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The Economics of Outsourcing Your Prospecting
There are two ways to look at the economics of outsourcing your lead generation:
from the perspective of results (i.e. ROI, payback, etc.,) or from the perspective of costs. No
two businesses are exactly alike, but the economics of sales are the same throughout the world.
The "Results" View
Whether you judge investments and expenditures based on ROI or payback, positive
cash flow or cost reduction, a successful campaign can pay-off every time. How do you
compare to these JV/M clients?
Example
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Outcome
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Benefit |
A commercial services company paid their telemarketer $8.50
per hour. Add 12% for taxes, $200 per month for benefits, $100 per month
for space and overhead, and $8/hr for telephone. On a good week, she found
them three good leads, so it cost them $262/lead.
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Using JV/M, they consistently generate 10-12
appointments per week, at an average cost of $224/lead.
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Savings: 15% |
A professional services company used one
of their analysts to prospect for appointments. At $60K/year, producing
one good lead a week, they were paying about $1,200 per appointment
(ignoring the additional cost of the telephone, and the opportunity cost
of the professional work that she wasn't doing.)
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JV/M produced three good leads a week,
for less than $250 per appointment. |
Savings: 75% |
An industrial distributor had inside salespeople who didn't like to
prospect, so they only did it about five hours a week. Their loaded cost was $23/hour, and they got about
one new lead a week, which nets out to $114 per lead.
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JV/M got them four times as many leads, at less than $80 each. |
Savings: 30% |
An e-commerce software company had a full-time sales rep prospecting for
new business. At a $40K base, he was finding about two prospects per month, and spending most of his
time putting proposals together. Their cost per proposal exceeded two thousand dollars!
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JV/M got them a 60% appointment rate, increased their close rate by a
factor of two, and reduced their cost per sale by 75%. |
Return on Investment: 1200% |
A marketing services company had hired a full-time sales rep to do
their prospecting for $4,000 per month, but he found virtually nothing in three months time.
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JV/M's first campaign cost the client $2,500, and landed them an account worth
over $100,000. |
Return on Investment: 4000% |
A software company hadn't been able to find a new piece of business
in six months by the time they called JV/M. Their two outside reps had worked every contact they could
find without success.
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A $7K investment in prospecting with JV/M netted them two accounts worth
over one million dollars. |
Net Profit: $200,000 |
A manufacturer of sales aids needed help penetrating the
pharmaceutical market. And if you know anything about the pharmaceutical companies, you understand
why they called JV/M: They're big and complex, you can't find the decision-makers, and it seems like
most of their employees are paid just to block salespeople from getting in.
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With JV/M, it was another case of "been there, done that."
We quickly got them into 6 out of 14 target companies, where they landed a sale for $75K
before the campaign was even finished. |
Gross Profit: $73,000 |
The "Cost" View
Many companies try to compare the cost of hiring someone to do their telemarketing
in-house (or making their outside salespeople do it in their "free" time,) to outsourcing. This
shows what one client expected, and what really happens.
| In-House | Outsourced | |
| Ideal | Actual | Actual | Notes |
Telemarketers/ Part-Time Field Sales Reps | 6 | 4 | 1 | The company
had six sales reps, but only four actually did any calling. |
Hours/Day | 1.0 | 0.5 |
6 | They thought they could do an hour a
day, but they only had time for about half an hour. |
Dials/Hour | 15 | 4 | 15 |
The goal was to make 15 dials per
hour, but the average turned out to be much lower due to distractions. |
Dials/Day | 45 | 8 | 90 |
They thought they could do 45 dials
per day to new prospects, but the actual number of dials was 8. |
Dials/Contact | 5 | 8 | 5 |
Persistence is the key to getting
through. Without it, the connect rate suffered... |
Contacts/Day | 9 | 1 | 18 |
And actual contacts with new prospects
was horrible. In fact, most reps just called their regular customers. |
Appointment Rate | 20% | 10% | 20% |
Without focussing on getting new
appointments, they didn't get much of a hit rate... |
Leads/Day | 1.8 | 0.1 | 3.6 |
...or very many new appointments per day... |
Leads/Month | 39.6 | 1.5 | 79.2 |
...or per month. |
Cost/Hour | $25.00 | $35.00 | $40.00 |
The cost per hour was higher than
expected because they forgot about the opportunity cost. |
Total Cost | $275.00 | $262.50 | $3200.00 |
The total cost was pretty low, though.
(But what's the point if they didn't get any leads?) |
Cost/Lead | $6.94 | $175.00 | $80.00 |
And the few that they got cost more than
twice as much than if they were outsourced. Was it worth it? |
Whether you want to reduce your cost per lead, maximize your return on investment, increase
your market share, shorten your payback or just generate net profit, at JV/M we make you money, no matter how you look at it. For a more personalize view, check out Compare Your Cost-per-Appointment to Ours.
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JV/M, Inc.
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1221 N. Church St.
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Suite 202
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Moorestown, NJ 08057
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Tel: 856-638-0399
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Fax: 856-316-7465
EMail: Sales@JVMinc.com
B2B Marketing Experts
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