When the economy faltered in the first part of 2001 and then collapsed after September 11, many sales executives panicked at their dropping sales. In a largely mistaken belief that they must be able to maintain their sales levels, they subsequently ordered their sales force to "hit the phones" and get selling. It is no surprise that the results of these sales "blitzes" were less than satisfactory.
Some of the hits taken to a firm's sales figures were caused by the faltering economy and some by the failure of management to, well, properly manage the firm. The same incompetent, ineffective or merely inattentive managers blame that portion of the "hit" caused by mismanagement on the economy. But this is another story...
The other is the ill will that annoying calls create in future potential customers. Think of someone who cold called you at an inconvenient time and tried to sell you something you did not need or want. This person was very aggressive and refused to take no for an answer. The pressure was great and in exasperation, you had to hang up the phone to stop the conversation. How do you feel about the thought of talking to this person again ? This person probably lost all chances of dealing with you in the future.
I have experienced this effect personally at a Silicon Valley firm where I was the VP of Marketing. As the economy of Silicon Valley collapsed with major layoffs from companies such as Cisco, the frantic calls from headhunters trying to place an ever increasing number of freshly laid off marketing and sales people became overwhelming. I resorted to screening my calls with voicemail and I did not return the calls of the various headhunters which is not how I like to do business. There were just too many of them. I like to return all my phone calls as a courtesy and a good business practice, but during this experience, I realized that this would only work if I do not receive many sales calls of the various types to overload me. This, cold call proponents will say, is just the type of person who needs a cold call in order to make a sale; and they might be right. But I doubt it.
So, remember the statement about responding to genuine leads even if they are weak ones ? This gives the salesperson a name of someone who is at least marginally interested and has pre-qualified themselves. This gives the salesperson the ability to use their people skills to develop a relationship with this person. Then, should this person or someone around them needs to purchase a product or service like yours, the name "Acme Manufacturing" rolls out and they call you. They call you when they have a need and your sales force can then bear considerable attention to this newly qualified lead. No wasting time calling 100 names out of the phone book and getting one or two leads, you are now working with a very interested potential buyer. Of course, the sales force needs to further qualify this potential customer and determine their needs and this is what they are best at.
Where did this initial lead come from ? This can be easy or difficult to determine. Sometimes all you need to do is ask the customer how he found out about you. This can result in surprising answers. I maintain most leads are from some sort of past relationship building such as the recommendation of a friend or partner, an advertisement, the web, a magazine article or someone answering a question on some listserver or newsgroup. But I maintain, rarely from a cold call. In fact, cold calls have the unfortunate side effect of annoying potential customers. They may need your product at some point, but like a pesky telemarketer, you could very well get shoved off the list. For the customer, thinking your name will invoke less than positive "vibes" and this will not likely result in a call from them if they ever need your product or service.
Other forms of contact such as advertisements (but not all), mailings and email are better because the schedule control remains in the hands of the customer and they are less likely to get annoyed at this minor intrusion. A cold calling salesperson could say "Is this a convenient time for me to call?" risks getting the answer "No" so they will rarely say this. I think how often this will be the answer depends upon the type of call and the situation. If you are lucky, the customer will ask you to call back at a prescribed, more convenient time.
Another reason is the sale is already made and sales people, being generally commission driven, would rather work on the next sale rather than wasting time with a sale already completed. Sort of like painting a house after it has already been painted once. A waste of time in many salesmen's eyes.
Bob Boys
rboys@earthlink.net
Copyright ©2002 Robert Boys
The Stories:
The stories are all similar. One firm has two salesmen make cold calls from Michigan into California trying to find new customers and this was largely ineffective. Another company's sales people, exhausted from the workload and the emotionally draining cold calls, cry out for relief to the sales manager. Another, without a suitable marketing department and no ad budget, was forced to make cold calling the only way to get customers. The stories go on forever and so does the rationale for resorting to cold calling.What is a "Cold Call" ?:
I define a cold call in this document as calling someone essentially from a phone book. This phone book might be an industry list of companies that might use your product or services. It could be a purchased database. It is usually targeted to some degree. Random calls might be done for certain products such as long distance services but not for sales of dedicated technical equipment and services for obvious reasons. A follow-up is not a cold call nor is a "targeted call" although the latter is very close. The Reasons Given:
The reasons given are also few and familiar. They are "we don't have a local office in California", "once the customers hear what you are selling - they will buy - so the sales force must be poor", "I can't afford anything else" and so on. These are not the real reasons; but only part of the truth...and a small part.The Real Reason:
The real reason is that cold calling is not very effective or efficient compared to other marketing methods. When the economy was running in high gear, it did not matter much what one did, sales were good and easy to get. Many sales executives watched as sales calls resulted in good sales and may have prescribed a certain percentage of calls made by the sales personnel to be the so-called "cold calls". As a result, they also saw a percentage of these cold calls result in sales - perhaps 1 or 2 % return rate which in some industries, is similar to those experienced by print advertising. What Was Really Happening:
What was really happening is that with business in the US at a very high level, no matter what a company did, no matter how incompetent the management, sales were good. So, if a company's sales and marketing efforts were not at the most effective point, it did not matter very much. It appeared to the company that what they were doing must have been correct - "look at the sales levels, they have never been this high before - we definitely are on the right track". Bang on enough doors and people will buy whatever you are selling. The rewards were full and fast and this fueled and motivated sales people further on and cemented the cold call fallacy in even deeper.The Hidden Costs of Cold Calling:
There are two costs not normally associated with cold calling. One is the wear and tear on your sales force from irate people Some customers, maybe many, do not treat people cold calling them with much respect. While their frustration might be understandable, it is rude and disrespectful. Furthermore, I believe that the way I treat people on the phone who call me will somehow reflect back in hidden attitudes how others treat me when I call them. Maybe it is just the way I portray myself, but I have a difficult time believing one can curse and hang-up on people in one time frame, and then treat others with full respect in another. Some of one is bound to bleed into the other. Unfortunately, sometime the only way to get rid of the more obnoxious and hard nosed callers is to hang-up.Worn Out Customers:
I suspect that as a result of the big cold call sales pushes resulting from last summer, customers are worn out from all the sales calls. I see this at trade shows where attendees are reluctant to give their names out to sales people. They are exhausted from the deluge of calls and since they still have to answer their phones to conduct regular business, they have taken the strategy of becoming as anonymous as possible. This is the equivalent of an unlisted phone number. How To Maintain Your Sales Numbers:
The only way to maintain your sales figures in a downturning economy is to take sales from your competitors' marketshare. In some markets, you can steal sales from the future by offering lucrative terms and prices to customers. The current automotive market is a great example with its zero percent interest rates and rebates. This can have ominous effects in the future where you have stolen your sales from. Of course, you could keep up sales by bringing out new products, special promotions and so on - but these are not cold calls and they take some time before they can be effective. The pie has and is getting smaller and your competitors will not normally allow you to take their marketshare easily - not if you have worthy competitors.Other Effects Creating Sales:
There are other interesting effects going on in the red-hot economy. Many companies felt their cold-calling techniques were working but they were mistaken. Other activities such as advertising, their web site, partner relations, magazine articles and "word-of-mouth" contributed to the sales effort. Also mixed in here was the "relationship building" practiced by the sales people disguised as cold calling. It is sometimes (often?) difficult to accurately measure these effects so they do not get factored into the measuring of the sales income.Genuine Sales Leads:
When I hear sales managers tell me that cold calling is necessary I question them further and often what they were really doing is responding to genuine leads generated by some other mechanism, even if these leads are rather weak. They, of course, can all point to the big sale that was obtained by a cold call and I do not dispute this. My premise is that cold calling is inefficient and is hard on sales people, their motivation and their energy levels. A cold depends on the fact that when you call, the customer is ready to buy your product at that time or worse, you are able to convince them they are, even if they are not. This works for things like yellow pages advertising and long distance sales (maybe), but the turnover rate is very high for these boiler room operations. It is not effective for development tools or other types of test equipment because of the intermittent buying process. There are other ways.Who Controls Who's Schedule ?:
A cold call transfers schedule control from the customer to the salesperson and is very intrusive. The sales person is unable to determine in advance of the call if their call is at a convenient time. While voicemail helps alleviate this issue somewhat, it is too easy for a customer to not return phone calls. In response salespeople must find other means to get their message across. It is impossible to do an effective sales call in the time of one voicemail.Follow-up Calls:
Follow-up calls are useful as long as the customer is still interested or can supply information as to why you lost the sale.
Follow-ups are excellent after the sale to make sure a customer is happy but many people do not like making them. There are two potential reasons for this. One is the fear that there might be problems getting the product working or that it does not satisfy the customer's needs and it is better to "let sleeping dogs lie". The sales people want to continue the "good feeling" about this sale to help motivate them. If they do not know about a problem, all must be alright. Wrong! The reason the customer has not called you with a problem is that they are too busy packing your product up to return it. Believe me, this happens all the time. Targeted Calls:
Targeted calls are very close to the standard cold call. Targeting means a company is chosen because it uses products that you sell and they probably purchase consumables. These are products they use on an on-going basis and your chances of them being in a purchase phase soon are relatively good. One reason these are not as bad as regular cold calls is that the salesforce are not making 100 calls to get 1 or 2 sales. Their energy is not drained from irate recipients (victims?) and from the demoting factor from getting little results from so many calls. They are spending more time on a targeted call which increases the chance of getting the sale. This is because this is a form of relationship building, not a cold call. Remember, a cold call happens once, if they are not interested, you are gone.
Relationship Building:
The best method to get new customers is to create relationships and many good businesses already do this and often they do not realize the extent they depend on it.
Pasadena, California