Sales Advocate Newsletter

Lead-Generation Marketing Versus Cold Calling: Which is More Effective?

May 2003

Phone Works continually emphasizes how critical ongoing lead generation programs are to a company’s consistent sales success. But how do marketing campaigns compare to cold calling in terms of generating good quality leads?

Marketing-Generated Leads

Lead generation marketing programs such as Direct Mail and Email Campaigns, traditional and online Direct Response Advertising, and Event Marketing (e.g., trade shows, seminars, web-based events) can be very effective if and only if Marketing and Sales first agree on the target audience and the marketing message that will speak to that audience. Many of us telebusiness professionals have been the recipients of great quantities of lead responses coming from marketing programs which sadly result in the wrong contacts or inappropriate and unqualified accounts in terms of title, size, industry or other critical qualification criteria. This is costly not just in terms of the marketing dollars spent on the program but also in terms of telebusiness resources used in following up leads that do not generate revenue.

Because of the importance of reaching the right person with the right message, a marketing program is only as good as your list. Commercially available lists can by very effective for certain target markets. Effective list sources for technology businesses include: Leadership Directory, One Source, ID Exec, Hoovers, and magazines.

Outbound Cold-Calling

Lead generation cold-calling may be necessary if your company does not have a lead generation marketing budget, or your marketing programs are generating unqualified or incorrect/incomplete leads.

Cold-calling should always be conducted by a telebusiness professional – someone who has been trained and is compensated on prospect identification and lead qualification (i.e., the early part of the sales cycle) using a combination of the phone and email. Not only is it too expensive to have a field sales executive cold-call, but it is also less effective. Most field sales people are great at the later stages of the sales cycle once a lead is qualified, but are usually notoriously bad at the discipline of outbound calling campaigns.

As in lead generation marketing campaigns, in order to be successful your cold-calling program must focus on identifying the appropriate contact in a target or pre-qualified account. Then you need to deliver a well-honed, succinct message consistently according to the type of contact, her or his company and industry, and other information known about the account.

Which is More Effective?

In order to answer this question, you have to measure and compare the cost and results generated from each program.

Marketing program expenses and results need to be tracked back to the source of the lead (e.g. a direct mail campaign to the One Source list or the Comdex trade show), so that cost per lead, cost per “hot” lead, cost per sale, and other key data can be captured. When Marketing and Sales first agree on key qualification criteria, an investment in lead generation marketing can return impressive results in the short term.

Similarly, a metrics-driven calling program will tell you exact statistics for each telebusiness person. This includes: how many “calls” (telephone or email) will result in an interaction or “contact” with the prospect, of those “contacts” how many will be qualified leads and, most importantly, how many turn into “closes” or sales revenue. The following chart shows typical results during the course of one month’s calling efforts:

Calling Program Results
	Low	High	%
Calls	770	11100
Contacts	77	200	10-25
Qualified Leads	5	20	5-15
Closes	1	6	10-25

Results and metrics will vary from “Low” to “High” based on factors such as your market and company stage. If you are in an established market and company, you will typically see stronger results than if you are in an early stage company, evangelizing a new product or market space, or are testing and validating new messages or value propositions.

Also, a calling program’s success rate will be greater if there has been previous contact with your prospects – in other words if your call is a “warm” follow-up rather than a true “cold call”. Because of this, we have traditionally recommended using telebusiness to follow up leads after initially generating them through marketing programs. This argument is based on economics: it is generally more expensive to use telebusiness staff to generate leads compared to using targeted marketing techniques. But sometimes you can’t or aren’t reaching the right people using just marketing programs. If this is the case, strategic, judicious use of cold-calling can be justified.

Our Recommendation: Start with a Little of Each.

If your budget allows, why not make a small investment in both Lead-Generation marketing programs and Strategic Outbound Cold-Calling? Track and measure pilot results carefully, and then scale up the programs that generate the leads that turn into sales at the lowest cost. Without doing this, you will only be guessing at which lead generation mechanism is more effective.

This newsletter is provided as a complimentary service from Phone Works, Inc., the San Francisco Bay Area's leading sales consulting firm. Phone Works helps technology firms increase revenue, shorten sales cycles and implement successful, repeatable sales models. The industry's largest technology companies and newest start-ups turn to Phone Works for lead-generation, lead-qualification, telesales and sales-productivity programs.

You can reach Phone Works at 510.749.9073.