Compare Your Cost-Per-Appointment

It's not the "cost per hour" that counts; it's your "cost per lead" or "cost per appointment" that matter. (At JV/M, giving you a good lead means setting an appointment with a real decision-maker who has a real need. We don't just give you a name on a mailing list and call it a lead, or send you the same leads we've given to ten other clients, or book you for no-shows.) When it comes to cost, we can beat the alternatives hands down, and we can prove it, too. Compare your alternatives with our real-world data and you'll see. Use the worksheets below to calculate your cost-per-lead for advertising, trade shows, direct mail, direct mail with a telemarketing follow-up, in-house telemarketing, and asking your sales people to generate their own leads. Then compare the results to JV/M's current, actual cost per lead.

Advertising

Running trade ads is a popular and convenient way to generate leads, but advertising is expensive, and defeated by clutter. Worse, as many as 95% of the leads from ads are "for information only," bingo-card responses, researchers and other "tire-kickers." Fill in the worksheet below to calculate your cost per lead from your advertising program.

Trade Advertising
Investment	Description	Typical Measure	Your Typical Cost	Notes
	Ad Development	$2,000		Creating an effective ad, either as part of a complex campaign or on a one-time basis, usually requires photography, copywriting, design and film. The initial costs will typically be around $8,000, which are spread over the useful life of the ad -- in this case, four uses. What is it for you?
	Advertising Management	$2,500		If you advertise, a manager must take the time to decide what to advertise, and work with the agency to prepare the program. Even a modest campaign is going to take a few weeks of effort to get going. Enter your allocation.
	Insertion Cost	$2,500		Trade magazine advertising is a great way to reach your target audience. A 1/4 page ad will run anywhere from $1,250 to $9,000 depending on circulation. Fill in your cost.
	Gross Cost	$7,000		An investment of $7,000 is fairly typical for a quarter-page trade ad, when you include the development and management costs -- which is necessary if you're going to "compare apples to apples." Add up your incremental investments to get your gross cost.
Results	Description	Typical Measure	Your Typical Results	Notes
	Responses and inquiries	100		Trade advertising is usually effective in generating inquiries and responses, both from the journal and directly. Response rates can vary, but 100 is typical for our clients. What do you get from each run?
	Subtract "The Tire Kickers"	5		Ninety five percent of all responses to trade ads are info-only researchers and "tire-kickers." Less than five percent are real leads. Estimate the percentage of response that are tire-kickers, (but don't think about the wasted cost of brochures you're sending to people who are never going to buy,) and subtract them from the responses.
	Appointments	3		About 60% of the leads will grant you an appointment after talking to you on the phone (assuming that you follow-up,) and give you an opportunity to sell to them. Calculate the average number of appointments you get from ads.
	Cost per Lead	$2,300		This may seem high, but it is really quite typical. If you calculate your cost per lead including ALL the costs, and counting only real leads, you may be quite surprised at how expensive advertising is -- and how risky: Because you really just spent $14,000 before you got your first lead! What's your real cost-per-lead?

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Trade Shows

We work with many companies who exhibit at trade shows, and are amazed at how expensive they are on a fully-allocated, cost-per-lead basis (as are our clients.) Trade shows are notorious for the lack of decision-makers these days, and a recent industry study showed that 95% of trade show leads are NEVER followed up at all. What matters, though, is only how many appointments you get with decision-makers who have a real need, and a willingness to consider buying from you.

Trade Shows
Investment	Description	Typical Measure	Your Typical Cost	Notes
	Booth Development	$4,000		Five thousand dollars is the cost of an average 10x10 booth, double it for a 10x20. If you're fairly diligent, you'll exhibit at two shows per year, and your booth will easily last three years. Don't forget to add in the cost of materials, graphics, transportation and hotels, give-aways and entertainment. Altogether, the allocated cost per show is typically around $4,000 for the booth. Figure yours out this same way.
	Management	$1,500		Now you have to staff the booth, plan the show, and do follow-ups. And the fewer shows you do, the more each one costs, because you're not efficient. (By the way, transportation is usually a big killer, here.) Enter your allocation.
	Show Cost	$2,000		Trade shows are doing very poorly in the current economy, so they've lowered their prices. You may even be able to do better than this, so fill in what you think you're paying.
	Follow-Up	$1,500		Most people don't follow-up their trade show leads, but if you don't at least send the good prospects a letter and call them on the phone, the show was a waste -- because they're not going to call you. We figure time at $20/hr and 1/4 hour each, materials at $3.00 per prospect, and phone costs at $4.00 per hour. What's your estimate? If you don't follow-up, reduce your appointment rate accordingly.
	Gross Cost	$9,000		After they've bought the booth, most people only think of the cost of the floor-space (and that's what the booth manufacturer and the trade show people want you to think, too.) But the real cost is a lot higher. A cost of $7,500 is quite typical for one use of a 10x10 booth in a campaign that has even one out-of-town show per year. Add up your costs to get your gross cost per show.
Results	Description	Typical Measure	Your Typical Results	Notes
	"Leads"	250		We have to refer to trade show responses as "leads" here because that's what everyone calls them, but 98% of them are pure junk. Of all the cards in your fishbowl, 95% of them only want your giveaway. But you collect them, and you buy the attendee list (Oops! We forgot to count that cost, didn't we?) and pick up the cards from the other exhibitors so you have something to show for your effort. How many names do you come home with?
	Real Leads	10		Real leads are decision-makers with a need. If you get 10 real leads out of the show, consider the show a fabulous success. If you were smart, you put some kind of mark on the card, or used a lead sheet, so that you could sort them out from the junk. What is your REAL take-home?
	Appointments	5		You have to consider the reality that 95% of all trade show leads -- even the good ones -- are never followed up. We'll be generous, and say that your people are good, and will follow up half in a timely fashion. What's your estimate of the number qualified appointments you end up with?
	Cost per Lead	$1,500		Trade shows can be quite a bargain, and if decision-makers would attend, they'd be a steal. Unfortunately, they usually don't. What's your real cost-per-appointment?

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Direct Mail

Here at JV/M, we use direct mail -- not because it's better than our own telemarketing, but because we can't spare any telemarketers, so we do it as inexpensively as possible. The cost of direct mail varies quite widely, with the example below being fairly common, so fill in your own experience below to calculate your cost per lead.

Direct Mail
Investment	Description	Typical Measure	Your Typical Cost	Notes
	Material Development	$6,000		The cost of materials can vary enormously. We know clients who print 20,000 postcards for $2,000, and others who've printed 2,500 four-color brochures with a CD insert for $38,000 (and then didn't send it out!) Don't forget the cost of design, copy, photography, printing, letters, BRCs, inserts, the mailing list, and waste. A typical commercial mailing of 1,000 pieces will cost $6,000, but you can enter your own estimate from your own experience.
	Management	$1,500		Again, you have to manage the mailing, and probably have to clean up the data base. Enter your estimate of the human costs here.
	Mailing Cost	$1,000		Fulfillment costs might be a dollar per piece, but a complex piece can be much more. Don't forget postage. Eenter what it costs you from the time you have your material in hand, 'til the time it's in your prospect's hand.
	Gross Cost	$8,500		Calculate the total cost of your mailing, including the allocated costs from re-usable materials. By the way, we hope you didn't forget a direct response mechanism -- otherwise your mailing is likely to fail!
Results	Description	Typical Measure	Your Typical Results	Notes
	"Leads"	20		You can get several types of responses to direct mail: phone inquiries, BRCs, hits on you Web site, or even orders. A response rate of 0.5% is typical, although repetition will help. We'll be generous and say that your good mailings can get a 2% response rate. Add yours up to get the number of leads.
	Real Leads	10		Again, you have to separate the "tire-kickers" from the real prospects. The typical ratio for direct mail is 50% are kibbitzers. How many real leads did you get from your last mailing of 1,000 pieces?
	Appointments	5		Enter how many of those real leads turn into appointments. Typically, it's 25%, but we rounded up -- way up. What's your experience?
	Cost per Lead	$1,700		Direct mail isn't much of a bargain if you don't get any business from it, is it? What's your real cost-per-appointment?

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Direct Mail With A Telemarketing Follow-Up

The secret to making direct mail work is to follow it up with a phone call. It adds to the cost (in the form of your sales person's time -- plus some opportunity costs that can be ignored.) But some people think it's so worthwhile that they don't even bother sending a letter, they just call and say they're following up a letter. We don't believe in dishonesty, but telemarketing does make direct mail more effective. Compare your results to the norm to calculate your cost per lead when you add the phone call.

Direct Mail With A Telemarketing Follow-Up
Investment	Description	Typical Measure	Your Typical Cost	Notes
	Material Development	$6,000		The cost of materials stays the same as before.
	Management	$2,500		The management cost is going to increase because you're going to have a big fight getting your sales people to make the phone calls. Either that, or you're going to have to take the time to hire a telemarketer. We'll be generous with our estimate. Enter yours here.
	Mailing Cost	$1,000		Fulfillment costs are the same as before. Write yours here.
	Telemarketing Costs	$5,000		Let's assume that your sales people are going to make their own phone calls (i.e. you're not hiring a telemarketer.) An average salesperson has a $40K base. One thousand contacts (if you call everyone,) is going to take about 250 hours which, of course, you couldn't possibly do anyway. But if you did actually make the calls, it would cost you about $5,000. Again, ignore the impact of the accounts he loses because he's on the phones, the cost of the phone calls themselves, and the increased turnover you have because sales people don't want to work the phones, for the moment, and enter the additional cost of the telephone follow-up here.
	Gross Cost	$14,500		Obviously, adding a telephone follow-up to your direct mail program is going to increase the costs, probably by a lot more than this. What's your estimate?
Results	Description	Typical Measure	Your Typical Results	Notes
	"Leads"	50		Telemarketing works, so your response rates are going to go up. Perhaps not as much as if we did it, but we certainly would concede that that will jump by a factor of ten, from 0.5% to at least 5%.
	Real Leads	25		From the fifty suspects you got above, how many are real prospects? Again, 50% is a good estimate from our viewpoint. What's yours?
	Appointments	12		And how many of those will turn into apointments? We figured half. What would you say?
	Cost per Lead	$1,200		This is starting to look good. The response was better, and it looks like the cost-per-lead went down. What's your cost-per-lead when you add a telephone follow-up to your direct mail program?

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In-House Telemarketing

In-house telemarketing can be a great tool to initiate the sales process, find leads and book appointments. Since so many people try to compare us to in-house, we're going to show you how to do the "apples-to-apples" comparison, because it's not just our $30-45/hour rate versus your $10/hour wage. Also, you have to keep in mind how hard it is to find a truly effective executive appointment-setter, how long it takes them to become productive, and the extremely high failure-rate.

In-House Telemarketing
Investment	Description	Typical Measure	Your Typical Cost	Notes
	Recruiting Costs	$11,000		Finding a good telemarketer is going to take several months, and cost quite a bit of money. If you use a recruiter, you're going to pay 25% of the telemarketer's first year salary of $20K, or $5,000. (And that's a serious underpayment for a good bird-dog.) If you run ads in the paper, it's going to cost you $400 per week, and will take you a minimum of eight weeks, for a total of $3,200, to find enough good candidates to be able to pick a good one. (How much do you pay for skills testing, by the way?) If you are lucky and your cousin Louie's daughter likes to talk on the phone (which says nothing about sales skills,) and is home for the summer, you've saved some money for now, but you still have to deal with the average turnover of a telemarketer of 300% per year, which puts you right back into recruiting costs. And what's the most expensive part of any in-house sales position? It's the money you pay the person between the time you should have let her go (because she's not performing,) and the time you finally do let her go.
	Management	$10,000		The biggest complaint we hear from clients who have tried this is the amount of time it takes to manage the telemarketing function. Managing one good telemarketer takes about 25% of your time, plus sales training. Four will need a full-time manager. Enter 1/4 of your manager's salary here.
	Salary	$20,000		Let's be short-sighted and give her (or him,) $10.00 per hour. JV/M actually has to pay quite a bit more than that, but that's because we have to get people who have high-level B2B experience, and who truly know how to sell. Write your telemarketer's wages here.
	Telephone and other Expenses	$10,750		We didn't count telephone expenses before (about $4/hour for 2,000 hours per year,) but now we have to, plus the cost of a contact management system (about $1,000,) data bases and mailing lists (about $0.35 per name for 5,000 names.)
	Gross Cost	$51,750		You might be able to do it for less, but if you count all the costs, and want to compare equivalent effort, it's going to be a lot more than the $20,000 you thought you were paying. What did you come up with?
Results	Description	Typical Measure	Your Typical Results	Notes
	Appointments	150		Most people tell us that we produce about three times as many good appointments as in-house telemarketing, on average. Two appointments per week is typical with a good in-house telemarketer (and zero or one is common,) where we'll usually get you one per day for a tough project, more for an easy one. Put in what you're getting.
	Cost per Lead	$345		According to industry statistics, the average cost per lead is $295 for commercial services, and about $250 for industrial products for in-house telemarketing -- actual appointments cost more. (We just talked to a company that was paying over $1,000 per lead, and over $5,000 per appointment, using in-house TM!) What did your cost-per-lead come out to be?

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Asking Your Sales People to Make Their Own Appointments

This is an easy calculation, assuming you can actually get your sales people to do the prospecting.

Make Your Own Appointments
Investment	Description	Typical Measure	Your Typical Cost	Notes
	Total Compensation	$20,000		To calculate the cost of your own sales people making their own appointments, simply divide their total expected compensation by the amount of time they spend prospecting (and add in the expenses below.) A decent base + commission rep is going to make about $80K, and spend 1/4 of his or her time prospecting.
	Expenses	$12,000		Telephone, gasoline and the rubber chicken they serve at the Chamber luncheon come out to about $1K per month for the average sales person. Include the cost of the lists that the telemarketer would have used, and a couple of dollars for letters and golf.
	Management	$5,000		Do you want to include management time? How much nagging do you have to do to get them to go out, or pick up the phone? How much does sales training cost? Pick a number.
	Opportunity Cost	$50,000		This is the biggest factor, and the source of the most controversy. Many sales people will tell you that if they have to go out prospecting then they're going to lose business at their current accounts. Sometimes they're right, sometimes it's an excuse not to go cold-calling. We picked an average number, assuming they're right half the time, they have a $1M territory, and are vulnerable on 10% of their accounts. You can estimate whatever you want, and take comfort in the fact that no one knows who's right.
	Gross Cost	$87,000		If you ignore opportunity cost, this number is $37K. You'll see in a moment that it isn't going to make that much of a difference. What did you get?
Results	Description	Typical Measure	Your Typical Results	Notes
	Initial Calls	250		In order to compare apples-to-apples, you can't count these suspects as prospects until there is a second call. That's because the first call is where the sales rep finds out if there's a need. How many first calls do your sales people make during a week? Five would be a lot.
	Appointments	100		Do your sales people turn up two good new prospects per week? Whatever they get, multiply it by 50, and enter it here.
	Cost per Lead	$870		Having your sales people do their own telemarketing is good because you've already invested in the resource. Understand, however, that it's still very expensive. If you ignored the opportunity cost, your cost per lead is $370 -- still a lot of money.

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JV/M's Current, Actual Cost-Per-Lead

JV/M generates appointments for all kinds of companies, from high-tech systems and professional services to commodity materials and commercial supplies, so the cost per lead can vary quite a bit. But using data drawn directly from our activity reporting system that we use to track results for our clients, at our regular billing rates, our current, average cost per lead is:

JV/M's current average cost-per-lead = $82.59

That's:

• $2,217.41 less than the cost of a lead from your advertising campaign
• 6 percent of the cost of a trade show lead
• $1,617.41 less than the cost of a direct mail lead
• 7 percent of the cost of a lead generated by direct mail with an in-house telemarketing follow-up
• $170.41 less than the cost per lead of in-house telemarketing
• $787.41 less than the cost per lead of having your sales reps do it themselves (and they don't quit on you! In fact, they'll thank you.)

Are you still sure outsourcing your telemarketing is more expensive?

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