What is a Sales Qualified Lead (SQL)?

A sales-qualified lead (SQL) is the fourth of six lifecycle stages in the buyer’s journey. It also happens to be both one of the most important and hardest stages for a company to define because it’s where the marketing-to-sales handoff occurs. So to provide some clarity, we think it’s prudent to review the other five lifecycle stages before discussing how the SQL stage fits in. 

For your company to effectively execute transitions between lifecycle stages, you need to have an agreed upon definition between marketing and sales for each stage. To make that happen, it’s best to create a Service Level Agreement between those teams so you can identify gaps where people are falling off or your conversion tactics aren’t working. This allows you to go back and fix issues, improving your funnel’s performance over time. 

What Are The Lifecycle Stages?

The customer lifecycle stages include:

Visitors 

The definition of a site visitor is self-explanatory — a visitor is anyone who stops by your website. From a digital marketing perspective, understanding how many people are coming to your site is an important first step. 

Leads

Leads are formed when a visitor has expressed interest in your company by providing their information. At that point, you’ve given them something of value through a gated piece of content or related offer such that they’re willing to provide details about themselves.

Marketing-Qualified Leads (MQLs)

When a company confirms a lead is a good fit and demonstrates return interest by marketing to them, that lead becomes a Marketing Qualified Lead (MQL). Once a lead becomes a MQL, the company continues to explore the contact and nurture them down the funnel. 

Sales Qualified Leads (SQLs)

An MQL is characterized as an SQL when sales agrees with marketing that the contact has enough interest and is a good enough fit for a discovery call to initiate a sales conversation. 

Opportunities

An SQL becomes an opportunity when they confirm your company could provide a viable solution to their problem and decide to continue the sales process by exploring your products and services in greater detail.

Customers

Opportunities become customers when they sign a deal.

What is a Sales-Qualified Lead?

With that background in mind, let’s delve further into what characterizes a SQL.

Typically, a meeting is involved for an MQL to become an SQL. That meeting can be a demo, an assessment or even just a discovery call, but a conversation between the prospect and a sales rep should occur at this stage. The contact only becomes an opportunity if during this conversation they confirm interest in continuing the sales process and potentially making a purchase. Of course, this procedure can look different for every single company. 

The reason SQLs look different for every company relates back to the SQL definition I gave earlier: “An MQL is characterized as an SQL when sales agrees with marketing that the contact has enough interest and is a good enough fit to start the sales conversation.” The key aspects that help define SQLs are their high levels of fit and interest. However, companies define high fit and high interest differently. Consider the fit-interest matrix below:

Fit can be judged on a number of factors. For instance, maybe for your company a contact is high fit if they are a member of a particular demographic or industry. For a B2B company, maybe they are high fit if their company is above a certain threshold of employees. 

There could be any number of variables that influence whether a contact is high fit, but ultimately, it boils down to which types of customers provide the most value to your company. Finding the variables that these customers tend to possess will help you identify what constitutes a high-fit contact. Forming these variables into an ideal customer profile can help you evaluate your contacts moving forward.

On the other hand, it might be easier for you to define what constitutes a low-fit company. Which characteristics do your customers that tend to churn at a high rate possess? In this situation, producing negative buyer personas, semi-fictional representations of customers who are not ideal for your business, can be a good exercise. You should invest very little, if any, time and energy selling to these types of companies.

Interest is easier to understand. Contacts normally reveal their interest in your company based on how much they interact with your content and offers. If you notice a contact is engaging with a high volume of your content, there’s a good chance that contact has high interest. Alternatively, contacts with low interest are unlikely to engage with your brand. 

Like fit, interest can vary by company. For example, what constitutes high interest for a manufacturing company might not constitute high interest for a software company and vice versa. Understanding what characterizes high interest for your company will help you qualify contacts as they progress through the funnel.

Overall, the fit-interest matrix identifies the actions you should take when you encounter different types of contacts. As we mentioned, you shouldn’t invest calories in marketing or selling to low-fit contacts or companies. Because at the end of the day, you want to produce successful customers that turn into evangelists for your brand, which only result from the best fits. 

The sales process for low-fit contacts that are highly interested in your company should be as low-touch as possible. Don’t allow your sales reps to waste their time creating custom proposals and selling to these contacts. Instead, send these prospects a pre-packaged, take-it-or-leave-it proposal that gives your sales team the opportunity to move on quickly.

On the other hand, contacts who are high fit but low interest should be characterized as MQLs. These are the types of prospects that you can invest some extra time and energy into with the goal of generating interest. That starts with a scalable, yet personalized lead nurture program that sends the right message, at the right time, in the right channels. When done properly, a well-designed lead nurture program can make it easy for your sales reps to book meetings with your MQLs and turn them into SQLs.

After a contact becomes an SQL, your sales team takes the responsibility to progress that lead down the funnel. Contacts in the SQL stage are in the discovery phase of the sales process. They have yet to pursue your company as a viable solution. At this point, both parties need to gather more information about each other before moving on to true sales conversations. 

Why do SQLs Matter?

Understanding the customer lifecycle and how SQLs factor into the buyer’s journey is vital for your success. Returning to the introduction, I discussed the idea of measuring a prospect’s progression through the funnel. Without clearly defining your lifecycle stages, you will not be able to monitor contacts and know which actions to take moving forward. 

If we didn’t leverage SQLs, we would face huge challenges in tracking our customer lifecycle funnel. Here at New Breed, an MQL becomes an SQL in our funnel when they book a meeting, demo or assessment. 

Currently, if we booked a lot of meetings but failed to convert contacts to opportunities, there could be a problem with our MQL quality or the quality of the meetings themselves. If we noticed a drop in our SQL-to-Opportunity conversion rate we would be alerted of a potential problem and could examine the situation in more depth to find a solution. 

Without the SQL stage, we might never suspect an issue. We wouldn’t have a way of tracking how many meetings we were booking and how contacts were progressing after they booked a meeting. We also wouldn’t have a way of determining where we should invest our time, energy and resources to improve our processes.

Of course, different companies define SQLs in different ways, so this type of scenario might vary for your company. However, the takeaway remains the same: understanding SQLs and the role they play within your company is integral.

Key Takeaway

In order to get contacts to the SQL stage of your customer lifecycle, you first have to generate demand at the top of your funnel. 

A true demand generation strategy does not stop at the top of the funnel, though. It extends over every touchpoint in the buyer’s journey; all the way from an anonymous visitor to a delighted customer.