In this article we’ll take a look at arguments on both sides of this issue and recommend when — and how much — cold-calling makes sense. We’ll look at it from the perspective of a software or hardware tech company, but the discussion really applies to any kind of sales.
This is an age-old question in sales. Some would say that’s what sales people should be doing. Others believe that if sales reps have to cold call, it’s an indication of poor marketing and is very inefficient. I often refer to cold-calling as DOOR-TO-DOOR marketing, because you’re really combining the introductory marketing and sales functions in one phone call or visit. The important question: is this a good or bad thing?
First let me say that by “cold calling” in the modern age I include ANY type of “cold” approach, meaning their has been no known previous interest shown by the prospect. In the modern age this not only includes picking up the phone and “dialing for dollars” or on-site visits, but also such activities as personal emails, social media, and the like. I’m NOT including in cold-calling any type of automated cold approaches (such as mass emails, automated social media activities, etc. – that’s MARKETING).
It’s really a question of what is the lowest cost of creating a lead, as well as what the best utilization of a sales rep’s scarce time should be. Many factors come into play when deciding how much, if any cold-calling is appropriate for a particular rep/company/product/market combination:
Ease of Prospect Identification
This is a crucial factor when deciding whether or not to include a lot of cold-calling in your sales mix. If target prospects are easily identifiable, it may make as much more sense to start contacting them sooner rather than later, as opposed to if your reps have to google or dial for hours to find an appropriate prospect.
Commodity vs. Complex/Missionary Sale
It’s very difficult to cold-call prospects when you are selling technology products or services which are very new, or difficult for the prospect to grasp quickly. Prospects are all very busy trying to do their own jobs, are overwhelmed with offers via every media and contact method and tend to tune out cold approaches that aren’t of immediate, obvious use to them. In such cases, using outbound and inbound marketing methods to educate and identify prospects first tends to work a lot better than a cold sales call. On the other end of the spectrum, for commodity items that people already know they need, a timely cold call can lead to an immediate sale that a competitor might have otherwise gotten.
Cost Per Lead: Cold-Calls vs. Marketing
How to divide your investments between marketing and sales is often driven by the relative costs of each. How effective are your outbound and inbound marketing programs? If your marketing cost-per-lead is very high and the close rate isn’t great, in some cases it might make sense to skip the lead gathering altogether and get right to the sales call. I caution that this usually isn’t the case–but it’s possible. If you find this is the case, I would first explore in great detail whether or not you’re doing a good job on the marketing side or whether it can realistically be improved. Also, whether this makes sense also depends on many other factors such as those discussed elsewhere in this article, notably the ease of prospect identification.
Software or Hardware Segment Market Size
This factor is most relevant with respect to cold-calling for tiny niche markets. For example, what if you have a software product with a multi-million dollar price tag — aimed at 100 or less total prospects? In this case, it doesn’t make sense to put much money into outbound or inbound marketing programs if these prospects are easily identifiable. While it’s still important to have available marketing proof points such as case studies and white papers, it’s probably time to call them up, reach out to them on social media or pay them a visit, as soon as possible!
Time of the Day/Week/Month/Quarter
If it’s the end of the day (literally or figuratively) and all the leads have been followed up on, it’s DEFINITELY time to cold-call. Every sales organization or individual rep should have a game plan on how to prospect on their own, when all the warm leads have been exhausted. It’s either that or it’s time to head to the golf course (which happens too often – at least figuratively). This tends to give the sales force a bad name, as well as not raising sales much!).
Big Ticket vs. Low Price Technology Products
In general, technology sales forces are costly. If you have a product with low revenue per sale, it’s suicidal to rely strictly on cold-calling. Unless your reps are working on a commission-only basis (not recommend in most cases – especially in tech, for reasons outlined in an article on sales compensation that I’ve written), it’s a prescription for a low or even negative margin sale. Low-priced sales absolutely require an efficient marketing engine to generate a large amount of low cost leads or even turnkey orders driven by marketing, which lead to easy sales. With a big ticket product, the sales-force economics work better and more frequently allow a sales-intensive approach. Commodity products are a less straightforward category; in some cases a sales-driven approach might be best and marketing-driven is preferred in other situations. It’s really dependent on the details.
So what’s my summary view of cold-calling? It’s hard to generalize, as I’ve outlined with some of the factors discussed above. But I believe that there is a place for cold approaches in the overall sales plan. I also believe, however, that in most cases if reps are doing 100% cold-calling–or even the majority of their time–then the company is operating at far less than peak efficiency. A 100% cold-calling sales force is usually indicative of an institutional lack of marketing expertise or expenditures. This usually means less revenue and profits generated for the company than there would be with a more balanced sales/marketing approach. Balanced, integrated sales and marketing is what works best in the great majority of situations.
With respect to individual reps, if they are forced to cold-call often, you’re probably under-utilizing them. But if a particular rep is reluctant or completely unwilling to cold-call when the situation demands it, you may have a rep you should consider replacing. There are always exceptions to all of these generalizations for specific companies and market, but with cold-calling I believe they these are excellent rules-of-thumb.
I’ve outlined some ideas about when, where and how much cold-calling is appropriate in sales. This is a topic that is much debated–what’s been your experience? Post a comment below so we can have the benefit of your view.
Follow Phil Morettini and Morettini on Management via Twitter, Facebook, LinkedIn, RSS, or the PJM Consulting Quarterly Newsletter. To ask a question or discuss a consulting or interim engagement, contact Phil directly at firstname.lastname@example.org
If you liked this post please share it with your colleagues using the “share” buttons below: