The Assumption:

Everyone agrees that the cost of a prospect is less if acquired through marketing automation, right? Well, then why do so many companies fail with marketing automation? It’s for the same reason that salespeople fail with prospecting. Before we explore the root reasons, let’s explore the numbers: A common definition in today’s world of marketing and sales is “Cost of Client Acquisition” (CAC). For the purposes of this article, we will compare a typical marketing campaign vs. a sales campaign.

Contrasting Sales VS Marketing CAC

Several of my clients have started marketing campaigns that range from $5,000 to $35,000 per month. It is interesting that the metrics are similar, regardless of the magnitude of the spend. Typically, there is a three to nine month investment to get a rhythm of continuous leads, in addition to these costs, and then the sales cycle time also needs to be added in. When we calculate the CAC using this model, the low end is $600 and it ranges all the way up to $4,800 for each close. The average we saw across a sample of nine companies was $1,346.

On the other hand, there’s a misconception that salespeople are obsolete and marketing is the “NEW” way of life. Let’s look at the numbers, but we should agree in either situation: If I hire a bad salesperson, or I don’t understand how to gauge if he is doing the correct things to close a deal, or if he is inhibiting the close by doing things incorrectly, regardless of who generated the lead, sales or marketing, the CAC is infinite. An example is if marketing provides ten $400 leads and I have a closing ratio of 10%, then I have a CAC of approx. $4000. If the closing ratio is 75%, then my CAC is $533.34. if you are not closing deals correctly, you could be out of business all too soon.

When we evaluate a sales team’s ability to find a prospective client, we also use the CAC measurement. To keep things fair, we start from a beginning point that includes some or all of the onboarding time to get the person up to speed as we do for marketing. Out of eight companies sampled, we saw a huge improvement in closing ratio if the salesperson found the lead and built the relationship from the beginning, with the lowest CAC being $400 and the highest ending up at $7,800 for a poor closing ratio causing a long sales cycle. The average CAC we saw was $1,589 per close across many industries, product types and price points.

The point of these findings is not absolute, but they are an indicator that sales and marketing can effectively find a prospect and the CAC is NOT as disparate between them as the professional marketing automation advocates would have you believe or hope.

Skill or Purpose?

The sales teams sampled had a prospecting ratio that ranged from 100:1 to 1.75:1. This is a huge difference, and skill was not the biggest contributor that determined whether they talk to 100 people to get one appointment or talk to two people to get one appointment. To be clear,  skill was obviously important because people that didn’t know what to say always had the highest ratio. But the best ratios came from a purpose-driven group of salespeople who did some very creative things to get in front of the right prospects. When asked for an explanation of why they thought to bring a balloon or a pie to a CEO, or to start the relationship with something unique, they all said it was to make sure they didn’t look like a salesperson and had a reason to meet the target client (my words not theirs).,

Bottom line: You can get great results if you have great purpose!