The Cost of a Sales Call
For those of us who are currently, or have served in the past, as executives in our companies, we are all familiar with the budgeting process. It generally rolls around in the Fall each year when we take a look at how we are spending money now, and how and where we should be spending money next year. Some budgets are driven top down, as in “You need to reduce your expenditures by 15% for next year”. Other budgets are driven from the bottom up, as in “We’ll figure out how we are going to go about achieving our goals, calculate what it will take to do those things, and submit that as our budget”. In reality most budgeting processes are a combination of the two.
Recently my partners and I have been talking about the cost of sales. The three of us have been in sales or sales management for a combined 75+ years, so we’ve seen our share of budgeting cycles for the sales function. This year is different though. While we have spent significant time thinking about our own sales budget, this year we have also been thinking about the real cost of the sales process itself. Specifically we have been considering the cost of the sales call.
I’m not sure most of us ever really think about the cost of a single sales call, at least in the normal course of business. Sure we might think about whether or not it is worth hopping on an airplane, being out of the office for two days, paying for a night in a hotel, a rental car, and meals. I think most of us do think about the cost of a sales call in those terms. If the customer or prospect is not qualified, we should be questioning whether or not we are going to spend a lot of time and money making a call like that. But that’s not what I’m talking about.
What I’m talking about is what that average single sales call costs our companies. Most of us don’t think about the cost of sales from that perspective. So what do you think it costs for an average sales call? You might be surprised to learn that there have been a number of studies done over the years on this particular question. I’ve looked at numerous of these studies lately, but many of them pointed back to a study done by CEIR (Center for Exhibition Industry Research). This organization is focused on doing research around conferences, trade shows, etc. As part of the research they do, they have done some studies focused on the cost of an individual sales call.
So what’s their number for the cost of a sales call? Well the most recent study they have done shows the average B2B sales call, across all industries costs $596. Now before you claim this is outlandish, think about it for a minute. When you factor in the salary, commission, benefits, office space, technology, travel, etc. each sales person “consumes”, and the number of sales calls each salesperson makes, this number is not that surprising. In fact, I’ve read articles by different people that suggest many industries have a much higher cost. In same cases I’ve seen numbers around $1600 per sales call. On the other end, I’ve also seen numbers as low as $200-$300 per sales call.
So what should these numbers mean to us as sales professionals or sales management? Should we be limiting the number of sales calls since they cost so much? No!…at least not for qualified leads. Many products or services in the B2B environment require a sales call in person. So if we shouldn’t be limiting our sales calls, what should we learn from the fact an average sales call costs $596. I think we should learn the importance of making each and every sales call count.
Think about the cost of a sales call. Just one call costs about the same as a set of new tires for your car. Two calls costs about the same as a large screen HDTV. The cost of three calls would easily pay for two roundtrip tickets to Hawaii. If we are spending that much money every time one of our sales people makes a call in person, we should be making sure those sales calls are as good as they can be. And yet, we typically don’t spend much time on making sure every call is done well. We certainly do for the “big” calls, but not so much on the average call…but that average call is costing us almost $600 every time. So what should we do?
Numerous studies tell us 80% of printed marketing materials are never used…read that one more time…N-E-V-E-R used. The most disturbing study I have seen regarding the sales call came from Forrester. According to one study they conducted:
- Only 13% of buyers in the tech industry believe the sales people calling on them are adequately prepared to meet their business needs.
- 31% said their reps were only somewhat prepared for their first meeting.
- 26% said their reps were not prepared at all.
These numbers are definitely cause for action, if not alarm. We are paying on average about $600 per sales call, and according to these statistics over half of the time in the view of the customer the rep is at best partially prepared.
So what do we do about this? Understanding and admitting the problem is the first step, but if we stop there we haven’t accomplished much. Probably the most obvious thing we can do is make sure we have the right sales people. But let’s assume for a moment we do have the right people. What then? The same Forrester study has some interesting information regarding the underlying causes for lack of preparation:
- They found sales people spend 7 or more hours per week looking for information to prepare for a sales call. An unrelated study by Scott Labell says sales people spend as much as 40% of their time preparing customer facing materials.
- Half of the information a sales person needs is delivered via email, but in only 10% of the cases is it in a form the sales person can actually use.
While I don’t think it is the only issue involved in making sales calls more effective, certainly getting the right materials in the hands of our sales people in a usable format can play a huge part. Do you know what material your sales team is using? Notice I didn’t ask if you know what materials they had. I asked what materials they used. If you don’t, you should.
Sales calls cost us quite a bit, and we owe it to ourselves and our companies to make sure they are as effective as they can be. One place to start is to find out what materials your sales people are using, and if those materials are worthwhile. Do they present your products in the best light? Are they visual, as opposed to wordy reports or sales sheets? Do they make it clear to your sales people and your customers what value your products provide? If the answer to these questions is negative, or if you don’t know the answers then you’ve got some work to do to get the most value out of the money you are spending on sales calls.