We received a lot of feedback when this article appeared in our newsletter, Initial Thoughts, last week. In case you missed it, we've republished it here. Click here to subscribe to our newsletter.
by Amy Keuper, VP Sales
Do you know what your real lead cost is? This deceptively simple question can challenge your preconceived notions about how to evaluate marketing programs and sales partners. It is common to weigh the cost of a campaign activity or a vendor's service in isolation, but the only way to accurately calculate a true meeting cost is to capture and compare all of your expenditures, from technical tools to the labor it takes to represent what you sell.
Wise marketing and sales organizations want to have the lowest lead cost possible, so the price of outbound calling is a natural concern. When we are discussing our services with prospective clients, we are often asked what our meetings cost. This number varies among clients and is determined by two things: the nature of what our client sells and the title of the decision maker. Historically, our clients' average meeting cost has ranged from $800-$3,000. Given the complexity of our prospect's sale, we can usually provide a ballpark meeting cost. We have found that no matter what number we share with a prospect, once this question is on the table, the conversation takes an interesting turn. Some potential clients find the estimated appointment price very reasonable while others balk.
When we speak at Initial Call about "average meeting costs," keep in mind that almost all of our work is cold-calling. So, the price of our meeting will reflect what it takes to qualify a target from scratch without marketing support--essentially the time it takes to navigate to the right buyer and uncover whether the target company is a fit. A prospective client who is taken aback at the price of our sales appointment may be thinking that other means of finding opportunities are less expensive. While that could be true, assessing the real cost of a lead requires one to consider ALL expenses included in generating and qualifying leads.
In the complex sale, we believe that most companies will find that their lead cost simply averages "$x,xx" regardless of the various activities employed to bring in prospects. This means that if your cold-calling meeting price is $1,800, your lead cost for qualified inbound leads will be comparable if you consider the marketing activities that you employ on a regular basis: website optimization, email campaigns, direct mailings, trade show exhibits, etc. Even if you do not have inside sales help today but your outside reps are cold calling, that lack of support is costing you something. Probably something big.
Obviously, certain activities may make more sense for your business than others. For instance, you might never use direct mail or attend trade shows. What we are saying is that it is unlikely that you will find a magic bullet--just one vehicle for generating business that costs exponentially less than another. A company with a specialized software solution whose outbound-calling meeting cost is $2,000 will probably have to spend in total the same amount of money on other activities to generate one lead. Their lead cost averages $2,000-no matter what methods they employ.
Naturally, everyone wishes that the cost of winning new business were lower, but truly driving down the net cost of a sale is very difficult. Initial Call's theory is that most company offerings will ultimately settle at a relatively stable cost-per-lead. Real reductions in the actual dollar figure, if any, are likely to be incremental. What can vary within the lead cost is the outlay on any one particular activity. For example, if we are able to call warm leads, the price of our meeting will be lower, but creating warm leads means investing in marketing somewhere else. Once your business is established, rarely is the option to simply spend considerably less overall. The question is, in reality, where to spend the money.
Outbound calling isn't right for every sales organization, but it makes sense when you sell to a narrow audience and want to pursue target accounts. As you evaluate the price of contracted inside sales support, be sure to weigh the real comprehensive costs of all other options for bringing prospects into your pipeline.