A well-designed telemarketing program just might save your company
Maybe, thought Jim Brigham, I should just sell the company.
Since James R. Brigham Jr. had dealt effectively with the White House (as former New York mayor Ed Koch's first budget director), prospered as an investment banker, and even survived (so far) raising two small children, it was hard to imagine anything frustrating him. But Diagraph Corp.'s most recent income statement had managed to do it.
At Diagraph, the St. Louis manufacturer of industrial labeling, coding, and marking equipment that his family has owned and operated for four generations, earnings had fallen in 1989, just as they had in every year since 1986. And that was in spite of a 6% sales increase that brought revenues to $40 million.
The fastest-growing part of Brigham's company -- the label-printing division -- had the lowest margins. And his cash cow -- the marking-equipment division -- was showing signs of running dry. It wasn't unusual for a marking-equipment salesperson to go out on a sales call, which experts estimate costs an average of $250 all told, and come back with an order for only $200 in sales of heavy-duty pens, inks for stencil machines, and the like.
The old ways of doing business -- making cold calls, hunting for leads at trade shows, and relying on referrals -- just weren't working anymore. Brigham needed to make his sales force more efficient. He needed to add telemarketing to his selling mix.
Telemarketing? Yes, telemarketing.
Telemarketing can -- when integrated into a company's overall marketing effort -- free salespeople to sell by eliminating paperwork. Plus, it substantially reduces the cost of each transaction. Why? Because even the most fundamental telemarketing program can use computer software to maintain records, track orders, and monitor follow-up automatically.
If you take another look at that $250 sales call, you'll understand how this works. Diagraph's salespeople were always on the road, in part because the company never had a product catalog and never offered customers an easy way to place orders on their own. When Diagraph decided to add a telemarketing program, it also created a catalog and mailed it to every customer and prospect. The catalog has an order form, of course, but customers preferring faster service can now call the company's toll-free number. If the customer places the order by phone, the cost of the sale drops 96%, from $250 to $10 -- which covers the phone call and the time of the person handling it.
The new telemarketing system could handle the flood of incoming and outgoing calls without a problem. The sales force simply could not.
It's one thing to tell your salespeople that you've purchased new technology that will enable them to do their jobs better. It's another to get them to use it. Sure, from the company's perspective, having a salesperson go out on a call just to sell refills doesn't make much sense, but from the salesperson's point of view it's a guaranteed commission check. The salespeople saw no reason to give it up.
Brigham gave them one. He overhauled the commission structure to encourage the sales staff to concentrate on bringing in new business.
"A survey of our salespeople showed they were spending 20% of their time selling our traditional marking-equipment products and earning 40% to 45% of their income," he says. "They were doing that because the commissions were relatively high, about 10%, and the sale was easy."
The sale remains simple, but it is no longer as lucrative. The commission for marking equipment has been cut by about two-thirds, to 3.5%.
However, the commission on the company's newer lines has been increased by more than 40% -- to 10% -- to encourage the sales force to concentrate on selling new accounts.
Who handles the old ones? As a rule it's the company's new telemarketing staff. Phone calls for service, refills, and product information are now routed to the telemarketing office in St. Louis. Although the salespeople are apprised -- via their laptop computers -- of what's been requested, the actual work is handled by people who cost the company considerably less than the sales staff does.
Freed of handling routine orders, the sales force can concentrate on bringing in new accounts, and the telemarketing system helps with that as well. Like most companies, Diagraph attends trade shows, advertises in industry magazines, and does direct mail. And like most companies, it collects information about the people who want to know more about its products.
But until the company began using telemarketing, there was no effective way to tell how qualified those leads were. Were they competitors, the merely curious, or serious prospects? And if the leads were serious, how serious were they? Were they planning to buy in six months, in three months, tomorrow? The way Diagraph used to do business, it never knew.
Now it does. When a potential customer responds to an ad, the telemarketers go to work. If the person has called in seeking more information, they get his or her name, address, and phone number; find out when the person plans to buy; and take down all other appropriate information. (See, "Getting to Know You," below.)
If someone writes in, it works almost the same way: the telemarketers call the prospect and qualify him or her. In both cases the information is routed to the salespeople, who now have a reason to follow up: they have just received the name of someone who has an excellent chance of becoming a customer.
The price of implementing the new system was surprisingly small. After auditioning 10 companies -- everyone from its computer-hardware supplier to suppliers that its trade association had recommended -- Diagraph at last selected Information Management Associates Inc. (IMA), a software house located in Trumbull, Conn. The final cost of the software was approximately $100,000.
What Diagraph got for that money was a flexible telemarketing system built on modules. That meant the company could ask IMA for a package that dialed outgoing calls automatically, tracked leads, and produced scripts its telemarketers could follow, but it didn't have to take the part of the IMA package that handled order entry. (Dia-graph had an order-entry system that was easily tied into IMA software.)
Because it was able to buy only what it needed, Diagraph could keep the cost down to a point at which Brigham expects the system to pay for itself within two years. So far he's right on target. Since Diagraph began phasing in the telemarketing system back in January, sales are up 30% in areas where the new program is in place.
Jim Brigham's thoughts of selling the company are starting to fade.
A PROGRAM OF YOUR OWN
The first questions to answer
Deciding to install a telemarketing system is easy. Figuring out what you want it to do is much harder. This is what Diagraph Corp.'s Jim Brigham asked before automating:
* What exactly are we trying to do? Brigham knew he wanted his telemarketing system to provide improved service to Diagraph's existing customers, as well as an easy way to track inquiries, qualify sales leads, and monitor follow-up. Once he knew what he wanted, he set out to find it.
* Who sells this stuff? Lots of people. To simplify the buying process, Brigham talked to his computer-hardware supplier and to companies that had undergone automation.
* Can we do it ourselves? Sure, but why would you want to? Odds are, there is an off-the-shelf system that, with some modification, will work just fine. It's cheaper to do it this way, and there are fewer headaches.
* Can I sell it to the troops? To make sure the new system was well received, Brigham scheduled several meetings to explain why he was switching to the automated system. There were then additional meetings, complete with training, to show the sales staff how it worked.
GETTING TO KNOW YOU
How to make the most of your leads
When a person calls Diagraph Corp. requesting information -- or has written in and the company is calling in response -- the company's telemarketers take great pains to qualify everyone they talk to. Here's what they ask:
* Name, address, and phone number. If the prospect has written in, that information is in the system. If he or she has called the toll-free number, that's the first thing the telemarketers type into their terminals.
* Why do you want this product? Working from a list of prepared questions, the telemarketers ask the prospect, "What changes or improvements would you like to see in your overall operation as a result of making this purchase?" (A reduction in costs, improved quality, whatever.) Knowing the reason allows the salespeople to tailor their pitch when they call to follow up on the lead.
* Do you have a budget for the purchase? Diagraph wants to know whether the prospect is ready to go (the money is in the budget), just looking ("We plan to have the money next year"), or merely window-shopping.
* Who's in charge of this project? The salespeople want to deal only with the decision maker.
* Is your plant or office the only site affected? How big a job will this be? It's another angle for the salesperson to pursue, especially when it comes to talking about price.
* When are you planning to go forward with the project? The telemarketers present a list of choices: one to 3 months, 4 to 6 months, 7 to 12 months, or longer. The object is to find out just how serious the prospect is and how quickly Diagraph should try to follow up and close the sale.