Over the past little while I have seen a battle brewing between those who say cold calling is dead and those who claim it is alive and well (and that any claims to the contrary are nonsense).
Of course each side has an agenda – one promoting social selling and the other promoting cold calling improvement coaching.
What I found frustrating was the abundance of opinions that are not backed with any data or evidence. I sought out to find the most recent (and reliable) research I could find on the subject, and review it here so you can begin to decide what the reality is for your industry.
There are a few points that require clarification:
1. Some people are defining cold calling differently than others, and this causes confusion. For the purpose of this post, cold calling means cold! Not merely the first call but an unexpected call out of the blue. In the old days, we used to call from lists pulled out of the yellow pages (that is as cold as it gets). The distinction is important because the social selling mantra calls for more evolved tactics to “warm up” a cold call and thus increase the efficiency and conversion of those calls.
2. We shouldn’t use the word “dead” (as in cold calling is dead) about any channel. For many, dead implies zero response rate, and I am not sure you can say that about any channel. Instead, let’s focus on overall trends and costs, and then draw conclusions.
3. Finally, let’s keep in mind that most research is industry based, and likely the results and conclusions will vary by industry. Once again, it will be more useful to look at overall trends that are likely to affect industries across the board.
Let’s look at some of the research:
KELLER CENTER FOR RESEARCH
This research was very specifically targeted to the B2C market. Real estate agents made 6,264 cold calls and found only 28% were answered. Of this 28%, the agents booked a total of 19 appointments with prospective clients, and 11 referrals.
In other words, for every 209 calls made, one appointment or referral was made. The total time investment required per agent was approximately 7.5 hours to complete all 209 calls (some resulting in conversations and some not).
Of course, at this point, the closing ratio will now determine effectiveness of strategy in this industry. If close rate is high, this method of generating leads may very well be worthwhile. If the close rate with these appointments is low, agents could be more cost-efficient at generating leads with other forms of selling.
I found that much of the research comes to the same conclusions about cold calling. It’s not that cold calling won’t generate any responses, but rather that the cost of the lead and sale can be more efficient with other methods. The point here is to measure your results and let the metrics tell you – don’t guess.
Implisit (a company purchased by Salesforce this year) analyzed the CRM data of organizations across the globe, and they found that the highest conversions (deals won vs. deals lost) came from leads that were generated from employee and client referrals. A close second were leads that came from social.
This research points to a very distinct pattern – higher conversions follow leads that have a higher level of engagement. Intuitively, this makes sense to me.
If you wanted to connect with a VP of a specific account and your options were to cold call, email or allow me to introduce you at my BBQ this weekend, which one would you choose? Most would opt for the BBQ introduction because you believe that your odds of success are higher. But why do you believe that? It is likely that your answer involves an environment that is conducive to a deeper level of engagement. An environment that can’t be replicated through a cold call.
A FEW MORE
It is clear sales professionals need to find new ways to reach decision-makers. Leap Job found that only 2% of cold calls result in an appointment.
Additionally, Ovation Sales Group found the average sales person prospects 6.25 hours to set one appointment. If we use the research from Implisit and assume that these appointments are now considered opportunities, only 6% of these (as an average across industries) will convert to deals.
When you crunch these numbers you certainly can’t say cold calling doesn’t work, but you can claim that its efficiency is quickly becoming questionable. This conclusion is mirrored by research from HubSpot (The State of Inbound) that found cold calling costs at least 60% more per lead than from other channels.
As you can see, this debate is not a question of, Does it work? Obviously, at some level, it does. The real question is, How well does it work?
Is the ROI from this activity getting better or worse? Are the number of calls required to generate a qualified lead growing or shrinking?
If you don’t rely on hard data like this, you are likely missing trends that may forecast a storm heading your way.
The Bridge Group reported that the average number of attempts per prospect (in order to maintain the same number of quality conversations) has gone up 46% since 2012. It will be difficult for anyone to debate that this trend doesn’t affect the a cold calling strategy. Although individual results may vary by industry, the data suggests that we are all victims of the same overall trend. However, this data doesn’t mean that the use of the phone is dead.
It seems plausible to me that cold outbound sales activity directed toward targeted accounts (representing larger contract values) may skew the ROI in your favor. Although effectiveness of this strategy may be decreasing, these sales professionals may be far from having to abandon this strategy on this argument alone. However, that doesn’t mean that using social tactics to improve effectiveness by “warming up” the cold call is a bad idea. In fact, research is telling us just that.
HOW SOCIAL SELLING WARMS THE CALL
Don’t be confused by those who profess that social selling is about waiting for customers to contact you. Although this does happen (I can attest to this personally), this behavior reduces the effectiveness of social selling and the results that the methodology can provide.
In truth, social selling is about adding a level of engagement prior to transferring the conversation offline, and in many cases with prospects who are difficult to connect with via the phone.
Strategies such as “social listening” help to provide sales teams with research about their prospects and current clients that add more relevant context to their outreach attempts (and current conversations) that not only helps them better tailor the value proposition when they finally do connect, but is far more appreciated by the buyers themselves.
A Hubspot survey this year found a large disparity among sales professionals who believed they had researched their prospects appropriately versus buyers who found them unprepared:
77% of salespeople believed they had researched relevant information versus only 44% of buyers who agreed.
This trend then worked its way down the sales process, where 71% believed they had delivered a pitch tailored to the customers’ needs, versus 37% of buyers who agreed with that statement.
Finally 82% of sales people felt they provided value to the prospect, but only 34% of the prospects agreed with that statement.
Clearly, there is a tremendous amount of room for improvement in the context of our outreach attempts. Social selling strategies help to do just that and thus result in the higher results we see in much of the research.
So the final word on cold calling at this stage can only be to identify an overall downtrend in its effectiveness. Data across your organization will paint a more accurate picture of how far along you are on this trend.
There is no denying, however, that by altering outbound strategies through social has a considerable improvement in the ROI of these activities. So rather than labeling cold calling as dead, perhaps we can agree that it has evolved into something more conducive to today’s selling environment.