The Shrinking ROI of Cold Calling

Why it’s Happening and What to do about it

What was once considered a ‘necessary evil’ by most BDMs, Sales Managers and organisations, is rapidly becoming an ‘unnecessary evil’.

And here’s the research proof.

We are, of course, talking about cold calling. Ten years ago it generally delivered a positive ROI for most organisations who did it well; but, for a long time now, we have seen its effectiveness and relevance decline. From talking to customers, to other business leaders, and to sales people across all industries over the past five years, the feeling is that the cold calling ‘pestilence’ is thankfully waning.

So we decided to quantify it a little more.

In March and April this year, Lead Creation ran research on the effectiveness of cold calling, asking over 100 senior professionals working in sales management and sales training.

We asked several questions on the impact of cold calling - the questions and responses are below, together with our analysis….

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Question 1: On a scale of 1 to 5, do you think there has been an increase or decrease in the effectiveness of cold calling in the

past five years? (1 = greatly increased, 5 = greatly reduced)

Key Finding:Not one respondent said that the effectiveness of cold calling had increased in the past five years.

Over 80% said that the effectiveness had reduced, with the majority saying that it had ‘greatly reduced’. In fact the average score on the scale was 4.4.

Question 2: What are the positives and negatives of cold calling?

The positives

Some respondents felt that there were some clear positives to cold calling:

“I think it creates awareness of a service/product.”National Sales Trainer

However, even when trying to name the positives, some respondents had to venture beyond strict cold calling to ‘warm conversations’ to find any:

“People like referral traffic and warm handovers. If you can invoke the name of someone they know (esp. in B2B calls) you are more likely to reach second base.”Marketing & Membership Manager

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The negatives

There were no such difficulties in finding the negatives, with one respondent being very forthright with his opposition:

“There are no positives to cold calling. As a recipient, I hate it. The callers are always rude and pushy and they are selling something I don’t want. If I need a product or service, I will find it! I would ban it if I could.“Joel Lentin, Strategic Marketing & Communications Specialist at Holding Redlich

Over half of respondents directly or indirectly referred to damage to the brand caused by people not wanting to be sold to:

“Cold calling focuses on the product/service rather than what the person on

the other side feels – there is a lack of empathy which can create the wrong perception of the brand and perhaps damages it in the long term.”National Sales Trainer

“It is a waste of time, ruins lots of good prospects that could be handled better… learn how to network and get referrals.”Business Development Director

With 12.5% of respondents, the invasion of privacy was another key negative of cold calling:

“Known sales tactic - people are far less tolerant - perceived as rudeness - invasion of privacy with contact details - rude staff can leave a bad taste - no personalisation - no relationship - there-fore low potential for repeat business.”Director of Marketing and Advertis-ing

“There are no positives to cold calling.”

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Question 3: What are the two main personal attributes that make a good cold caller?

Question 4: If you had to train a cold caller on only two skills, what would they be?

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How can you compensate for the decline in cold calling ROI?

The responses to the first two questions are of particular interest here.

Without question, the widespread perception is that the effectiveness of cold calling has faded considerably in the past five years; and, while the list of positives gets shorter, the list of negatives seems to grow.

This is largely because people are now more aware that better alternatives exist, with much better ROIs.

This trend is only going to accelerate as we become more adept at using online resources. Today, does any B2B organisation not research extensively long before making a purchase or switching suppliers?

Our survey findings are backed up by some other notable research on cold calling:

1. 90% of C-suite executive say they never respond to cold calls or email blasts, according to Harvard Business Review.

2. Cold calling costs at least 60% more per lead than other methods, like social selling, according to The State of Inbound Marketing by HubSpot well over a year ago.

3. 8 attempts are required to reach a prospect with a cold call on average today, compared with 3.7 in 2007, according to TeleNet and Ovation Sales Group.

Cold calling has always been considered difficult, and most salespeople loathe it; this means that they are generally not very good at it.

However, the issue is NOT simply that effective cold calling requires better recruitment and training.

There is a perception out there that telemarketing done well can still be a very effective sales tool. But, as outlined in questions 3 and 4, the very skills necessary for high quality cold calling are exactly those that could be better directed to converting warm leads into sales.

Such skills are scarce and very valuable to any organisation, and they should be applied where they are most effective. The talents of well-trained cold callers are essentially wasted on calling that is totally cold.

The effectiveness of cold calling has faded consider-ably in the past five years.

The very skills necessary for high quality cold calling are exactly those that could be better directed to converting warm leads into sales.

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The real ROI comes from having skilled sales people talk face to face or on the phone with targeted prospects who have already shown interest. These leads are generated from well-managed, highly targeted Social Media campaigns that build relationships and replace the in-creasingly questionable need to cold call.

Yet many organisations continue to persist with outdated methods. They have failed to adapt to the recent changes that have occurred in sales and marketing and in spite of the declining ROI expected from it. In the last five years US$22 billion was spent on telemarketing globally, so not a small amount!

There is clearly a large vested interest for sales and marketing organisations who run call centre operations. These appear to be the only people who still consider cold calling to be effective – as evidenced in the recent article Why Telemarketing and Cold Calls No Longer Work. It details four main reasons why cold calling is no longer viable:

1. Even the most ardent fans admit it’s less effective than it used to be.

2. It positions you in a negative light in B2B sales.

3. It won’t find what we all want: qualified leads.

4. Salespeople typically hate it – and are therefore not very good at it (the opposite of “Love what you do and success will follow”!).

Even the most ardent fans admit it’s less effective than it used to be.

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The article attracted some comments from people disagreeing that cold calling was poor value for money. Most of these were from those with a vested interest in the business.

A typical comment was:

“Cold calling is an art form. To be good it requires hard work, intellect, charisma and a thick skin among other attributes. It’s not as effective as it used to be because it’s been around longer than it used to be, and emerging technologies offer other routes to contact people.”

“Cold calling is one of the best means of generating growth for any company, but only if it’s done the right way.”

However, comments from those on the receiving end of cold calls overwhelmingly agreed with the premise of this article:

“I get telemarketed to death. It’s got to the point all private number calls are ignored and sent to voicemail and if they call from a registered number their number goes into the automatic ignore list so I don’t know if they call back again or not.”

The fact is that a well-managed and targeted Social Media Marketing strategy produces results. Results that increasingly leave cold calling trailing and highlights the wide array of negatives associated with cold calling that simply don’t exist with Social Media.

Organisations investing large chunks of their budget in cold calling can expect far greater ROI by formulating a smart inbound marketing strategy. One that incorporates social media channels such as LinkedIn, Twitter, Facebook, etc as their primary lead generators.

Such a strategy engages contacts and builds relationships before any selling is done… then the skilled sales people come in and convert the leads into revenue.

Furthermore, the budget involved for SMEs to deliver warm leads via this methodology is a LOT lower than the salary of a talented cold caller.

“Cold calling is one of the best means of generating growth for any company, but only if it’s done the right way.”

You can expect far greater ROI by formulating a smart inbound

marketing strategy.

Give us a call and we’ll be happy to share our targeted social media marketing strategies and tools developed over the last eight years. We’ll

start the conversation and get your prospects talking back to you.

To learn more about what we can deliver for you: www.leadcreation.com.au

or +612 8188 8600 or email me at tobym@leadcreation.com.au

Toby MarshallL5 Commerce Building

39 Liverpool St, 2000 NSW Sydney