Salesopedia, June 10, 2008
When is cold calling right for your business?
Bix and Olga Taylor
Out in the cold: When is cold calling right for your business?
It was clear as day. We had a useful reasonably priced service to offer to an omnipresent and growing industry. We had happy customers eager to give us new projects if and when the projects got funded. All we needed were some new accounts. The more the better.
"Why don´t you just cold call?" said my boss.
I was skeptical.
"Have you ever gotten any business by cold calling?"
"Not yet, but we got a few meetings."
"You know, by being aggressive."
Aggressive. Sounds good? How about persistent? Playing the numbers game? What about just asking for a meeting? Do these tried and true techniques spell success for the undaunted? Let´s stop and ponder these questions for a moment. I will come back to my story later.
Chances are your company grew by making smart and sometimes tough choices about where to focus limited resources. Not only is your salesperson's time your company´s most important revenue-generating resource; it is also the most expensive. Why expensive? Because any time spent away from negotiating and
closing-even prospecting or presenting-has an opportunity cost equal to the value of sales that could have been accomplished during that time
Our point is a simple one: your salesperson´s time should be used where it´s most effective. Is cold calling consistent with this principle?
In order for a cold call to lead to a sale, a key decision maker, even after this person has been located and engaged in a conversation, must
- Need your product or service
- Recognize that she has the need
- Understand that your product serves the need
- Have urgency about the need: ready to buy
- Feel comfortable doing business with you
- Determine your product meets the company´s requirements
- Believe the price is a good value
- Find it easy to buy from you
How many on your cold-calling list are likely to meet all of these criteria at the moment you call them? Consider the process your prospective buyer must follow in order to make a decision on every item listed above. Especially if your product is complex or expensive, consider the number of people directly involved or
influencing each decision, and the chances of your call coming in too early or too late in the process. Still think you can win the numbers game?
Is it necessary for the prospect to have met all the qualifying criteria prior to the first contact in order to become a customer? After all, can´t a persuasive salesperson change the buyer´s mind?
In our experience buyers typically make decisions the way they´ve made them in the past. Changing minds is in essence changing habits: it takes time. Logic alone rarely suffices. Besides, there simply may be too many minds to change.
If time is the issue, what about persistent follow-up?
To be successful, a follow-up call needs to reinforce a message with which the prospect has already begun to agree, in a way that adds value. Else it´s just pestering. The problem is that, even granted the prospect´s permission, cold calls rarely provide value. That´s because the salesperson is often missing background
information that would enable him to speak directly to the prospect´s needs. Plus persistency adds on to the cost of sales.
How about just getting the prospect to agree to a face-to-face meeting? That´s an even bigger waste of your salesperson´s time if the client isn´t ready to buy.
Quite contrary to the "numbers" argument, we believe the goal is to never have a salesperson talk to anyone who isn´t ready to buy and primed to make a favorable decision. Therefore, cold calling only makes sense if the majority of prospects are qualified - whether by the nature of your product or service or by observable
characteristics enabling you to predict your prospects´ purchasing behavior-- before you spend time talking to them.
So, what if those conditions aren´t met? In other words, what if only a small portion of your marketplace meets the eight criteria we described above and there is no way to tell -- without insider information -- which prospects are ready to buy from you? In
this case cold calling is costly and ineffective. We typically recommend replacing it with a prospect qualifying process that ends rather than starts with a sales call.
What do we mean by a prospect qualifying process? A mixture of sales and marketing activities allowing your company to:
- pinpoint your most promising prospects;
- target them with a value proposition focused on their needs;
- collect feedback that validates the value proposition and suggests the prospect may be ready to buy
Once we understand the types of buyers that are likely to buy from us, most of the time we can reach out to them using a less expensive resource than a professional salesforce, or a less time-consuming approach than cold calls-until we have confirmed that they are ready to buy
Let me give you a few examples.
A computer storage company hires student interns to call large corporations regularly asking about intent to buy, budget, and purchasing process. Only buyers pre-qualified through this process as having allocated budget to storage receive a professional sales call.
Although less expensive than traditional cold calling, this approach is still costly because it is one-to-one. Most companies can make better use of their marketing resources by beginning with one-to-many communications--such as well-written
direct mail or email or a talk at an industry meeting-that set forth a value proposition compelling to their target audience.
A financial software vendor uses an email newsletter and webinars to drive traffic to its website which offers free trials and demos of its products. A salesperson then follows up only with those prospects who signal their readiness to buy by investing
the time necessary to try out the software.
To get back to my story, as you may have guessed, I didn´t get very far with cold calling. The turning point came when I realized I needed to close a sale in two months in order to keep my job. I was forced to ask myself which of the hundreds of prospects would be ready to buy within that time. With this in mind, I asked my boss´s permission to interview existing clients in order to profile our most promising prospects and find out what compels them to buy. It was his turn to be skeptical.
"We already know what they think", he said.
"Let´s ask them anyway", I said, "As they are musing on what makes us great, maybe they´ll give us a referral or two."