Technology has driven historic changes in consumer marketing. But despite the billions of dollars being spent in the business-to-business (B2B) and  business-to-consumer (B2C) sectors on inbound marketing e-newsletters, social media, blogs, podcasts, video, white papers and certain “permission marketing” techniques used to enhance brand awareness among customers and prospects — most companies, including many that sell business insurance, aren’t seeing results.

This is because, if you set aside industrial commodities purchased through supply chain management (where the needs are explicit), most discretionary purchases such as insurance don’t lend themselves to inbound marketing, which is designed to leverage the prospect’s awareness of his needs to reduce your cost of sales.

The belief that inbound marketing should work in B2B–for financial advisors, this translates to marketing to business owner prospects–contradicts a fundamental precept underlying B2B marketing and sales for more than a hundred years: that most decision-makers don’t know they have a need (for many products and services) until they talk to a salesperson. And insurance is arguably the archetype of this class.

So while one of the functions of advertising is to pave the way for the salesperson, does increasing the budget and moving it online obviate cold calling and personal networking?

Despite the enthusiasm of today’s marketing managers for inbound, products like insurance often require that credibility and relationship precede the discussion of need. And with the decision-maker busy doing the day-to-day job of running the business, there’s often no window for inbound marketing to break through. That’s why traditional interruptive prospecting techniques such as cold calling, networking, events and direct mail still work and why inbound marketing continues to struggle.

Cold calling does get a lot of bad press. Many producers, particularly those who lack proper training, are uncomfortable with the technique. And competitive marketing solution providers make much (perhaps too much) of decision-makers’ complaints about cold calls.

But if you look at the cost-per-lead for the initial appointment with a decision-maker, and you include all the costs (which many conveniently ignore), inbound marketing actually increases the cost of sales compared to cold calling, rather than decreasing it.

A simple Excel spreadsheet can tell you whether inbound marketing, or any technique for that matter, is better than cold calling.

 

Without Inbound

With Inbound

Target Companies

600

600

Inbound Marketing

 

 

Email

 

$2,000

Search

 

$1,000

Blogging

 

$1,500

Total Inbound

 

$4,500

Cold Calling

 

 

Dials/Contact

5

4

Dials Needed

3,000

2,400

Dial Rate

12 dials/hour

12 dials/hour

Hours Needed

250

200

Appointment Rate

8.0%

10.0%

Appointments

48

60

Total Cost

$5,000

$8,500

Cost/Lead

$104.17

$141.67

Impact of Inbound Marketing on Cost-per-Lead

As you can see from the chart above (which shows the results of an actual quarterly campaign for a health insurance brokerage), starting with a given number of target prospects, cold calling will have a certain dial rate (dials/hour), contact rate (i.e. dials/contact), and appointment rate (contacts/appointment), which will result in a cost-per-lead that you can easily calculate.

Adding inbound marketing, as shown in the right-hand column will, of course, increase the cost of the program. But it hopefully will reduce the number of dials required to get someone on the phone (i.e. improve the contact rate), and increase the appointment rate, enough to compensate for this increased cost.

And as you can see from the data in red in this example, inbound marketing did improve the contact rate by 20 percent (reducing the dials/contact from five to four.) And it increased the appointment rate by 25 percent, from 8 percent to 10 percent. But because it cost an additional $4,500 for the quarter, it ended up increasing the cost-per-lead by more than 35 percent!

If you assume that the close rate was the same for both types of appointments (e.g. 20 percent), which is normally the case, you can see that adding inbound marketing actually increased the cost-per-sale. And its only benefit was to reduce the stress of cold calling.

Your results, of course, may be different. For example, you may get a high response for your email blasts. Or people may contact you based on your published white papers or blogs. But most companies find these are rare events. The best to be hoped for is that such content marketing warms up prospects, making the cold call a little easier.

The point is: Before you invest in inbound marketing, be sure you’re comfortable with its impact on your cost-per-lead. This means amortizing the development and management costs for the program over a limited period of time. And it especially means accounting for the cost of creating content, something that’s easy to hide, but that can also easily make your inbound marketing program uneconomic.

To be sure, some aspects of inbound marketing can reduce cost-per-lead. For example, having good content on your Website, and taking the prospect to a compelling page of service benefits or case histories during the telephone call, is invaluable. And researching your prospect’s website can make your cold call far more relevant, while helping to eliminate some prospects who aren’t worth calling.

But eliminating direct marketing in favor of inbound as a way to secure business owner clients is, from our experience, a step too far. While the available content can enhance the efficiency of a cold call or networking event, if there’s no cold call or networking event to enhance, then you’re left waiting for prospects who are willing to call you.

And waiting for the phone to ring has never been a particularly good strategy.