When management, for whatever reason, decides to cut the lead generation budget the consequences have both long and short-term penalties for the company and its salespeople.
First some definitions, and then a practical story:
A Sales Lead Blackout occurs when all lead generation activities cease.
A Sales Lead Brownout out occurs when there is a partial sales lead generation cut-off.
A True Story
The President of the small public medical instrumentation company called in the VP of Marketing and immediately launched into his problem.
“We are half-way through the year, our forecast is off a bit, expenses are up. I made promises on earnings per share and I need to cut the marketing budget for the last quarter of the year. Go look at your budget and give me the best news you can.”
He placed a document on the president’s desk and said something like this:
“We can cancel the two shows we have in November and December. That saves $75K in show expense and 2X that for the people for another $150K. We’ll have some penalties for cancelling.”
“We also have six print media insertions, plus some on-line banner ads and some pay for click which can be pushed. That is another $36K.”
“The direct mail drops in the last quarter can be cancelled and there are some savings (we mail 5,000 a week) so that saves 12 drops for $48K.”
“Great,” the president responded as he tapped away at his calculator and saw the $384,000 figure pop up. “Even with some cancellation fees for exhibits we’ll still save $325K or better.”
And then the VP of Marketing dropped the other shoe.
“You realize that this is going to be almost a total sales lead blackout, the web site will contribute, but that’s about it."
“We will not be getting 800 inquiries in from the shows. The print and on-line media brings us about 600 inquiries, that will be gone. The direct mail gives us 1% so from the 60,000 mailers we will not be getting the 600 inquiries. This totals up to 2,000 less inquiries which means we will not be getting in front of 900 buyers. We will not get 315 sales over the coming 15 months. This is $2,677,500."
"Considering the cuts are in the 4th quarter, the salespeople will drain their pipeline and sales in Q4 will be difficult, but we’ll make quota. 10-15% of this loss will be in the first quarter of next year and equally spread over every quarter and even into Q1 a year from now. The pipeline will dip pretty substantially and it will take time to recover. But that $2.6 Million from 315 sales will be lost to competitors."
“What do you want me to do?”
From elation to sadness, the president waved the VP of Marketing out of the room with an “I’ll get back to you,” comment.
Of course the marketing department didn’t get off Scott-free. They had to contribute something from the non-lead generation budget, but nowhere near the $284K threat. The Sales Lead Blackout was avoided.
The classic tactic to avoid losing your lead generation budget is to connect the budget cut to a reduction in leads which is connected to a reduction in sales.
So the next time senior management threatens a sales lead brownout or blackout, take the time to measure the losses that will occur over time. Sales losses, forecasts blown up, territory turn-over, market share lost, etc. are the result of short-term thinking.
1 James Obermayer, Sales and Marketing 365, Racom Communications & Business Marketing Association, Evanston, Ill , #66 page 32. Buy the book
with all 365 Tips, Tricks, and Tactics for making more money all year long from the publisher: $17.95.