 
The road to unhappiness
is paved with unrealistic expectations!
In setting marketing goals, the key to happiness
is to set realistic expectations and then meet
or exceed them. This section provides some ROTs
(rules of thumb) on what results you can expect
to get in typical lead generation
campaigns.
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How to use these ROTs
(rules-of-thumb)
ROTs are always "wrong". That
is, you can always find examples where they
don't work. Their value is in alerting you
to possible problems. So, if your expectations
fall within the ROT range, you are probably
right (no guarantees). But if your expectations
are well outside the ROT range - this is an
indication that you should double check your
numbers.
These ROTs are only for genuine opportunity
generation projects (the difficult and
valuable stuff). They don't apply to such things
as loyalty newsletters, surveys and so on.
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Real response
rates for mail |
We only count "real" responders.
Some people count "take me off your mailing
list" or "please update my address" or "I want
some information for my homework project" as
responders. We only count the ones who are
raising their hand to positively indicate
that they are interested in the content of your
mailer. We call them "positive" responders.
Our ROTs may look depressingly low. But the
results of most mailers have been depressingly
low since the mid '90s.
Much higher response rates are often
obtained by bribery; a free pen or some other
trinkets and trash. Since you are selling a
solution that costs many thousands of dollars it
is silly to think that a senior (that is, rich)
decision maker's desire to engage with you will
be affected by offering them a $2 or even a $10
toy. So, the extra responders pulled in by a
premium usually drop out at the next stage. |
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Simple letter |
0%-0.5% |
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Self-mailer |
0%-0.5% |
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Fancy mailer |
0%-1% |
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Real response
rates for email |
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Simple text |
0%-0.3% |
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Simple HTML |
0%-0.5% |
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Elaborate HTML |
0%-1% |
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Qualified lead
rates from telemarketing |
Assuming the common single-touch,
three attempt project against the typical list. |
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To positive responders from mail, email or Web |
5%-35% |
Positive responders (as defined
above) often represent a rich vein of
opportunity - as long as they were not "bribed"
to respond. |
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Cold calls for a simple $40,000 solution |
2%-3% |
We often see plans that say
"20% of the market needs my solution". Even
if this is true, valid leads will only be
generated for those contacts who can be reached,
who are aware of the need and who are not
already engaged with another solution. The
lead rate tends to go down as the ticket-price
and complexity of the solution goes up. |
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Cold calls for a complex $200,000 solution |
0.5%-2% |
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Win rates from
qualified leads |
Win rates depend critically on
the quality of leads. The quality of leads
depends on how the qualifying is done - or in
the case of telemarketing, the experience of the
callers. |
Self-qualified |
0%-5% |
Business cards in a fish-bowl,
responders to a mailer, Web site visitors who
fill out a form. Some people call these "sales"
leads and believe that you can get a prospect to
qualify themselves by filling out a form. We
don't agree. As you can see from the win rates,
our experience indicates that leads from these
sources shouldn't even be called qualified. |
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Generated by regular telemarketing callers |
5%-15% |
"Regular" callers are college
graduates with two to five years relevant
experience in industry or in your solution area.
This level of caller generates leads with a high
proportion of false positives. |
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Generated by experienced callers |
15%-30% |
An experienced caller probably
has a better resume than the sales reps they are
passing the leads to. KMA's HiQ reps have an
average of over 25 years in the IBM world of
high-tech solutions. Cold calling on
valuable solutions and accurately judging the
needs of a prospect in minutes demands a level
of sophistication that only comes from
experience. It can't be injected in a training
session. |
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Expense to
revenue ratios (E:R) |
Many people want to measure ROI
for their marketing programs or campaigns. But
we find that ROI methods differ greatly between
organizations and comparisons are problematic.
If you want to compare yourself with others or
with ROTs, we recommend using Expense to Revenue
ratios instead. |
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The maximum affordable E:R of a marketing
project |
??% |
This is one thing we can't tell
you. It depends on the gross margin of your
offerings and your net margin goals. What
we can tell you is that many big companies allow
up to 20% for the total expense for marketing
and sales. So, since the sales organization
needs to be paid out of that, it suggests that
the marketing expense had better not take half
of the total - that is, marketing E:R would have
a maximum of say 9%.
If you don't have a maximum
marketing E:R for your organization's projects,
give us a call right away! |
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Good E:R for a hardware upgrade campaign |
3%-6% |
Let's say we call 530 of your
customers at a total cost of $7,000. We
generate 16 qualified leads (3% lead rate) and
you win 4 upgrades (25% win rate) for a total of
$200,000 ($50,000 average sale including
hardware, software and services). Then the
E:R would be 7,000/200,000 = 3.5% (very good).
If we only found 11 leads (2% lead rate) and you
only won two of them (18% win rate) the E:R
would be 7% - not good but probably affordable. |
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Good E:R for a campaign to sell a complex
solution to new prospects |
5% - 10% |
Winning new business is more
difficult; some large companies accept that the
total marketing and sales cost of a new
customer sale may be as high as 30% of the first
year's revenue. As a result, new business
marketing is often only profitable if you look
at the lifetime value of the new customers.
Let's say we call 600 of your
prospects at a total cost of $8,000. We generate
12 leads (2% lead rate) and you win two new
customers (16% win rate) for a total of $240,000
revenue in the first year ($120,000 average).
Then the E:R would be 8,000/240,000 = 3.3% (very
good for new business).
If we found only 6 leads (1% lead rate) and you
won only one new customer (16% win rate) the E:R
would be 6.7% - still pretty good for new
business. |
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