Back to all posts
Sales

What is a prospect in sales: all you need to know

Gain valuable insights into how to identify prospect, enhance your sales strategy and drive business growth.

Rose McMillan · January 24, 2024
What is a prospect in sales: all you need to know

Go to section

Go to section

Who has the potential to buy from you?

Let's get you closer to your prospects. We’ll explain how to spot them, turn them into customers and decipher their thinking.

With easy-to-follow advice, the guide is perfect for anyone looking to up their sales tactics. You'll also get a good dose of theory!

What is a prospect?

The term prospect refers to someone who could become your customer. They aren’t just names on a list – they’re a potential customer who can turn into a sale.

Who qualifies as a prospect?

There are a few criteria that prospects fulfill:

1 - A prospect has a clear need for your product or service

If someone browses a product or service and it resonates with what they need – bingo! They might be a prospect because that’s something they seek out.

Then, the prospects might be in the evaluation phase, so they weigh up the pros and cons of using your products or services. Then, you should paint a mental picture of how your product fits into their life. That's your reference point for taking further sales action to make them decide.

For example, if you provide a fitness app and your prospects like yoga, you could show them the exercise part of your app. Illustrate how the app works with a simple video, targeted ad, social media post, or create an email campaign - the point is demonstrate your value.

2 - A prospect has the budget to purchase what you're selling

If products or services exceed a potential customer’s budget, it’s a no-go. Most often, people make decisions based on what they can afford.

They might have lots of questions in mind, like “will this purchase add value to my life?” It's typical to be risk-averse when it comes to spending money.

Here's where a little show-and-tell helps; think of case studies or demos. They're sneak peeks into the future and show what a prospective customer can expect.

3 - A prospect is in a position to make buying decisions

Prospects are in the driver's seat, ready to press go on buying decisions. They have the power to say “yes” to your product if it meets their requirements.

Having the authority or the budget to make a purchase is one of the aspects that determine who your qualified prospects are.

4 - A prospect shows interest in what your company offers

Once they're genuinely intrigued by what your company offers you can transform this interest into a purchase.

Prospects might express interest by asking questions, requesting more information, or showing enthusiasm about the features or benefits of your product or service.

These signals are indicators they might be a genuine prospect. It suggests they are thinking about, for example, how your product solves a problem they are facing. That doesn't always mean they will buy right away, but it's a first step – they are starting to see value in what you offer.

A prospect's lack of interest, however, doesn’t disqualify them from being considered as one. It’s a sufficient, but not necessary criterion. Potential customers who seemed uninterested at first can be nurtured and developed into prospects later.

5 - A prospect matches your ideal customer profile

When someone looks like your perfect customer, they're probably a good prospect for you. Think of it like this: you know what kind of person usually buys and likes what you sell.

If someone fits that criteria, they might be interested in your product. The good news is that it’s easier for you to talk to them about your product because they're already the kind of person who would use and appreciate it.

Prospect vs lead

In the sales funnel, a prospect might be someone who could potentially buy your product or service but hasn't engaged with your company yet. They fit your ideal customer profile and can make purchases.

A lead, on the other hand, is a prospect who has engaged with your company’s content or sales process. They have shown interest and entered the top of your sales funnel.

Prospect vs contact

After a lead engages with your sales content and expresses interest in purchasing your product, they become a contact.

They have moved beyond initial engagement and are more involved in your sales process.

Prospect vs opportunity

An opportunity arises when a contact is qualified by your sales team and shows a serious interest in purchasing. It’s an important stage during which a qualified contact is given dedicated attention to convert their interest into a sale.

Opportunities represent potential gains and are key to future success in sales.

How do people make choices? Expected utility theory vs prospect theory

Here, behavioral economics is worth mentioning. It describes how people make choices when they're not sure about the outcome, and it tells us that we don't always go for the logical choice.

Instead, buyers are wired to evaluate choices in their own unique, human way. Expected utility theory (EUT) and prospect theory (PT) are two separate models used for decision-making under uncertainty.

Expected utility theory

EUT says that people are rational and make decisions based on the expected result of each option, considering the probability and utility of possible outcomes. It suggests choosing the option that maximizes expected utility, regardless of risk.

Prospect theory

PT, a behavioral model, suggests that people evaluate decisions based on potential gains and losses relative to a reference point – often the status quo.

This theory suggests that people are more sensitive to losses than gains and tend to overestimate low probabilities and underestimate high ones. In this theory, we consider the psychological factors and biases that influence decision-making.

Knowing these theories gives you a better idea of how your prospects might think and choose. Your sales and marketing teams can then be smarter and more tuned into what prospects want.

Certainty effect

When discussing how people decide, keep in mind the certainty effect. It says that people frequently opt for sure things over chances, even if those chances might bring greater results. For instance, someone may prefer getting $50 for sure rather than having a 50% chance to win $200.

Imagine you're selling a product. Don’t say there’s a chance it could help the customer, give a solid guarantee. Instead of saying "This vacuum cleaner can make your cleaning easier", say "Our vacuum cleaner will make your cleaning easier, or your money back."

Promising something for sure, like a money-back guarantee with a product, really speaks to customers who don't want to risk being disappointed. Prospects will feel more comfortable buying from you then.

How to turn a prospect into a lead

There are many different ways, but we’ve listed our top tips.

01 - Understand your prospect before the first interaction

Do some research to learn about the customer's needs and assess the opportunity for conversion.

Tools like Capsule CRM are useful here. It offers features such as contact management, providing an overview of the people and companies you do business with, as well as sales analytics to monitor various aspects of your sales cycle.

Such features also help you gain insights into your prospects and tailor your approach to them. On top of that, knowing your prospects better makes it easier to address their concerns and increases conversion potential.

02 - Perfect your sales pitch

To move prospects through the sales pipeline and close deals, start with persuasive communication.

Clearly explain why your product or service is the best choice. Your value proposition should be at the heart of your pitch – it's the unique benefit that sets you apart and solves your customer's problem.

Be confident and clear, and remember, a good sales pitch isn’t just talking, it's also listening and responding to your prospect's questions and hesitations.

03 - Create high-quality product demos

Once you thoroughly understand your product, you can demonstrate its benefits and features confidently and clearly.

For a great product demo, you need to know your product inside out and focus on showing how well it works. This will be useful during the sales process, since if you show how the product works then people can see why they need it.

Make sure your demo highlights the most useful and interesting features of your product and explains them clearly. Keep your audience in mind and aim to make your demo engaging and valuable to them.

04 - Have your sales team follow up with prospects regularly

Regularly following up with prospects keeps the conversation going, so stay in touch and check in on their interest level. With consistent engagement, you get a better sense of how close they are to making a decision.

Your follow-up strategies should match the preferences of your target audience – some might like emails, others phone calls, or even messages. And remember, every follow-up is a chance to learn more about them.

This is a step closer to lead qualification. It shows you're not just interested only in a sale but in what prospects truly require.

05 - Highlight your prospect’s pain points

In other words, address the specific customer challenges they face. Through market analysis, identify your prospect’s pain points and develop a solution specifically for them.

You’ll demonstrate your understanding of their challenges and position your product or service as the ideal solution. Once you get what challenges your customers face and provide solutions that work for them, this makes a big difference in acquiring new customers.

People are more drawn to your product or service after they see it can fix their specific problems. It’s a smart move in your prospecting strategy and can provide your customer acquisition rate with a real boost.

06 - Make smart sales choices with reports

Using reports in sales lets you make informed decisions based on data. With sales analytics, you can look closely at your sales performance.

This is called report utilization – it gives you a view of the target market to understand what works and what doesn't. You can see what people are up to and spot things in your sales strategy that need to be tweaked a bit.

Your sales tactics will then not be just based on guesswork, but informed by actual data.

07 - Take care of customer relationship with better contact management

In every industry, good contact management may level up customer relationships. Think of it as engaging with a customer through different forms of communication and opening up possibilities for greater connections.

When you get this right, it's like a win-win – you acquire loyal customers, and they receive the attention they deserve.

Capsule CRM lets you manage customer relationships easily. It keeps all of your customer info in one place, so you can revisit past chats and analyze them whenever you want.

It also helps you see where your sales stand and what to work on next. Plus, Capsule can handle repeat tasks faster with workflow automation.

Key takeaways

  • Prospects are potential customers who can drive sales, and understanding them implies considering human decision-making behaviors like weighing up equivalent gains and potential losses.
  • When qualifying prospects you must deduce if they need and can afford your product, are responsible for making buying decisions, show sufficient interest, and match your ideal customer profile.
  • In sales, people tend to make decisions influenced by factors like risk, benefits, and their current situation, as explained by theories like expected utility theory and prospect theory.
  • Some sales tactics are understanding prospects, perfecting pitches, creating product demos, regularly following up, and highlighting pain points. Each step increases the chances of converting prospects into leads.
  • Good contact management can strengthen customer relationships, offering the possibility for deeper connections and loyalty. This is similar to stock market investments, as informed decisions lead to better outcomes.

Conclusions

Now, it’s your time to turn prospective customers into loyal ones. Know your prospects and get a sneak peek into how people make choices – invaluable knowledge for any seller that has all covered in this article.

And for getting all of your contacts organized and neat, use Capsule CRM. It’s great for all business types, so sign up and automate sales processes with ease.

What is a prospect in sales?: Frequently asked questions