Invest in mores Sales or Marketing resources?
Posted by Terry Hedlund | Posted in Demand Generation | Posted on 02-03-2009
A friend of mine was telling me about a great new sales person he just hired. He told me he was expensive, but he was sure he would be a big contributor to the sales revenue this year. That got me thinking. “Expensive” in his world is going to mean a six figure salary, plus commission and bonuses. Let’s conservatively guess a total investment of $150K for the first year. I know from working with him that their Demand Generation pipeline is just barely supporting their current sales group… in other words when the new sales person starts, he is going to spend most of his time trying to find leads rather than closing deals. Question: would it be better to invest the $150k into Demand Generation to create qualified leads that can be then routed to a sales person to close?
I recently had the opportunity to dig deep in to another company’s Demand Generation processes with the goal to establish some benchmarks for the ROI. What I found might help answer the question. There are some similarities with my friend’s company, so I feel the comparison could be relevant for him. If I take the benchmark model I created and plug in his average value of a sale of $50,000 and use the annual cost of the sales person at $150,000, these are the results:
1. The cost of acquiring a new customer through ONLY the activities of a Sales Person is $19,637
2. The cost of acquiring a new customer through ONLY the activities of a Search Marketing is $7,846
Both numbers are big but the difference between them is what tells the real story. Based on this model, if you invest $150,000 in a sales person and let him or her generate their own leads, they would close about 8 sales for a 255% ROI. Spend the $150,000 in only search marketing and then route qualified leads to the sales person and you would close 19 sales with a 637% ROI.
While the model is not exact science and there are lots of factors that could change the outcome, it provides enough information to at least ponder the question: Should I invest in mores sales or marketing resources? Sales people are absolutely necessary for any organization, but working towards making your sales teams more efficient and profitable through Demand Generation activities might be a strategy worth a closer look.