Tuesday, September 20, 2011

Lesson #95: The Basics of Telemarketing

Posted By: George Deeb - 9/20/2011


& Comment

Depending on the nature of your business, telemarketing can be a useful tool to cost-effectively drive targeted leads and sales for your business.  There are two types of telemarketing strategies, outbound and inbound, that we will cover in this lesson.


Outbound telemarketing is often referred to as "cold calling".  This tactic is most used by B2B businesses looking to sell their product or services, B2C companies that are selling home-based services or other organizations looking to raise funds or awareness for their cause (e.g., donate your clothes, support our candidate, police fundraiser).  I much prefer cold calling for B2B, as that is the expected normal way of doing business in the industry.  For B2C companies, traditional marketing is a much better way to reach a lot of people faster.  However, for local service companies (e.g., window washers, landscapers, chimney sweeps, cable TV upgrades), that can logically open a dialog with a target (e.g., doing work next door for your neighbor, did work for you before), cold calling (or in this case warm calling), can be a very effective tool.  But, just be sensitive to how much consumers hate receiving unexpected cold calls to their homes from businesses they don't know or for services they have no interest, so research accordingly and craft your pitch around those hurdles.

A successful outbound telemarketing campaign is determined by: (i) quality of the list; (ii) the pitch; (iii) the process; and (iv) the conversions.  For quality, you want to make sure you are calling on people that are actually interested in your product or service, and preferably the decision maker who can pull the trigger on the order.  So, for example, maybe that is using a service like Hoovers or D&B, to pull a list of phone numbers of nationwide CFO's for small and medium sized businesses that may be interested in learning more about your state-of-the-art financial software system.  Or, in another example, you can work with AT&T to pull a list of phone numbers in the 60093 zip code, a ritzy Chicago suburb, to market your handyman services business.

In terms of the pitch, the more relevant it is to the listener, and the more trusted you come across to the listener, the better it will be for your efforts.  So, for example, mentioning mutual colleagues or references can go a long way to warming up the client to listen more closely.  Intros like "I was referred to your by John Doe, one of your CFO colleagues" or "I am doing work next door for Mrs. Smith" starts to build trust of you already doing business for people they know and trust.  The other key part of the pitch is getting it out as quickly and sweetly as you can, in one sentence, not one paragraph.  Just as if you were pitching a VC, the listener has a very short attention span and is trying to get you off the phone as quickly as possible.  So, an opening pitch like "we are an award-winning insurance agency that can save you 80% on your healthcare costs using your current providers" will get their attention.

As for the process, where you can, avoid wasting the time of your best salespeople on cold calling.  Use an administrative sales assistant to carry the heavy workload of "dialing for dollars" in mass, as an "appointment setter" for your key salesperson to swoop in can close the hot lead.  But, in many startups, for budgetary constraints, you may have no other choice than having your salesperson do their own cold calling.   There are also many professional appointment setting services you can use here, but I find their costs are typically 2x-3x the cost of you hiring your own admin and doing the calls yourself.

Finally, in terms of tracking expected conversions, here are the historical metrics I have experienced, which you can use as a benchmark.  You will need to make 100 phone calls to get 5-10 serious leads, and of those leads, you can expect around 20% to close.  Obviously, these metrics may vary based on the appeal of your core service and the price point of such service.  But, as you can see, on average, it takes a lot of work to get the sale (1 sale in 50 tries), so make sure you are covering the labor and phone costs of your cold calling, with a large enough margin from your service.  For example, if the labor for 50 calls at three minutes each costs $40 and the phone bill for those 50 calls cost $10, make sure your gross margin from successful sales is at least double the $50 investment.  The economics get wildly better from cold calling, the more expensive your product.  But, that also requires a much more educated/expensive sales person and a longer lead time to close the sale.


Inbound telemarketing is built around supporting a 1-800 number in your marketing materials and on your website.  It is much easier to close an inbound sales lead, since the clients have pre-selected themselves as initially interested in what they have read about your product or service.  So, unlike cold calling, you should typically have a receptive listener on the other end of the phone.

A successful inbound telemarketing campaign is determined by: (i) the pitch; (ii) the process; and (iii) the conversions.   For the pitch, it is listening to the needs of the consumer, and giving them the exact thing they are looking for and reasons why they need to buy that product from you.  So, for example, in a competitive space like travel, with a high $5,000 luxury price point like we had at iExplore, we would differentiate ourselves with competitive advantages like: (a) building your dream itinerary to spec--you pick the dates/sites; (b) privately guided trips without the "herd" of other travelers; (c) exclusive professionally-trained naturalist guides; (d) five star hotels at three star prices; (e) unique experiences only available at iExplore; and (f) a list of happy past traveler references. You get the point and can tailor this strategy for your business.

Equally important as the pitch, is the creative opportunity to upsell the client, to increase your average ticket and drive a higher ROI from the sale.  So, continuing with the iExplore example, this could include things like: (i) while you are all the way in South Africa, it is a quick extension to take in "must see" Victoria Falls while you are there; or (ii) while at Machu Picchu, I would recommend you paying a little bit more for the Sanctuary Lodge, it is the only hotel right at the ruins site and you will have the ruins entirely to yourself after the busloads of tourists leave.
As for the process, most inbound call centers are organized around key product specialties.  So, for example, when you call Comcast, dial one for cable TV, dial two for internet and dial three for phone, is sending you to different product experts on the back end, most qualified to answer those questions.  Continuing with iExplore, we organized our inbound sales team based on geographies of the world (e.g., Africa sales to Marlyn, Europe sales to Rosemary).  So, figure out how to most-efficientaly organize your inbound sales efforts and make sure the team is highly trained in educating, closing and upselling clients.

The converstion metrics are much better in inbound call centers than outbound call centers.  So, expect 10-20% of the inbound calls to close (5-10 of 50 is 5x-10x better than the outbound telemarketing metrics we discussed above).  And, once again this will vary based on your price point and the ease and availability of competitive products.

Underlying all of the above is the necessity for great salespeople that will ultimately make or break your telemarketing efforts.  So, make sure you are hiring the best talent you can afford, with experience in your industry, that you can highly train and incentivize to succeed.  Be sure to re-read Lesson #25 on how best to structure your sales team and Lesson #26 on how best to incentivize your sales team.

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