How To Conduct Feasibility Study Of Lead Generation Campaign

Most of the new things that we try to learn seem pretty complex, tough to learn in the beginning. And the same is true for conducting feasibility study of a given lead generation campaign (LGC) (via direct mail/email).

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But trust me, in next thirty minutes you will learn it like Experts!, just you need to give it your full focus, attention.

Beside that it is imperative for you as a Small Business Owner, Marketing Strategist to learn it as it will surely help you to develop and deliver effective and efficient lead generation campaigns and isn’t that what you want ?

First I am going to give you The Bigger Picture (an image actually) of the whole lead generation process from mail/email production to sales and in that picture I have specified certain phases by encircling them with red color.

Those circled (red) phases in the whole lead generation process plays a key role in determining the feasibility, affordability of a given lead generation campaign (LGC).

Normally any LGC feasibility is calculated in context of cost(financial resources) it will cost or require and so I have conducted feasibility in that context.

All you will need to do is to calculate the costs in those encircled phases and then adding those costs together and comparing it with the item (products/services) price for which you are planning to carry out a given lead generation campaign (LGC).

Doing that (the comparison) will help you in calculating the amount of money you will need to spend to make a single sale via given LGC for a specific item and so you will know if it is cost-wise feasible, reasonable to go for LGC for a given product/service or …

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So let’s start with the The Bigger Picture

The Bigger Picture

Four Phases

As you can see there are total four phases in a LGC from production to sales

1.      Phase 1: Production
2.      Phase 2: Mailing to Target Market
3.      Phase 3: Expected Inquiries
4.      Phase 4: Sales Team

And I have circled red three phases out of four, which means you will have to calculate costs involved only in these three phases.

1.      Phase 1: Production
2.      Phase 3: Expected Inquiries
3.      Phase 4: Sales Team

Adding all the costs involved in these phases will give you a total cost and from that total cost one can easily calculate the cost it will cost to make a single sale via given LGC.

And then compare that single sale cost with the specific amount per single sale that you are willing to afford for a given LGC in cost and if it turns out to be what you are willing to afford then that means you can afford to go for the given LGC and vice versa.

Now let’s dissect the bigger picture into its phases to calculate the costs it will cost in each phase, let’s start with first phase.

Phase 1: Production Cost

In this phase you are required to gather information on the following things

Information Required
Things	Explanation
Production Cost of email/mails -Research Cost -Design Cost -Mailing Cost -Other Cost	Means how much a given number of mails/emails in a given LGC will cost. For instance it costs $150 to produce 500 emails/mails for a given LGC

Phase 3: Expected Inquiries

In this phase you need to have information on the following things

Information Required
Things	Explanation
Expected Inquiries/leads	Means how many inquiries or leads a given LGC will generate. Taking our example, for instance 500 mails/emails result in 5% inquiries, which are 25 inquiries per 500 mails.
Cost per each inquiry/lead	Now since we assumed the cost for 500 mails/emails to be $150 that means it costs $6 to generate a single inquiry.	How I calculated $6 ? Well since expected inquiries in our example are 25 and total cost of production of 500 mails/emails was $150, I simply divided $150 by the expected inquiries to calculate cost of each expected inquiry and that is $6.
Conversion ratio	Means how many inquiries are converted into sales, in other words the cost of converting an inquiry into sale, for instance if the quality of lead/inquiry and sale team capacity is outstanding your conversion ratio will be good and vice versa Now in our example for instance the conversion ratio is 1/3 that means one out of every three inquiries is converted into sales.
Direct mail/email cost per Sale	Means how much does it costs for direct mail/email to result in a single sale Since in our example cost per inquiry is $6 And Conversion ratio is 1/3 Thus our direct mail/email cost per sale would be $18 Direct Mail/Email Cost per Sale = $18	How I calculated $18 In our example we calculated $6 cost per inquiry and our conversion ratio (lead into sale) that we assumed was 1/3, which meant that our sale team has to cover three inquiries to achieve a single sale thus the cost of those three inquiries would be 6X3=$18 which is our direct mail/email cost per sale.

Sales Team (Phase 4)

 

In this phase you need to have information about the following things.

Information Required
Things	Explanation
Sales Call Cost	Sales Call definition: “Usually pre-arranged and face-to-face meeting between a salesperson and a customer or prospect for the purpose of generating a sale.” (1) And for instance our sales call cost is $25
Conversion & sales call cost (SCC)	As we know the conversion ratio in our example is 1/3, that means to make a single successful sale, our sales team will spend total $75 in sales call costs. So our SCC is $75 Thus $75 is spent on converting single lead into sale (of a single item). SCC = $75	How I calculated $75 Our sale team sales call cost is $25 and our sales team conversion ratio aka converting inquiry into sale is 1/3 that means one out of every three inquiries is converted into sales and on each inquiry $25 are spent in terms of sales call cost, thus to make a single sale our sales team will have to spend $75 ($25X3=$75) and thus $75 is our SCC.

Once you calculate the following two costs (the costs with blue font in the three phases)

1.      Direct Mail/Email Cost per Sale = $18
2.      SCC = $75

You can then easily calculate how much a single sale will cost via a given LGC.

So for instance you want to earn 60% of an item price as net profit through a given LGC then all you need to do is to add the above two costs (the costs in blue font) and convert them into percentage of the item price to know how much a single sale via a given LGC will cost and how much you are going to earn on each sale of a given item (product/service).

That means to make a single sale of a given item via given LGC will cost you $93.

And for instance our item price is $300

Then it would mean it will cost us 31% of our item price to sell it via LGC, assuming that there are no other expenses/costs then remaining 69% is our net profit.

So LGC for this particular item (product/service) is affordable, reasonable, feasible, go for it!

That’s it, over to you guys, let me know if there is something I missed, some typo or miscalculation … or anything that you guys would like to add.

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References:

1.      http://www.businessdictionary.com/definition/sales-call.html