20 May 2016 Category: Insider Perspective
Organisations of all sizes are familiar with the dangers of becoming too focused on turnover alone as a measure of success. Business leaders continue to focus on profit and, with digital and social media now promising ‘cost effective’ alternatives to traditional marketing channels, there is growing pressure on marketing executives to deliver new business at the lowest possible price. Companies are scrutinising their marketing spend and questioning whether they have chosen the most cost-efficient marketing channels to support their business objectives.
When it comes to business-to-business communications, telemarketing is a highly effective platform for generating new leads. Nevertheless, there is a perception that this tried and tested channel is also an expensive one, especially when outsourced to a telemarketing agency.
A common concern is that telemarketing – a uniquely personal, one-to-one channel that connects with each prospect individually – takes time to deliver measurable results. This leaves some clients feeling that they don’t have adequate control over costs.
Through this article, we question the effectiveness of the most common strategies we see our customers adopt to either avoid, manage or cut their telemarketing spend
Telemarketing is expensive – what are our alternatives?
More often than not, we see marketing teams attempt one or sometimes all three of the following approaches to manage and even cut their telemarketing spend:
- Bringing the telemarketing function in-house, believing that it will be more affordable to use existing resources or to manage the process themselves.
- Partnering with telemarketing agencies that offer a cost-per-lead or cost-per-appointment pricing model instead of the per-hour billing approach taken by most established agencies.
- Redirecting spend towards other channels which they perceive to be ‘cheaper’ – often platforms which connect with prospects in a much more impersonal way, such as pay-per-click advertising or direct email campaigns.
Unfortunately, all of these alternatives to an adequately or appropriately financed outsourced telemarketing campaign tend to come with hidden costs, such as high overheads or leads that are not properly qualified and therefore burn up resources further down the line.
Let’s delve deeper into each of these ‘cost-cutting’ measures and see whether they do, indeed, make better business sense.
1. The true cost of bringing telemarketing in-house
Handling your telemarketing campaign in-house may seem more affordable than partnering with an experienced telemarketing agency. Setting up an internal telemarketing team, however, can be more expensive than you think.
Firstly, there are the hard costs to take into account, such as acquiring or demarcating extra office space, procuring hardware, extending IT services and of course, the calling charges. None of these apply when the service is outsourced.
There are also a wide range of HR expenses, from additional salaries to the cost of recruiting, developing, managing, motivating and retaining talented staff. Given the gruelling nature of the work, telemarketers tend to move between jobs fairly regularly. Maintaining appropriate staff volumes and skill sets will be a constant and costly task for the in-house marketing department. Without constant coaching and management, the quality of leads will vary significantly.
The benefits of outsourcing
On the other hand, an experienced agency has invested in its staff and methods, and has years of expertise to draw on. An agency is also likely to be more productive due to the fact that it can afford to carry a relatively large staff complement, allowing back-up during illness or down time. Importantly, there is also no cost implication or management overhead if you need to stop, ramp up or ramp down with an agency - this can be a real headache and expense if you are doing the work in-house. You can effectively switch it on or off as you require, on a campaign or project basis so that it closely aligns your business or sales cycles. For seasonal businesses or during potentially quiet or slow periods of the year such as the summer months, this can be a real benefit and overall cost saving against potentially running an underutilised in-house team.
At the Telemarketing Company, our agents work in a competitive, measured environment and will dial 18-20 times per hour for 7 hours per day. This work rate is almost impossible to maintain in-house.
Surely the value that you would get from this level of expertise, availability and productivity – as well as the quality of leads delivered also needs to be factored into your decision?
2. Paying per lead instead of per hour
There is a perception that telemarketing has a higher cost-per-lead than other channels, because it does not reach as large an audience as other marketing methods, such as digital or direct mail. This perception can lead companies to drive for an immediate ‘cost per lead’ pricing model from the outset of a campaign. Unfortunately, this approach runs the risk of focusing too heavily on lead quantity at the expense of quality.
At face value, the cost of acquiring one lead over another may seem more expensive but this is typically against a rather crude method of measuring ROI. It stands to reason that the true return on investment will not become apparent until these leads are closed. One lead may convert to a one-off sale while another could open the door to a prosperous business partnership that lasts for decades. The life-time value of each customer by definition cannot always be predicted from the outset.
Instead of judging the value of a marketing channel based on cost-per-lead alone, it’s perhaps more useful to look at the type of leads that each platform offers your business, how many and the life-time value?
At The Telemarketing Company, we charge our clients by the hour at first (and for some clients and campaigns we will move to alternative models such as cost-per-appointment once a campaign is up-and-running and has been fully tried and tested). This allows our entire organisation to focus on providing the maximum ROI for our clients by delivering quality as well as quantity in terms of leads or appointments.
The danger inherent in paying per lead is it can encourage counter productive behaviour in agents and managers who become too focused on quick wins, which increases the risk of ‘burning through data’ instead of extracting optimal value from each call. Often, the more valuable prospects require careful nurturing until they are sales ready. Being paid by the hour means that we make every interaction count, not just those that might get a result for you today. Leads or appointments that are fully ‘BANT’ qualified, which means that budget, authority, need and timescale have all been confirmed are by their nature of higher quality and typically result in higher value outcomes over time.
What is an ‘acceptable’ cost per lead to your business?
Essentially, quality is the critical element that underpins ROI. This includes both the immediate benefits that a lead can offer your business as well as the life-time value of that potential customer or client.
Poor quality leads, on the other hand, do not only convert to business at a much lower rate, but they also generate massive extra costs further down the process as sales teams chase non-existent interest or business contacts who don’t have decision making authority or access to budgets.
All this considered, it makes sense to opt for a marketing channel and payment model that focuses on providing high quality leads, at a cost that is acceptable to your organisation. This means that instead of searching for the cheapest leads, no matter the quality; you rather invest in the platform, or mix of channels, that can offer you the best value for your money.
3. Focusing spend on other marketing channels
In the B2B arena, telemarketing is one of the longest-standing methods of directly connecting with decision-makers. It is also one of the best-proven channels for generating leads, delivering sales, gathering data and building client relationships. However, there is the perception that telemarketing can be replaced with other communication platforms, usually digital. This is often justified by a cost comparison.
When it comes to social media, for instance, some marketing experts argue that platforms such as LinkedIn, Twitter and Facebook are virtually ‘free’. This, of course, is not strictly true. While you may not pay to set up your company profile, it still costs to build an audience and drive traffic to these pages. Not only do you require the human capital to write and design the content, manage interactions, and continually analyse performance; but you also need to promote and boost this content regularly in order to increase your visibility and reach.
Others argue that digital marketing channels – including content marketing, email marketing, social media and paid search advertising – reach a much larger audience than telemarketing does; and therefore offer a lower cost per lead.
Not all leads are created equal
The problem with comparing leads across marketing platforms is that you first have to make sure that everyone agrees on how to define a ‘lead’ or ‘sales lead’. For some digital agencies, it is a click on a web banner or Google Ad. For others, it is a competition entry, newsletter sign-up, a request for a white paper or even a social media share. The important question is: are these genuine prospects? We would argue that they aren’t.
While a telemarketing campaign can be slower to achieve results due to the time it takes to interact personally with each prospect, leads are generated by a direct conversation with a potential customer. Their level of interest is ascertained during the call and the lead is qualified immediately. With a digital campaign, a lead’s level of interest remains unknown until a sales conversation takes place.
How, then, can you compare leads gained from one channel to another; and judge whether one channel offers better value for money than another based on cost-per-lead alone?
Instead of a myopic cost-per-lead approach, it is advisable to look at the true value that a telemarketing campaign can offer your business. Judge this in terms of the types of leads that this channel delivers. Not only are they consistently high quality, but in some cases they are also unique.
In many ways, telemarketing is able to reach certain segments of your target audience that other marketing channels simply cannot connect with. We call this the ‘Heineken Effect’ (referring to Heineken’s legendary premise that it ‘refreshes the parts other beers cannot reach’).
There are many industries where people are out in the field and can only be reached via phone. There could be an audience segment that ignores spam and is generally reluctant to engage with digital communication from those outside of their immediate circle in case this opens a floodgate of unwelcome communication. Or perhaps there are prospects who are not signed up to social media as they don’t have the time or are not tech-savvy enough to navigate digital channels.
The question then becomes, can you afford not to connect with these potential leads? And how can you quantify the cost of these leads when part of the equation and true value lies in the very fact that you would not have reached them any other way - telemarketing was always going to be your only way ‘in’?
Using Channels Together
Sometimes, marketing decision-makers are so busy pitting channels against each other that they fail to recognise the value in using channels collaboratively. Many platforms offer a higher ROI when they’re used together.
Take telemarketing and digital as an example. Email and pay-per-click marketing work very well in conjunction with a B2B telemarketing campaign. A follow-up phone call could reach out to those who opened your email or clicked on your advert but have not yet followed the call to action. When you speak to these prospects on the phone, they’ll be familiar with your brand, which paves the way for a better quality dialogue and a healthier sales pipeline.
You may even find out why they interacted with your digital marketing but failed to act on it – thereby improving future digital campaigns. This information may have been impossible to glean had you not used telemarketing.
The true value of telemarketing
In closing, it is understandable that marketing executives want to extract the most value from their marketing investment. It is important, however, to recognise that value is not based on price alone – and the most affordable platforms may offer cheap results as well.