If you have seen ‘The Wolf of Wall Street’ you will very well remember the scene where Jordan ‘hard sells’ for his fake firm’s pump and dump scam. The premise is that it worked and he made money with unscrupulous methods. This was an example of cold calling to generate leads at its finest.
Cold calling to generate leads is not a scam, period.
In the past, cold calling to generate leads has worked magnificently for many companies. And the process was quite simple: create a database of your target audience or just purchase it from reliable vendors. Hire an appropriate number of salespersons or tele-callers, teach them the finer nuances of cold calling, provide a dedicated telephone line, and start calling. Depending upon the nature of the product and prospect, a specific target was assigned for each day/week. These reps had to call a certain number of prospects and engage them to buy the product.
At that point of time, it was a matter of convenience for the buyers. Rather than having to go to the brick and mortar store, all information was being made available to them in the comfort of their homes or office. There was a higher chance of conversion from prospects to customers in the good old days. Does cold calling work for lead generation?
Having reaped the benefits of cold calling to generate leads in those times, some companies depend on this method largely to reach out to their target market. However, there are a few factors they haven’t yet considered which could lead to their downfall.
Information at customer’s finger tips
Due to the advent of technology, every bit of information that you ever want to talk about is already ‘literally’ available at the customer’s finger tips. Smartphones have dramatically simplified the ease of scouting for information at any point of time. All you need is working internet connection and you are good to go. If browser’s and Google were the information delivery vehicles in the past, with the arrival of Google Home and Alexa Echo, information delivery has been simplified even further (now even voice based)
Today, across industries, you will find that typically the conversion rates for cold calling to generate leads is approximately around 0.5 -1.0 %. That is a rather poor statistic and can take enormous amount of resources to meet the company’s or sales rep’s target at any given point of time. Before the advent of caller ids, cold callers did had an advantage. But now apart from phone numbers, some apps even provide the exact information about the caller such as to whom does the number belong to and where are they calling from.
As a matter of fact, it is possible to list these numbers under ‘Spam’, not unlike emails, and that information too is revealed to other prospects if a sufficient number of people report it under spam.The recipient doesn’t even have to answer the call to understand who is calling them. Right then and there, cold callers lose their opportunity to connect with their prospects.
Here are some alarming statistics about cold calling that companies should consider:
- 44% of salespeople give up after one follow-up. [Source: Scripted]
- 80% of sales require five follow-up phone calls after the meeting. [Source: The Marketing Donut]
- It takes an average of eight cold call attempts to reach a prospect. [Source: Brevet]
- It takes 18 or more dials to connect with a prospect over the phone and call-back rates are below 1%. [Source: TOPO]
- Tele-prospectors make between 100 and 500 calls for every lead they qualify. [Source: SiriusDecisions]
- Sales reps can spend up to 40% of their time looking for somebody to call. [Source: Inside Sales]
If you carefully observe all the statistics, you will notice that it takes a significantly long amount of time to actually connect with the prospect and that’s after multiple attempts. In this era of cut-throat competition, sales personnel have been known to quickly run through their list of prospects to get a lead.
If some prospects cannot be reached on the first attempt, they are mostly abandoned. After the list has been completely exhausted, only then attempts are made to contact these prospects. Basically, if their targets are met, there are chances, most of these prospects will not be revisited, leading to a loss of potential opportunity.
Another aspect is the quality of communication and attitude of salespersons. Many companies typically have incentive based remuneration for salespersons while the fixed component of salary is comparatively low. That is not exactly a thrilling offer unless the candidate is supremely confident of their ability to sell via cold calling.
There is also an abundant number of candidates available in the market which has been a major factor behind the hire-n-fire trend in recent times. Rather they should train their employees and develop their skills so that their productivity can be increased.
Inbound Marketing much more effective way to connect with your target audience
Cold calling definitely used to be a great way to get prospects and set up appointments. But today, inbound marketing has become a much more efficient way to connect with your target audience. Inbound marketing works better than cold calling because it delivers warm prospects who are receptive to speaking with a sales person. It is a part of pull marketing wherein there is a higher chance of conversion as compared to cold calling.
Another important point to consider is that cold calling is highly sequential in nature, whereas most of the inbound marketing mechanisms can be deployed, where you can reach large number of people simultaneously. The greater your reach, the higher is your chance of conversion.
Cold calling for lead generation also leads to a decline in brand value
Remember you spend enormous efforts to build a brand that is trustworthy, stands for quality goods/services. In doing cold calling for lead generation, with the enormity of the calling and the calling staff, there is very little chance you can control what is being said about your brand to the outside world. The end result is that your brand gets diluted.
Also remember that we said that the conversion ratio is less than 0.5 – 1.0 %. The bad part is that 99% of the guys end up getting irritated with the repeat calls that they receive and that also leads to negative branding for the company. Do you realize the amount of negative branding, cold calling is causing to your company?
In our next post, we will talk about how How Inbound Marketing is steadily replacing Cold Calling and the best ways to go about it.
At Xenia Consulting, we recently created an eBook ‘ 20 steps guide to start generating inbound leads’ . Make sure you download your copy now