Cost of Sale vs. Lead Cost – and the WINNER is?

A cheap lead may just do the trick for you. However, unless you track all the cost elements in delivering sales with these leads from a marketing and sales perspective, how do you know you’re not just fooling yourself?

Not all leads are created equal and they don’t necessarily all produce the same results. Just ask your call centre staff or the sales team!

To illustrate this point, outlined below is an example of how the quality of a lead can make a significant difference in your profitability.

This example shows the outcomes of using a telemarketing list secured from a list broker vs. leads generated in-house though an Opt in Survey Lead program. To keep it simple, I’ve based all the Telemarketing Activity on 10 operator hours and rounded to get whole numbers.

What’s an Opt in Survey Lead?

Opt in Survey Leads are leads generated by conducting surveys with potential prospects through your in-house call centre – in this example, leads are householders. In conducting the survey, household decision makers are asked a number of questions designed to identify those householders that are interested in receiving information regarding your products/services and/or an in-home demonstration from one of your sales representatives. These householders give expressed permission for your team to contact them in the future to set up a sales presentation with a member of your sales team.

Telemarketing Activity

Broker List

Survey Leads
Operator hours 10 10
Avg. # of Leads used per Operator Hour 35 10
Leads Used 350 100
Presentations / Operator Hour* 6.5 8
Total Presentations 65 80
 Appointment Booking % 18.46% 30%
Gross Bookings 12 24
Show Rate % 67% 67%
Appointments 8 16
Sales Activity
Appointments 8 16
Sales Conversion Rate 25% 25%
Sales # 2 4
Net Average Sales Price $4,950 $4,950
Sales Revenue $9,900 $19,800
Cost Per Sale
Telemarketing Costs (includes labour and overhead costs) $400 $400
Lead Cost++ $122.50 $500
Total Costs $522.50 $900.00
Sales # 2 4
Cost Per Appointment $65.31 $56.25
Marketing Cost per Sale+++ $261.25 $225.00
Marketing Cost of Sale % 5.28% 4.55%

*Presentations per operator hour are based on an average talk time of 5 minutes per presentation.

++ Lead Cost for the Broker list is based on acquiring a telemarketing list from a broker for $350/1,000 ($0.35/ lead) and using 35 of these leads per operator hour – (35 X .35 = $12.25) X 10 hours = $122.50

In calculating the Lead Cost using Opt in Survey Leads the cost of generating these leads in-house is $5 per lead, and using 10 of these leads per operator hour – (10 X 5 = $50) X 10 hours = $500

+++ To determine the Marketing Cost of Sale, one divides Total Costs by the Sales Revenue.

Certainly the gains in using Opt in Survey Leads in this example may leave some somewhat sceptical of the productivity increases, until they consider the following:

  1. When cold calling most of an operator’s time is spent separating the “wheat from the  chaff” just trying to find someone to speak with, who might be “qualified”, and have the time to talk with them when they call.This means most of an operator’s time is spent dialling rather than booking appointments – even when using a Predictive Dialler!Once your operator eventually finds the right prospect to speak with, their presentation time is usually much longer because they have to provide cold prospects with product information. And then quite often – call them back to give the prospect time to consider the benefits of an in-home demonstration or purchase with their partner.

    Operators usually need to go through the booking or sales process all over again, a second or third time. And that’s only if your operator remembers to call them back!

  2. With an Opt in Survey Lead, your operators only speak with qualified prospects that have shown enough interest in your product/services to request information from you so they can consider your products/services benefits; and are willing to speak with your operator when they call to schedule a sales presentation.This reduces a tremendous amount of operator time, which allows for the increase of presentations per operator hour that saves you money!Booking % increases as well, because your operators are only speaking with genuinely interested and qualified prospects that are aware of who you are and what you have to offer them. They also have an identified need and have expressed an interest in hearing back from you and are expecting your call.

    Naturally, you decide who calls these prospects, so you can ensure that your best operators are dealing with the best leads! With more aware and better targeted prospects attended by your better operators you achieve better booking rates.

    With more bookings, even with the same show rate %, you’ll get more sales presentations, which reduces your cost per appointment.

    With more appointments, even with your usual sales conversion rate, you’ll get more sales. And even though the costs of your overall spend is higher than what it would be with a cheaper lead – you actually make more sales, spend less per sale and make more money!

    Isn’t that what it’s all about?

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