When budgets are limited or strained, attempting to quantify how much effort should be invested in a prospect can often be a contentious issue. However, as the following example details, the consequences of your decision could have a substantial impact on the bottom line.
1. Client spends $XXXX developing an inquiry via various demand generation activities.
2. Once the prospect raises their hand and indicates some interest, how many times should we attempt to contact him before calling it a day?
Over the years, we’ve developed some statistical models that essentially tell us the following:
1. About 20% of the inquiries will, in the short term, represent a “ready to buy” opportunity.
2. Regarding the lead qualification effort, about 3 completed contacts are generated per hour. So within this period, we will identify just less than one opportunity.
3. We further know that once distributed to a channel partner and or field salesperson, about 25% of these opportunities will close with an initial average sale of about $25k.
4. We also know that;
a. 25% of the opportunities will be developed within the first 3 call attempts.
b. Another 50% will be identified between attempts 3 and 8.
c. And another 8% between attempts 9 and 10.
So, therefore, some 83% of the opportunities are identified within 10 attempts.
Now for the kicker. The client reduces the budget and decides only to invest 3 attempts in every inquiry.
What are the probable consequences?
Quite simple. 75% of the opportunities will not be identified as only 25% are qualified and quantified within 3 attempts.
Let’s dive into the numbers more closely (and conservatively).
Let’s say that only 10% (not 75%) of the leads are lost.
This means that for every 1000 inquiries, 100 opportunities will not be identified, and 25 sales will be lost.
At $25k initial revenue, the client will have lost $625,000 in revenues – for a saving of a few per cent in cost.
Does it, therefore, make any sense for the client to make this decision? Of course not! On the contrary, if he increased his budget, the incremental revenue to the company could be substantial.
Ten lost sales also probably mean the loss of 10-lifetime customers. Over the years, each of these companies could potentially represent millions of dollars to this company. And the competition more than likely would be the beneficiary of their short-sightedness.
Lastly, suppose the actual result of lost opportunities is 75%, as projected. In that case, the actual loss in revenue (never mind lost opportunities) is between $4mil and $10mil.
But who’s counting?