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However, if we employ the dreaded cost-benefit analysis (and actually use it appropriately) the cost begins to fall apart.
According to one lead company’s site, their cost per lead is roughly $0.05 to $0.017 per lead. Of course that is depending entirely on the number of leads (most likely numbering in the thousands), and in no way shows the quality of the lead.
Here’s where the cost-benefit comes into play.
Let’s say that list has 1,000 names. That puts the cost at $50.00 for that lead list. Not too shabby, except that’s for a phone list. (Internet lists, tend to run in the $0.60 area of cost).
A quick google search suggests the length of cold calls last 10 minutes. However experience (both making and receiving) puts that number at closer to 1 minute. Just enough time to answer the phone and say “not interested.”
Due to the current climate towards cold calls in America, we’ll put the number closer to three minutes. Completely arbitrary? Yes, but based off polite estimates.
At three minutes a call, with 1,000 leads, that equals 30,000 minutes of phone time. Divided by 60, and we get 500 hours. Which is close to two and a half months of nothing but calling. So one employee, paid minimum wage, will cost a company $3,625 to do nothing but call potential leads.
This is a simple cost analysis, that doesn’t take into account the act of researching a lead, or qualifying a lead. All of which add to the total cost of lead lists. Even with every cylinder firing, lead lists generate a whooping 8% return rate. At least according to the IIABA.
Does 80 leads, justify three months worth of calling and $3600 worth of investment?
For most of us, the answer is no.
Mr. Black
It depends upon the worth of the lead. What if one lead gives you revenue of $50,000 which is a typical case in my industry i.e. IT Services. In that, though, the success rate is not 8% but somewhere near 3%. But big deal. I am making money and if my deliverables are of quality I get repeat business too.
But I understand this article is not for telling that cold calling on the basis of lead list is bad but to convey how to do cost-benefit analysis.
Welcome Mandar!
I am saying that calling on the basis of a lead list, while not “bad” per se, is just not effective anymore. There are better ways to generate business.
You’re success rate is 3%, that means for every 100 calls you make, 97 are failures. If you could double your success rate that’s an extra $150,000 every sales cycle for you! Now think if you could bump it up to 15 or 20%
It’s good that you, and other sales professionals are making money, but is the return of investment really cost effective?