Do the Math: Marketing really is a cost-effective way to build your business
Most of the fastest-growing companies I know don’t rely solely on one-to-one sales contacts to grow their business. Why? Because it’s difficult to find effective salespeople, and often it takes too long for new salespeople to start showing a favorable return on the company’s investment.
Instead, the more successful companies leverage lower cost-per-contact, one-to-many marketing tactics to address the front end of the sales pipeline: prospecting and qualifying after sales lead generation. Then they focus their more costly one-to-one in-person sales contacts on the end of the pipeline: the heavy lifting of doing demos, crafting proposals and closing sales.
If the initial steps in the sales process–sales lead generation, prospecting and qualifying–can be effectively accomplished by using less costly one-to-many marketing contacts, you’ll save your company real money and free your salespeople to be more productive. This is true even if more marketing contacts are needed to get the job done.
It Makes Dollars and Sense
Research on the cost of sales calls by Cahners and Reed Publishing companies found that the average cost of a Business-to-Business sales call in 2013 was over $518 (This is the most recent research I could find on the subject, so the cost of a sales call is probably much higher now.) The same research said that it took an average of 5.1 in-person sales calls to close a sale. So the total cost of sales visits required to close an average B2B sale was just a hair under $2,650.
Even if your sales are large enough to justify this big expense, wouldn’t it be nice to keep some of that money as profit, or to invest in more marketing and sales instead? You can. Simply replace a couple of those expensive, in-person sales calls with lower cost-per-contact marketing tactics such as e-mail, direct mail, telemarketing and pay-per-click advertising.
Do the math again, replacing two of the $518 sales calls with 12 marketing touches at as much as $15 each for the prospecting, nurturing and qualifying steps. The result? You’ve invested only $180 to complete the first 3 sales steps that otherwise would have cost you $1,554 with in-person sales calls. And the total cost per sale goes down to under $1,300 – a nearly 50% reduction.
Wait, There’s More
The research I referenced earlier also showed that the average salesperson spent less than a fifth of his or her time meeting with new prospects. This works out to be approximately one day of every business week. When you consider vacations and other time off, that works out to less than 50 days of new business development a year!
Do the Math
How many prospects do you think your salespeople can visit during a given day? Unless their territory is limited to the immediate neighborhood, I’d say they’ll probably be able to schedule a maximum of four meetings a day. Add these numbers up and you’ll find that your average salesperson can complete 200 in-person sales visits a year at most (50 days multiplied by four visits).
Divide the 200 visits by 5.1 (the average number of in-person sales calls required to close a sale, as mentioned earlier), and you’ll find that if they close 100 percent of the sales to prospects they visit, they’ll close a maximum of 40 sales a year. However, my experience says that the average B2B close rates are closer to 20 percent to 30 percent, meaning average salespeople will only close between eight and 12 sales from their 200 in-person sales calls!
How much more productive would they be if they only had to make an average of three sales visits to close a qualified business lead that was generated for them by marketing? The answer is 40 percent more productive at closing sales.
Qualified Business Leads
So instead of adding more salespeople to knock on more doors, use marketing to cost-effectively contact your prospects and fill the sales pipeline with qualified business leads via sales lead generation tactics. Doing so will result in more sales-ready opportunities that your salespeople can turn into new business, meaning greater sales revenue and profits for your company.