A Peek Into A Consultation With A Networking Consulting Business

in On Entrepreneurship

Clients say the darndest things…

This is a peek into a real conversation I had with a client on Friday. Let me set the scene:

The client, I’ll call him John, owns a multi-million dollar networking consulting business with a staff of salespeople on salary and commision. When I heard they were spending about half their time cold calling, I immediately set about replacing the inefficient and damaging cold calling with marketing systems that’d produce as many qualified, motivated leads as the salespeople could handle. In this case, the network solution being sold has a high dollar value associated with it, and the client can afford to spend a little to get the clients in the door.

Me: Do you have the numbers back yet [from the latest promotion]?
Client: Yes, new leads came in at $32.50 each. That seems awfully expensive. I think we should cut back on [proprietary component of the marketing piece that increased the cost per piece] to make it cheaper.
Me: Are the leads converting?
Client: 11:1 so far. (NOTE: This means that for every $1 being spent on the marketing $11 is being returned to the company.)
Me: 11:1 and you want to go cheaper? Why not run with it and get another system up and running.
Client: Well, $32.50 seems expensive!
Me: How much was your cost per lead when you had your salespeople cold calling?
Client: I don’t know.
[ Cue music as we crunch the numbers. ]
Me: Ah hah, so it was costing you over $279 per lead your salespeople were pulling in by cold calling, and we already know those leads didn’t convert better. Does $32.50 still seem expensive? Stop focusing on the cost per lead and focus on the ROI. It is the only number that really matters.

There are a few lessons here. First is that you have to know your numbers to make good marketing decisions. Cold calling is often thoroughly unaccounted for in businesses, thus not accurately measured in terms of ROI. Big mistake. Second, while there is nothing wrong with testing and trying to reduce expenses, don’t trip over pennies on the way to the dollars.

P.S. The client OK’ed me posting this here, as long as it was anonymous. He’s a good guy, and can laugh at himself (a good entrepreneurial trait!) as well as anyone I’ve met. Thanks. grin

{ 2 comments… read them below or add one }

1 Anonymous April 21, 2004 at 3:04 am

Michael, you are right there with this post.  I think people have a cultural bias towards cold calling in the states.  Yet they do not really add up the numbers to determine the ROI.

John

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2 Anonymous April 21, 2004 at 8:04 am

Michael, you are right there with this post.  I think people have a cultural bias towards cold calling in the states.  Yet they do not really add up the numbers to determine the ROI.
John

Reply

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