results in a
waste of resources, inaccurate sales forecasts, and potential loss of sales. A quantitative
model that may be used to predict which leads will convert, based on information inherent
in the leads themselves, would be highly valuable. Several lead characterization models
192 have been proposed, but none is based upon sound theory and none has been field
validated. In this work, a qualitative model is developed based on the sound theoretical
underpinnings of industrial purchase decision determinants. It is reasonably consistent
with some of the previous unvalidated models; however, it is more comprehensive and
should thus prove more accurate. The model lists 16 independent lead characteristics that
are often observable and that should be collected and examined for each lead to help
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determine the probability of its conversion to a booking. An informal quantitative field

validation of the model (using discriminant analysis) yielded ,65 percent accuracy in
predicting which leads would convert to bookings and which would not. The new model
will be refined and formally field validated in upcoming work. This should prove useful to
sales and marketing managers, who need to forecast bookings and sales, optimally
allocate resources, and structure marketing and promotion efforts for maximum return.

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Appendix. Power profile questionnaire (adapted from Donath et al., 1995)

This profile asks the prospect the following 11 questions:
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(1) Is your requirement:

a. Immediate
b. 1-3 months
c. 4-6 months
d. 7-12 months
(2) Are you currently budgeted? a. Yes b. No
(3) Have you used our products in the past? a. Yes b. No
(4) Did you know that (company name) made this product? a. Yes b. No
(5) Has a (company name) salesperson called on you before? a. Yes b. No
(6) What is your application for this product?
(7) Would you like a representative to call you? a. Yes b. No
(8) What is the best time to call? a. a.m. b. p.m.
(9) Would you like a no obligation demonstration? a. Yes b. No
(10) Do you:
a. Recommend
b. Specify
c. Have final approval
d. Purchase
(11) What other companies have you contacted to supply this product?

About the author

Jamie P. Monat is a Director and Adjunct Professor in the Corporate and Professional Education
Department at Worcester Polytechnic Institute, Worcester, Massachusetts, where he teaches
courses in Operations Risk Management, Productivity Management, Operations Management,
and Project Management. His current research interests include productivity maximization,
industrial customer buying behavior, application of logistic regression to business situations,
and multi-attribute decision analysis. Jamie P. Monat can be contacted at: jmonat@wpi.edu

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