In Marketing It’s Profitability That Counts

The most important metric, from the company’s perspective of course, is ultimately the profitability of a marketing program. This holds whether it’s an in-house telemarketing program, a direct mail program, trade shows, SEO, a drip campaign, or an outsourced telemarketing campaign. Getting a positive return on their investment – a net positive cash flow – is what determines whether it was worth doing. And it also determines whether they can keep funding it.

Because of this, the quality of the leads matters as much as, if not more than, the quantity. We talked a bit about this in other articles, and we’ll have even more to say on the subject, but suffice to say that a good lead (defined often in extremely specific and objective ways,) is better than a bad lead. And, in fact, one good lead may be a whole lot better than many bad ones.

While we’re on the subject of economics, let’s consider the impact of a bad lead where, in addition to wasting time and money producing it, there is also some field sales expense associated with following it up. And if you include the cost of an airline ticket and maybe hotel accommodations, you could be talking about a lot of money.

There is also opportunity cost, and time wasted on a bad lead, which can both be more than the cost of the lead itself and the sales expense.

So, while it may be true that sales (or any form of marketing,) is a numbers game; such an assertion assumes that the leads are of a certain quality, otherwise the economics fail completely. The better is the quality of the appointment (usually determined by the intensity of the need, the relationship created, etc.,) the greater is the chance that you will make money.

This deliberately ignores the not inconsequential impact of margin for the sake of simplicity, however, as the profit margin on a product will also have an effect on the profitability of the campaign. For example, if it costs $100 to generate a lead and you get a 10% close rate (ignoring sales expense to keep things simple,) then your cost of sales is $1,000. If the margin on the product is more than $1,000 (e.g., the product sells for $2,500, and costs no more than $1,500 to make,) you win. If it’s less, you lose. Of course, if you can improve the close rate, you can potentially achieve profitability. And it is sometimes easier to improve the close rate than to reduce the cost-per-appointment. But the point is that you must measure the right things.

About the author

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Jeff Josephson is the founder and CEO of LeadGen.com., the one stop shop for all your sales and marketing needs. LeadGen.com has found nearly a billion dollars in new business for their clients over the years, helping to overcome their barriers and challenges so that can meet and exceed their revenue, growth and profitability objectives.