It is not unusual today to notice that telemarketing cost-per-sale results are higher than they were a few years back. It's a trend we see in numerous campaigns conducted for insurance and bank credit card projects.
To an extent it is a symptom of saturation and less patience on the part of prospective customers. That is fine to say, but we all have budgets for sales, revenue and profitability to manage.
Here are a few suggestions on how to improve the performance of telemarketing campaigns:
1. Brand really matters. Customers become increasingly concerned about who is calling them and whether they should accept any offers received over the telephone. If the name of the organization behind the call is well known, credibility and hence listening will be much stronger.
2. Protect your brand. Although the ability to project a strong brand in telemarketing is vital to success, organizations are increasingly concerned about the experience people have when they receive a call. The communications and listening skills of telemarketing service representatives are the key to making a good impression and to avoiding making a bad one. Comprehensive call monitoring that listens to a representative sample of calls is one key to supervising a large campaign. Few project managers and their staffs have the time to do more than verify that scripts are working correctly, so often outside call monitoring is hired to provide supplemental listening and reporting.
3. TSR incentives can make a difference. Attracting and keeping effective TSRs on your campaign is becoming a real challenge. Current unemployment reports issued by the Bureau of Labor Statistics show unemployment for the states of Iowa, Kansas, Nebraska, North Dakota, South Dakota and Missouri averaging around 3 percent in January 2000 compared with 4 percent in January 1999. In an effort to combat the continuous flight of skilled workers from call centers, teleservices companies have implemented creative new employee incentive plans. Quality employee incentive programs help a company differentiate itself from its competitors. Many firms offer higher shift pay, cash rewards for quality orders taken and a monthly bonus for low absenteeism or completing scheduled hours. Other offers that work well include paying an employee's monthly cable bill or offering to reimburse commuting expenses. Developing a “mixed bag” of incentive programs helps reduce turnover and ultimately provides the employer with a return by driving down new-hire costs, which can average $6,500 or more.
4. Know what cost per sale you can afford. Often, campaigns are trying to generate a specific amount of sales or calling until an available budget is exhausted. Such production goals can lead to overspending to generate the last few sales. High costs at the end can easily reduce a campaign's overall profitability. It is very important for continuity sales campaigns to define maximum cost-per-sale standards based on forecasting the present value of total lifetime revenue.
5. Track your revenue curves. The way to do this is to track closely several representative batches of sales through their first two years of billing. This will give you a measure of persistency after the initial billing. We often track sales from the first month of each quarter as a benchmark. The second step is to measure beyond year one to measure renewal rates. This applies to programs from monthly to annual billing.
Persistency percentages beyond year two become predictable and provide an opportunity to estimate the lifetime revenue from a batch of sales. Based on actual billing rate statistics for years one and two, you can forecast persistency for the balance of years while remaining sales are still producing significant revenue.
The average annual revenue per enrollment is used to calculate each year's total annual billing. Then multiply the discounted present value percentage by the annual revenue to calculate the present value today of that revenue flow. I keep my college math text close at hand for the present value tables. Margin should reflect your costs to provide a product or service to a customer. Multiply the total lifetime revenue by your margin percentage to generate the net revenue available to pay marketing and hopefully to leave some profit. To be profitable you can spend on cost per sale no more than the present value of the lifetime revenue per unit sold less the annual cost to provide the product or service.
6. Develop good list segments. Many campaigns lose profitability and, in some cases, are shut down because they contain too many nonprospects. Modeling to find ideal list segments has been around for a long time but is not always conducted in an ideal manner. Increasingly, companies are using inhouse resources which are not familiar with the distinct buyer/nonbuyer profiles for every product.
The key is segmenting prospects from nonprospects and ranking the mediocre ones to determine cutoff points. Continuity program models need to focus on customers who have paid for the service at least once without canceling. This means creating an ideal customer segment from buyers who did not cancel after at least 90 days from making payment. The characteristics of this “best prospect” list should be used to determine the best groups for prospect lists. Testing should be made of the bottom groups in five-point ranges to determine the cutoff score for those not worth calling.
7. Maintain cost per sale through your call window. Good telemarketing management can be witnessed by consistent daily cost-per-sale rates through a typical four- to six-week call window. In the early stages of a campaign, CPS is often high as on-the-job training occurs for new TSRs. You want to avoid having the contacts per hour “revved up” as a substitute for adequate selling skills. As a precaution, set a limit on the number of hours of daily calling that can be conducted until the goal CPS is reached.
Typically, the cost per sale reaches its lowest point by week two of the campaign as TSRs are seasoned to the campaign and the list quality is still good. People who are hard to reach are less apt to buy. The end of the campaign is the second time good campaign management can make a difference. As the workable list is reduced through calling, contacts are harder to make, and fewer sales are made. It is important to manage schedules so that calls are made at peak times of day or on Saturdays. You will also want to keep only your best-performing TSRs on the campaign at that point. There is always competition for retention of top TSRs, but keeping track of individual performance is a key.
