Cold calling is a terrible use of resources.
Maybe not a “Terrible” use of resources, but it is a pretty bad use of resources. The theory is that all it takes is one sale to make cold calling worth it, but that theory completely ignores the basic tenants of return on investment.
I spent a few years of my life working for an enterprise software company. The company sold its product for as much as $30,000 or more, depending on use, industry, and budget. The company was hemorrhaging profits, to the point where nearly everyone on staff (except me, because why not) was given six figure salaries or close to complete relatively standard jobs.
The Wasted Sales Dollars
One of the shining spots – at least in terms of strategy, friendly employees, and a VP with people skills, was the sales department. The VP – I’ll call him “Chone” for anonymity (that’s a Seattle Mariner joke) – was a personable and excellent salesman with a plan. He knew how to motivate the department, he knew how to keep everyone working, and he knew how to wow potential clients.
And yet, despite all that, it is my firm belief that they were throwing away their money.
Sales – pure sales – requires cold calls, email campaigns, and a variety of marketing tools that are long since outdated. Potential clients receive sales calls ad nauseum, and most email marketing campaigns are marked as spam or thrown in the trash by the recipient. This was a small startup, and the company maybe had 4 sales staff at any given time. But consider the costs. The sales staff earned roughly $400,000 per year combined, including commissions. That time was used for:
- Email Campaigns – Hours of labor finding potential client email addresses.
- Cold Calls – Hours of labor calling various numbers.
- Meetings – Holy cow, sales staff love to have meetings.
A liberal estimate would be that about 1/5th of the time, a sales staff member is actually dealing with someone that is likely to be a potential client, and that number is fairly generous. In reality, it is probably closer to 1/10th.
The company had no problem with this. Indeed, because its product was so expensive, it still made roughly one million off of all of these sales, leading to $600,000 in revenue. For them, that seemed like a great success.
But was it really a great success? How much more could they have brought in if they had used modern online advertising methods?
- They could have invested in hundreds of pages of content, thousands of articles for marketing, and hours of link building.
- They could be at the top of every search engine as the number one result for any and all of those exact same clients they contacted via outdated marketing techniques.
- They could keep 2 or 3 sales staff instead, and use them to field the countless phone calls they’d receive as a result of these marketing efforts.
- They could cancel some of their more costly advertising techniques, such as a Google Adwords campaign that was nothing short of a catastrophe.
And all of this would have cost less than a single sales staff member. But instead they spent it on a sales department that used costly and time consuming “cold” sales methods, and so still today they are nowhere on the first few pages of Google, nor have they gained any notice outside of their customer base.
The company is still in the black, but the reality is it’s possible to make a profit without achieving true success. This company could have been one of the leading software developers in their industry. They aren’t. Had they used their resources more wisely, they would have been so much more.