Sales and Sales Management Blog

March 18, 2012

Guest Article, Sales Lead Brownouts Produce Sales Dips Wihin Three Months, Leading to Pipeleine Failure, by James Obermayer

Filed under: lead generation — Paul McCord @ 10:04 am
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Sales Lead Brownouts Produce Sales Dips Within Three Months, Leading to Pipeline Failure.1
by James Obermayer

“Companies often decide to curtail lead generation spending because cash flow slows and sales stagnate.”

Please reread that last sentence.  Does it make sense?  It should read:

“Companies that curtail lead generation spending because cash flow slows and sales stagnate see a further decline in sales for three to twelve months thereafter because the sales pipeline has been reduced.”

Of course, I can understand caution when cash is short, but slowing down lead generation is not the way out of the morass.  Whether you average 100 inquiries or a thousand a month, if you cut lead generation spending and your lead count drops by 50% or more for three to six months, sales will correspondingly drop within three months.  What’s more, they’ll remain curtailed for three to six months after lead generation picks up.  It isn’t just a fact, it’s common sense.

This is how it works.

After lead generation spending is slashed, sales continue for about three months as the pipeline is drained of opportunities.  At this point, senior management is beating on sales management to increase the pipeline, and sales management replies with excuses for just about everything except lack of leads; that comes a month or so later when he or she gets desperate and every salesperson cries for leads.

It’s not too late, but recovery is several quarters away.  It takes months to build the inquiry level back up to what it was, and months longer to rebuild the pipeline.   Just consider the average sales cycle for your product and you’ll see that the rebuild time is considerable.  But there is no choice.  You can reignite sales lead flow, but it takes months for the pipeline to come back and months longer for sales to reappear.

What do you do?

First, don’t cut lead generation if you need an increase in sales: increase leads to increase sales.

When management requests a reduction in the lead generation budget explain the consequences:

Fewer leads for six months = smaller pipeline for nine months  = declining sales for three to twelve months.

Conversely:

Increased leads for three months  = increased pipeline within six months = increased sales for one year.

The lesson: curtail sales lead generation spending at your peril, understanding that there are consequences to your pipeline and to sales far into the future.

[1] James Obermayer, Sales and Marketing 365,  Racom Communications & Business Marketing Association, Evanston, Ill , #66, page 32.   Buy the book with all 365 Tips, Tricks, and Tactics for making more money all year long; from the publisher: $17.95

August 28, 2008

Guest Article: “Six Ways to Prove the ROI for Sales Inquiries,” by James Obermayer

The Six Ways to Prove the ROI for Sales Inquiries
by James Obermayer

Are there more than six ways to prove the ROI for inquiries? Probably, but these basic six ways to prove the ROI will start you off.

1. Salespeople report: The best way.

In this instance, salespeople report on the disposition of every inquiry through your CRM system, SFA contact management program or ASP vendor. If you sell direct you have the control to make this happen. If you sell indirectly, you’ll probably use one of the following methods.

2. Compare invoices to inquiries: The most accurate way.

If you sell direct and have the names of people who buy from you, you can compare the name with the person who inquired. If the sale is made after the inquiry date, you can claim a connection and take credit. Isn’t that wonderful?

3. Did You Buy Studies by telephone:

A statistically significant way to take snap shots of buying activity for a single product.

Take a list of inquirers that are six months old and call them. Get at least 100 completed questionnaires from a single product and a single point in time (typically a month) and you have a report that is significant. You will know what percentage buy in six months from you or your competitor. Any outbound telemarketing company can do this for you. Ask questions such as:

* Did you get the literature you requested?

* Did a salesperson from our company contact you?

* Have you bought a product?

* What did you buy?

* Who did you buy from?

* Are you still in the market?

4. Did You Buy Studies by Mail.

Similar to Did You Buy Studies by phone, this method is attractive because it can generate the greatest number of responses at the lowest cost. For every inquiry that comes into the company, send them a self-mailer six months later. Make sure the self-mailer can be refolded and it becomes a return mailer to you. The response you get can be 10-25% over time. Make sure the name is coded so you can compare like sources to like sources within a specific timeframe and you have the most inexpensive study possible.

5. Did You Buy Studies Using email.

This is an attractive method, although with the email opening rate continuing to drop, you may have a difficult time getting at least 100 responses for a single product and source at a specific time (month). Try it. It is cheap, fast and sometimes very efficient. If you get many thousands of inquiries in a month for a limited product set, you may have a winner here.

6. Comparing warranty registrations to inquiries will give you reliable and statistically significant information.

Compare warranty registrations with the inquiry database and you have a statistically significant report if the date of purchase is after the inquiry date.

James W. Obermayer is a principal in Sales Leakage Consulting, Inc., an Orange County, California based sales and marketing strategy consulting firm and a principal of Cerius Consulting. He specializes in helping small to medium-size companies identify sales and marketing leakage issues that stifle sales growth and waste valuable marketing dollars. He is the author of Managing Sales Leads, Turning Cold Prospects into Hot Customers and Sales & Marketing 365.

March 21, 2008

Book Review: Managing Sales Leads by James Obermayer

Let me start by disclosing my personal perspective—I’m a sales guy, not a marketing guy.  I mention that because when reading anything relating to lead generation I’m constantly examining the information, recommendations, and workability of content from a sales perspective, not a marketing perspective.  Reading Managing Sales Leads: Turning Cold Prospects into Hot Customers (South-Western Educational Publishers, 2007), by James Obermayer was not an exception.

As a sales trainer and sales consultant, I’ve had the opportunity to work with salespeople and sales departments of a good number of companies and to see a wide variety of efforts to manage the leads generated by marketing.  Unfortunately, for the majority of these companies, using the term ‘sales lead management’ is almost laughable.  Not that there isn’t some effort—it is simply futile effort.

I often hear complaints about lead generation from all sides.  Sales complains about the quality and freshness of the leads; marketing complains that they send leads to the sales department and then never hear another word about them; executive management complains that they’re spending a great deal of money on lead generation but have no idea for what—marketing shows them a huge stack of leads, sales complains they’re worthless, and finance or accounting complains that the cost is unjustified.

This isn’t to say that there aren’t companies that have somehow managed to work through the problems and solve them.  I’ve been fortunate to work with some of them also.  Not many—but a few.

With that as my starting point, I was somewhat skeptical of Managing Sales Leads.  It would probably turn out to be either a pie-in-the-sky theoretical treatise filled with graphs and charts—and totally useless information in the real world or it would pontificate on how ROI on lead generation COULD be managed if it weren’t for the miscreants in sales screwing everything up through their refusal to cooperate.

I was absolutely wrong.

Managing Sales Leads: Turning Cold Prospects into Hot Customers aims to resolve three critical issues in lead generation:

Lead Quality:  One of the main objections salespeople have to working leads generated by marketing is the quality and freshness of the leads.  The single most common complaint I hear from salespeople regarding the leads they receive is that the leads really aren’t leads; they’re simply unqualified names and phone numbers.  Marketing, in the humble opinion of the salespeople, has no idea of what a real lead is.  For marketing, the salespeople believe, any piece of paper, phone call, or any other inquiry is a lead.  Marketing pops out a name somehow and it’s the sales department’s problem to find out if they are a genuine prospect.

Obermayer not only recognizes the issue, he sets out in detail how marketing can, through the use of inquirer questioning, not only pre-qualify a lead, but rate the lead’s quality prior to submitting it to sales.

In addition, he works through the lead distribution process, showing where leads get held up and, more importantly, how to uncork the bottlenecks that keep leads from reaching the sales force in a timely manner.  As he points out, sales leads are a perishable commodity, making freshness a major issue—and one that is the bane of many, if not most, companies.

Lead Cost vs Return:  The ever-present issue with upper management—why are we spending all these dollars on leads?  Although not a marketing only issue—sales is often put on the spot to justify what they do with leads, marketing is saddled with problem of justifying the money allocated to their lead generation efforts.  Whether through direct mail, cold calling, advertising, their web presence, or any other method they use, they are constantly under the microscope by upper management.

Most often, according to Obermayer, when marketing is asked to justify the investment the answer is, in essence, “trust us, it’s working, we just can’t prove it in terms of dollars and cents.”   When pressed further to specify where the leads are coming from and which channels are producing the best results, the answer is a blank stare.

Those blank stares and “trust us” responses no longer need be tolerated by management, according to Managing Sales Leads.  The book sets out a workable process for identifying and quantifying the return on investment of each and every lead generation channel marketing pursues.

This isn’t to say the process is easy, it’s to say the process is workable and realistic.  Relying on a software program to solve the problem—as promised by many software companies—is unrealistic.  Although Obermayer discusses the benefits of such programs, he points out what should be obvious but is so often overlooked—the data the program spits out is only as useful as the data marketing allows it to produce.  Then the data must be interpreted by someone who knows what to do with it.  Interpreting the data and making decisions based on that data is the real key to tracking lead ROI.

Yet, the final problem remains.  How can marketing track the data and make rational decisions—and justify the investment, if sales isn’t doing their part by giving full and accurate lead tracking information?

Marketing/Sales Cooperation:  Getting the sales department to follow-up on and track the final disposition of leads has always been a major issue for marketing.  Although earlier I mentioned that one of the reasons has been salespeople’s view that the leads generated weren’t worth the effort because the leads themselves weren’t qualified, Obermayer recognizes that simply beginning to supply qualified leads won’t solve the problem.

Even though the quality of leads given to sales is a serious issue, even more fundamental to gaining their cooperation is how marketing and sales interact.  The vast majority of salespeople I’ve spoken with in many, many companies have no interest in helping marketing track the disposition of leads because it’s a marketing issue, not a sales issue.  In other words, salespeople don’t feel any connection to the process—there’s no ownership on their part.  They are simply given leads and then the demand comes from marketing: “you will report on what happens with these leads.”

Demanding cooperation, complete with threats, achieves little to nothing.  Instead of demanding, Obermayer argues, a full and complete explanation of why a full reporting is necessary and why and how it benefits the salesperson—more and better leads in the future, meaning more sales and income—can not only gain cooperation, but gain buy-in by the sales team.  Once they have some ownership in the success of the program, their interest level and desire to see the process work becomes real.  Not that Obermayer eliminates the possibility of threats, because he doesn’t.  However, demanding and threatening by themselves won’t get the results that voluntary cooperation through a recognition of why reporting benefits the salespeople will get.

Certainly if you’re in marketing or sales management, you should read Managing Sales Leads.  Geared to mid to large companies, any company that generates leads—even the smallest company with any type of lead generation program—will benefit from the book.  Even individual salespeople who use direct mail, advertising and other lead generation channels can find enough benefit from the concepts and strategies outlined by Obermayer to justify the purchase of the book.

March 18, 2008

Guest Article: “The Rule of 45: Predicting Sales Results From Inquiries,” by James Obermayer

The Rule of 45: Predicting Sales Results From Inquiries
by James Obermayer

The Rule of 45 is the basic measurement premise from which you can measure the effectiveness of virtually all lead generation programs. It is a steady, reliable rule which simply says that 45% of all inquiries (not just qualified sales leads), will buy from someone. The timeframe for this purchase is usually, but not always within 12 months. The percent that buys in three months is between 10%-15% and the percent that buys in six months is 26%.

If you follow-up 100% of the inquiries, the biggest variable in this formula is the time needed to reach the 45% threshold. Every product has a typical average time frame for the majority of the interested parties to make a decision. For consumer products this could be a few months, for B2B products the Rule of 45 is completed within 12 months.

On average the following rules apply:

  • Within 3 months 10%-15% of business to business prospects will buy someone’s product.
  • Within 6 months, 26% will buy someone’s product.
  • Within one year 45% will buy someone’s product.

While time is a pacing item, the most influential issue for a company to attain it’s fullest share of the market place is the follow-up by the salesperson. Follow-up only 25% (a consistent number I hear from many companies), and you’ll only compete in 25% of the available deals.

How important is this variable? The following example shows what happens when sales follow-up dips to 25%. First, let’s look at the potential in a group of 1000 inquiries if follow-up is 100%.

  • 1000 Inquiries X 45%% = 450 potential buyers
  • X Follow-up of 100% and you still have 450 buyers
  • X 25% market share = 112 buyers
  • X ASP (average sales price) of $10,000 = $1,120,000 in sales

Reduce the follow-up to 25% and this is the result:

1000 inquiries, x 45% x 25% Follow-up X 25% X $10,000 = $280,000

Your own market share is projected as a percent of the buyers. I have been involved in over 100 Did You Buy Studies on a variety of products, and the Rule of 45 is consistent.

Pretty brutal isn’t it. Spend 2%-20% of yearly revenue on marketing and because of poor follow-up your sales will be 25% of what could have been. This calls for a mandate from sales management: 100% Sales inquiry follow-up is part of every salesperson’s job description. At some companies, this is a condition of employment.

Copyright 2008, James Obermayer. Published with permission.

James W. Obermayer is a principal in Sales Leakage Consulting, Inc., an Orange County, California based sales and marketing strategy consulting firm and a principal of Cerius Consulting. He specializes in helping small to medium-size companies identify sales and marketing leakage issues that stifle sales growth and waste valuable marketing dollars. Aside from consulting, his career has been equally divided between sales and marketing positions in business-to-business corporations. In addition, Obermayer is the author of “Managing Sales Leads, Turning Cold Prospects into Hot Customers” and “Sales & Marketing 365″, and co-author of “Managing Sales Leads, How to Turn Every Prospect into a Customer.” Visit his company’s website at http://www.salesleakage.com

Paul McCord of the Sales and Sales Management Blog may be reached at pmccord@mccordandassociates.com

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