In the spring of 2002, when I was director of marketing for a large and fast-growing home improvement company, we were spending eight figures on advertising, but cold-call telemarketing was generating better than half our leads.
I knew that wouldn't last. I watched the legislative momentum of Do Not Call growing and began a series of warnings to the company owners. My memos made the case that in an election year, telemarketing was about as lovable as the tobacco industry (but without the lobbying budget), and the Direct Marketing Association's legal efforts to stop the juggernaut were like BB's fired at a Bradley Fighting Vehicle. The law would certainly pass and when it did, oceans of editorial ink would jump-start the consumer sign-up. What's more, as the world's telemarketing resources focused on fewer and fewer people, the sign-up rate would accelerate until one hapless guy was getting 4 million calls a day — 3 million at dinner time. In short, we needed to find an alternative to telemarketing or find another line of work.
Breaking Records By October, my warnings had their effect. The owners invested in a canvass fleet but they were still determined to ride telemarketing as long as they could. They upgraded their predictive dialers to comply with the new regulations for call drop. I fully expected cold-call telemarketing to sink like a mastodon in a tar pit.
But by November, the story wasn't playing out as I had expected. Instead of dropping sharply as I had predicted, telemarketing leads were breaking records. The draconian new telemarketing laws seemed to act as a tonic to our phone rooms.
I was flummoxed. How could I have been so wrong? The short answer: I wasn't — at least not about the imminent collapse of telemarketing. With a battalion of salesmen waiting impatiently for their daily ration of more than 300 leads, the lead total took on searing urgency. I had begun to see leads as a commodity. Big mistake.
Ready to Buy After a few weeks under the Do Not Call regimen, I analyzed the install rate of our new telemarketing leads. I found that an advertising lead was three times as likely to actually install as a telemarketing lead. And the gap was widening. The telemarketing leads simply weren't passing credit muster but they were consuming a lot of sales and management resources. Clearly, the creditworthy homeowners were signing on to the Do Not Call list. All our telemarketing capacity was focused on clueless homeowners oblivious to the DNC legislation, folks with no sales resistance who'll buy anything — if you can get them financed. (Good luck on that.)
We attempted to counter this deterioration of lead quality by credit-screening our calling lists, essentially targeting the top half of what was left in the pool. It helped briefly, but it was clearly a rearguard action. The earlier decision to look beyond telemarketing for our low-cost high-volume lead production proved to be a sound one.
Lessons Learned Here are the lessons I gleaned from the experience:
Lesson One: Evaluating lead sources by cost-per-lead alone is dangerous if you don't follow through and consider the relative value of the leads from different sources. At what rate do they install? What is the profit on the average sale? What does the effort contribute to your brand awareness? No matter what you may tell your salespeople, don't believe for a minute that all leads are created equal.
Lesson Two: Cold-call telemarketing probably is tusk deep in the tar. The smart marketer will abandon his dialers in favor of the emerging low-cost lead sources like pay-per-click Internet. (More on that subject later.) —John Stevens is a marketing expert specializing in the home improvement industry. He lives and works in Atlanta.