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Why Most of Your Assumptions About Phone Calls Are Wrong
 

Phone calls are not dead. Neither is email.

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If you follow the tech media you would be subject to a lot of narrative biases that are completely off base, and this includes the value of email and phone calls.

TL;DR

  • Tech news keeps proclaiming "phone calls are dead," which is useful except that the data suggests the exact opposite. Calls are changing but not dying.
  • All the data actually suggests with the growth of mobile, inbound sales calls will double from 30 billion to 60 billion in 3 years (source: Kelsey)
  • In fact 61 percent of all mobile searches where a customer contacts a business it is via a phone call (source: Google). Much more data in the full post.
  • It's why the first company I ever invested in as a VC -- Invoca -- just announced a $20 million funding by Accel Partners. They have grown at a 200 percent CAGR over the past 4 years
  • This 1-minute video shows exactly what Invoca does

The Full Story

I'm sure you've heard the meme that "email is dead." In fact if you Google it you'll find a long list of articles that will mislead you.

Some quick data that I pulled from EmailisNotDead.com (mid 2012)

  • There are 2.9 billion email accounts. This figure is predicted to reach 3.8 billion by 2014
  • The three largest webmail services had over 1 billion global users at the end of 2011
  • 62 percent of adult US Internet users check or send email on a daily basis
  • 94 percent of all online adults use email. 73 percent of those aged 12-17 do so
  • Social media users are over 60 percent more likely to check email at least four times a day than those who don't use social media

Of course that website isn't completely up to date but it's a great resource for seeing the overall picture. But my specific point is that while everybody is busy telling you that "kids don't use email" or "email is dead" I have actual data from portfolio company's CEO showing the efficacy of email as a communication and marketing channel.

The key is understanding the nuance. Of course unsolicited spam has very low open rates and is filtered by the major providers. But bacn (email you have subscribed to) can have incredibly high open rates. It’s precisely why Twitter now sends you regular emails telling you who has followed you, what your most popular Tweets are, new users suggestions, etc. It's why opt-in marketing databases can be so incredibly valuable for companies like Gilt Groupe, One King's Lane and AdoreMe.

And while it's true that young people are massive text messengers and increasingly using "messaging apps" - as they graduate and join the workforce I assure you they will use email. Yes, email is changing and I personally use it less frequently as I gravitate towards texting, DMing, FB messaging and even just @Tweeting people. But it still is a major force and it ain't going away. Only naive people believe that but for inexperienced entrepreneurs you can be fooled into the narrative by the press who sometimes write stories without the actual data.

Phone Calls

Enter phone calls.

What we've heard even more than email is dead is that people don't make phone calls anymore. In a way it feels intuitive to us -- the readers of this blog - because we're the tech crowd. We love to streamline and text people.

But let me start with some data. In the US alone there are 30 billion inbound sales calls every year. Just. Sales. Calls. Inbound. That number is projected to GROW to 70 billion by 2016 (Source: BIA Kelsey).

Huh? But phone calls are dead? People don't want to speak to customer service reps. I don't want to speak to customer service reps!!

Right! Right?

Not so fast. As the mobile ecosystem has grown the industrialized world is now carrying a mini computer in their pocket that is connected to a cellular network. The reduction in screen size has made the economic model of Internet advertising totally inefficient. If you thought people didn’t look at banner ads before, you can imagine how little they look at them on their smart phones.

It's why I wrote this article about Invoca (formerly RingRevenue) that the most obvious mobile Internet ad unit is, in fact, a phone call.

Google knows it. They now have massive efforts to sign up local merchants and are sending direct mail (yes, erm, physical mail isn't deal either!) espousing the ease and benefits of signing up with Google AdWords to … you guessed it …. drive inbound phone calls. Restaurants, barber shops, gyms -- people still want to call. Not everybody. Not all the time. But that's still the world we'll live in for the foreseeable future as these smart phones are now in the hands of the "normals."

The most obvious phone call ad unit is what we call a "considered purchase," which is high price, complex and requires lots of information or lots of choice. Home alarms. Insurance. Cars. Home gym equipment. Higher education. Real Estate.

Some Interesting Data

1. Seventy-seven percent of online shoppers want live assistance available with their purchases so it's not surprising that 52 percent of shoppers re-evaluate or abandon shopping carts because of the lack of live assistance. (source: Harris Interactive IM Shopping Poll (August 2009))

That alone is pretty compelling.

2. Sixty-one percent of mobile searches in which a customer contacted a vendor, a phone call was generated. Sixty. One. Percent. I suppose I could have skipped the whole rest of the blog post and just posted that. Why? The quote comes from Google. And while this data is from mid-2011 I can assure you that data is not going down. More recent data I've seen suggests it's now near 70 percent.

3. Call centers provide conversion rates of 10x to 20x that of online shopping and also 1.5x to 2x the average order value.  When you listen to Tony Hsieh talk about his Zappos customer reps in "Delivering Happiness" you get a sense of the effectiveness of call center relationships.

It's no accident that 1 out of every 25 employees in America work in call centers.

The broader market knows businesses want calls and people want to make them. We've just been biased by our narrower view from "people like us" and the tech press who are in our same demographic. If you don't understand this you're potentially operating your business at a disadvantage.

The best evidence is just how much higher these merchants will pay for qualified leads. Here are some representative rates that we're seeing by category.

4. 63 percent of all consumers looking to buy financial services now research online but only 33 percent actually buy online. Considered purchase. (Source: Credit Union Times)

5. When you put a phone number in an online ad two unexpected factors go up

  • 12 percent higher click-through rates on the online ad
  • 15 higher conversion of online lead forms

Simply, customers trust businesses that are available by phone. Even if they don't want to always call you.

The Annoying Thing

The first investment I ever made as a VC was in a company now called Invoca. If you want to understand the power of how they're built inbound call management into a SaaS category where they're the market leader watch this one minute video. Go on. I'll wait.

Yet when we went out to fund raise this year after 4 years of a 200 percent revenue CAGR (compounded annual growth rate) the first firm that we spoke with said,

"We love what you do and we love SaaS. You're data looks fantastic. But we can't get over the fact that phone calls are dying."

Are you  kidding me? You're a VC with access to your own portfolio company data which should show you that email, phones and direct mail are alive and well (albeit changing) and you have public market data by Google, Kelsey and others showing the trend on mobile is INCREASING and you're going to fall pray to the narrative of the tech press?

Luckily most investors were more savvy. We quickly found ourselves with multiple VC firms wanting to invest and I'm super proud to announce that we have just announced a $20 million round of funding to continue to grow the business into the enterprise class leader that I know we can become.

I have long admired the telecoms prowess of Rich Wong at Accel and of course know of the legendary reputation of Jim Breyer (who has the best Twitter handle of any VC I know). But through this process our team got to work with Ryan Sweeney, the lead of Accel's growth practice (who won me over by announcing he was an Eagles fan) and newest growth partner Kobie Fuller.

So even though I swore we wouldn't do it, we cut off the process early when we realized how aligned our team was with Accel and how much the team felt Accel could help with our growth.

It's funny but recently I was at the CornerstoneOnDemand conference in Santa Monica. My friend Byron Deter of Bessemer was on stage and was saying, "local [LA] investors are great in the earliest stages of a business when you need local, hands-on support. But when it's time to scale you need to bring in a bigger firm that has global resources and relationships that can't be matched by smaller funds with less resources and staff."

I think when Byron said that he kind of feared that he might slightly be offending some local VCs. I found myself nodding in complete agreement. It's why I spend time early with great partners like Byron who have deep SaaS skills and global practices because as you scale a business you need different skills, different resources, more and different relationship. So I send Byron any SaaS investment I do at the earliest stage where I know we've nailed product / market fit.

You're company needs to evolve as you grow. You can't act like a seed-round company when after you raise your $5 million A round. And you can't act like a B-round company when you raise $20 million in growth capital. Companies need to evolve and so do boards. I wrote a post recently about how we’ve evolved the board at Invoca by adding experience industry veterans and tried to offer some advice on how to think about this for your company.

I couldn't announce at the time that we had also added Accel but now I can. And I look forward to how the combination of our great management team and industry board members added to Accel can go own to build a valuable part of the enterprise ecosystem.

And proving to all of you that …

People still want to make calls!

This article was originally published on Mark Suster's blog, Both Sides of the Table.

IMAGE: Getty
Last updated: Jan 15, 2014

MARK SUSTER is a two-time entrepreneur who has gone to "the dark side" of venture capital. He joined GRP Partners in 2007 as a general partner after selling his company to Salesforce.com. He focuses on early-stage technology companies. You can find him on Twitter @msuster.




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