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Sales Tips

How small businesses burn marketing budget but don’t sell

February 12, 2015

When we are talking about sales, it’s all about your pipeline. On one end there is your target audience, on the other you have sales. There are usually several avenues to reach your audience. Advertising, visits to your website, outbound sales, for example. Some of these folks will become leads. Some will go on to express interest and negotiate. Eventually, someone will become a buyer. There is always some conversion rate between each stage but you could always determine two major stages – the conversion between target audience to lead (someone who showed their interest in your products or services) and conversion between lead to sale. We call this First and Second conversion.

First conversion is all about your marketing. You can do a lot of things to attract your target audience. However, not everybody will become a lead. For example, if you use web and Google.AdWords to attract new leads, you have web-ads, clicks and visitors with only some of them showing interest in your business by filling web-forms or giving you a call. This first conversion has a direct effect on the overall cost of your leads. The better your first
conversion is, the lower your cost for leads will be.

Most businesses, especially among SMB’s, are very concerned with getting more leads and the cost of acquisition. They are spending a lot of money and resources to buy more clicks or to get better first conversion. But here’s the thing, leads do not equal customers. You will never grow your sales until you begin to focus on 2nd conversion, from lead to customer.

Obviously, the better 2nd conversion you have the more leads you close. The trick is, if your second conversion is good, you become less sensitive to lead acquisition cost. You can pay more for each lead, become more competitive in lead generating and finally get more leads. This is a very self-sustaining model. But, if your second conversion is poor, you will always find yourself concerned with lead acquisition cost and focused on first conversion. Now, you are chasing your own tail generating new leads rather than closing.

Since we here at amoCRM provide an affordable, easy-to-use lead management solution that emphasizes 2nd conversion, we found a way to illustrate why it is important to manage your leads, not just acquire them and how businesses on average fail to do so.

Research

The idea of our research is very simple – We take one competitive industry and act like a mystery shopper. We did a popular search request and gather 20 businesses through their AdWords campaign. Now that we have 20 businesses that buy clicks and visitors to their website, we contact them and measure how they deal with new prospect.

First we try to reach them by web-form if available on their site. If there is no web-form or if they failed to reply, we start calling and try to reach them by phone. We attempt several times before we can say that we failed to reach them.

Our goal is to have one quality conversation with a business representative in which we act like a real lead interested in their services. In every case, we give them an idea that we are going to make a visit or purchase next week, so we don’t mind if they call us back. Afterword’s, we wait several weeks to measure who will follow-up and call.

So once again, we have 20 companies who purchase very expensive clicks on Google AdWords. We contact them as a potential customer and measure how they deal with leads, how do they reply and if they follow-up or not.

Tax Consultants: burn marketing budget, but don’t sell

So this time we decided to research how small tax consultant firms. So the story is: we need to file tax returns for 2014 and would like to find someone to help us. We used a couple popular, but quite narrow search queries (tax return services San Francisco, CA; tax preparer San Francisco ca; tax preparer Oakland Ca; tax return services Oakland ca; Bay area tax services; independent tax preparers; Tax services alameda ca; Tax return services Marin county) and found 20 companies that pay for AdWords for it. Here they are:

Audit and Tax Solutions CPAs Inc www.auditandtaxsolutionscpas.com
BOOKS IN BALANCE www.booksinbalance.net
Chahal & Associates, Inc. www.chahalassociates.com
Cornerstone Tax Systems www.taxpreparationservicerichmond.com
Dimond Tax Services www.dimondtaxservices.com
Elmwood Wealth Management, Inc. www.elmwoodwealth.com
Hoang Le Tax & Financial Services www.hoanglelowfeeincometax.com
Hunter & Company CPAs www.accountingwalnutcreek.com
Mcmillen & Associates www.rpmcmillen.com
MEYER & ASSOCIATES www.meyeraccountancy.com
Pillar6 Advisors LLC www.pillar6.com
Putney-Klein Associates, Inc. www.pkatax.com
Raymond Palmarini CPA www.raymondpalmarinicpa.com
Safe Harbor LLP. www.safeharborcpa.com
Simon C. Wong CPA www.sanfranciscocpaaccounting.com
Summit Accountancy Group www.sanjoseaccountingservices.com
TC Financial Group www.valenciataxpreparationservice.com
The Lee Accountancy Group, Inc. www.theleeaccountancy.com
Thomas P. Cooper, PFP www.pleasanthillaccountant.com
Valley Bookkeeping & Tax Service www.accountantsanramon.com

So with the same story, we started to reach out to these companies.

80% of websites had a webform to fill, which is good. Because, we think that webforms are more efficient than just receiving calls because you will definitely gather enough data to follow-up with the lead. You also have some time lag to give a response to customer, and in some cases (for example if you use amoCRM build-in web-form) web-forms can give you more data about the source of the lead, so you can measure which marketing channels are generating leads and sales, so you can really optimize your marketing budgets. Anyhow, let’s get back to the story!

And here we go, for some surprising results. Though the fastest response we got came in within 15 minutes (and looking ahead, I have to say that this company was one of 20 that completely passed the test), only 30 % of filled forms called back or contacted within 24 hours. Can you imagine? 70 % of the tax consultants buy clicks and visitors but don’t call back for filled webforms.

But as we said before, we put more effort than the average customer to get our quote. And we called to those who had no webform or those who didn’t reply. And guess what? 3 out of 17 just failed to answer, with several attempts. Have to say that among them was one complete outsider, who first ignored our request and webform, and after that failed to answer our calls. We have only one question – why do they pay for adWords?

infographic 1

BTW, 50 % of calls made resulted in very little effort from their part to sell us anything, not even themselves – they just write down our information and promise to call back (not all do, actually), so why they want customers to call instead of using webform is also a mystery.

Anyways, we finally have reached everyone we could and spoke with them. Some said that this was not a service they provided, but most of them were eager to sell and propose I drop by their office to close the deal. So we promised that we would schedule a visit to their office the following week and gave everyone the idea that we would like them to remind us. So, 14 companies promised to give us a call and follow-up. And guess what? Nobody did! Just imagine. They all buy very expensive leads from google adwords, burn money, finally have their lead which just ask them to give a reminder, and, they just throw it away!

So among all 20 companies, we got only one company who actively pursued the sale: fast reply to webform, follow-up and gave a call back.

infographic 2

Now, what should they have done?

The Tax consultants illustrated the antithesis of lead management. Here is what we believe should be the steps

  1. Collect leads primarily with webform, so you could have more information regarding customer and opportunity for a thorough answer and follow up call.
  2. Track the lead through their pipeline – from initial contact to visit, negotiations and final sale.
  3. Set-up reminders and keep promises you give, or give follow-up calls to every lead they just bought.

You see, just 3 easy steps to grow your second conversion that tax consultants do not do. If you are a small business, think about how much resources and attention you pay for lead generation, online marketing and how much you do with managing the leads you have – Probably, you are among the majority of business who could benefit from using a lead management service.

Michael Tokovinin
Co-founder, managing partner

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