Written by You’ll find a few posts along these lines, but often we find that the questions they ask are around things like “will people notice that I have outsourced telemarketers,” “who writes the scripts,” or “how will I ensure that KPIs are being met”. And while those are important questions, they shouldn’t be the first ones you ask yourself.
The first questions you ask yourself should be commercially-focused – you need to know that outsourced telemarketing is the right call for you, and to do that, you need a clear picture of the metrics inside your business that make this a good or bad investment.
What do I want to achieve?
Without knowing what you want to get out of it, you may have a difficult time working out if it’s right for you (incidentally, we’re more than happy to talk to you about this – we know it’s a tricky question sometimes).
Perhaps the question is better stated as “How does this contribute to my business goals”? Because ultimately, businesses need to make money, and outsourced telemarketing is a tool designed to help you do that.
What is my Customer Acquisition Cost (CAC)?
One thing you should know is how much it currently costs you to acquire a customer. You can answer this by dividing the number of new customers in a period by the amount of money you spent on sales and marketing that same time period.
So, let’s say you have 10 new customers in a quarter. You spend £15,000 that quarter – which includes the cost of your sales and marketing staff, any tools they use, phones, expenses, transport, marketing and advertising costs, and so on.
£15,000/10 = £1,500 – that’s your CAC.
Knowing this number isn’t just something that’s helpful before outsourcing any activity – it’s always worth knowing. Because when you combine it with your Lifetime Customer Value (the average value of a sale multiplied by the average number of transactions per customer), you know whether or not you’re spending more to acquire a customer than they bring in.
Equally, if your CAC is extremely low, especially compared with your LCV, it indicates that you’re investing too little in your sales and marketing, which could bite you in the long run.
What’s my Lead to Sale (L2S) ratio?
This is a super important one, especially when you outsource any kind of lead generation. If you get a lot of leads but don’t close any of them, there’s something wrong in the sales process. On the other hand, if you have a high ratio, you know that investing in getting more leads is highly worthwhile, because a lot of them will turn into customers.
Divide the number of new customers by the number of leads you had, then express as a percentage.
So, if you get 500 leads, and you end up with 50 customers, your L2S is 10% (50/500 = 0.1 = 10%).
You can add to this for better data, too. What’s your L2Q2S? That’s Lead to Quote to Sale. If you quote a lot of your leads, but convert very few of them, you again know that there’s something wrong – they’re getting to the stage in the process where they’re engaged enough to be quoted, but they’re being turned off right at the critical point.
So, your 500 leads turns into 250 quotes before becoming 50 customers. That’s a 50% Lead to Quote ratio, and a 20% Quote to Sale – which turns into our 10% Lead to Sale.
If you know your percentages, then you can benchmark the quality of your previous leads against those you get from your telemarketers.
Fitting it all together
When you know all of this, you can be a lot more precise in working out the value of outsourcing your telemarketing. You know that approximately 10% of your leads will become paying customers. You know how much you usually spend to get a customer. And you know how much a customer is worth to you in the long term.
If you aren’t closing deals, getting more leads isn’t necessarily your issue, improving your conversion rate is. Because you can absolutely still outsource your telemarketing and lead generation, but it’ll be harder to see the value of it.
If your deal close rates are good, and your lifetime customer value is healthy, then generating more leads through an outsourced provider might just reduce your customer acquisition cost – after all, like any type of marketing, it’s an investment rather than a cost. You just need to know your numbers to make sure it all adds up.