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).
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).
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 costwise feasible,
reasonable to go for LGC for a given product/service or …
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
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
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
prearranged and facetoface 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
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.
You may also like How Many Qualified Leads are enough ?
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References:
1. http://www.businessdictionary.com/definition/salescall.html
TAGS Business Profitability Direct Marketing Editor Choice lead Generation Leads Marketing Organization Small Business Strategies
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