Cold Calling Definition - Investopedia

Cold calling is a technique in which a salesperson contacts individuals who have not previously expressed interest in the offered products or services. Cold ... TableofContents Expand TableofContents WhatIsColdCalling? HowColdCallingWorks TheDifficultyofColdCalling ExamplesofColdCalling ColdCallsandDoNotCall Business BusinessEssentials WhatIsColdCalling? Coldcalling(sometimeswrittenwithahyphen)isthesolicitationofapotentialcustomerwhohadnopriorinteractionwithasalesperson. Aformoftelemarketing,coldcallingisoneoftheoldestandmostcommonformsofmarketingforsalespeople. Warmcalling,ontheotherhand,isthesolicitationofacustomerwhohadpreviouslyexpressedinterestinthecompanyorproduct. KeyTakeaways Coldcallingisasalespracticeinwhichindividualsarecontactedwhohavenotpreviouslyexpressedinterestinaproductorservice.Coldcallingiscommonlyusedintelemarketing,andonlyproducesmaybea2%successrateforthemostskilledprofessionals.Consumerstendtodislikecoldcalling;Congresshaspassedlawsmakingitmoredifficulttocoldcallonalargescale. HowColdCallingWorks Coldcallingisatechniqueinwhichasalespersoncontactsindividualswhohavenotpreviouslyexpressedinterestintheofferedproductsorservices.Coldcallingtypicallyreferstosolicitationbyphoneortelemarketing,butcanalsoinvolvein-personvisits,suchaswithdoor-to-doorsalespeople. Successful cold-callsalespersons shouldbepersistentandwillingtoendurerepeatedrejection.Tobesuccessful,theyshouldadequatelypreparebyresearchingthedemographicsoftheirprospectsandthemarket. Consequently,professionswhorelyheavilyoncoldcallingtypicallyhaveahighattritionrate. TheDifficultyofColdCalling Coldcallinggeneratesvariousconsumerresponses,suchasacceptance,callterminationsorhang-ups,andevenverbalattacks.Accordingtoa2020LinkedInreport,roughly69%ofprospectsacceptedacallfromanewsalespersoninthepreviousyear,with82%ofthegroupultimatelywillingtomeet.However,thesuccessratecorrelatestothepersistenceoftheseller,withanaverageof18callsneededtoconnectwithabuyer.Meanwhile,mostsellersgivesupafter4calls,nevergettingtoa"yes."TheLinkedInreportreferencedastudyfromconsultingfirmRainGroup,whichwassurveyedbybuyersin2019.Conversely,awarmcall salespersoncanboastamorefavorablesuccessrate. Astechnologyadvances,coldcallinghasbecomelessdesirable. Newer,moreeffectiveprospectingmethodsareavailable,includingemail,text,andsocialmedia marketingthroughoutletslikeFacebookandTwitter.Comparedtocoldcalling,thesenewmethodsareoftenmoreefficientandeffectiveatgeneratingnewleads.  So-calledrobo-dialing(robocalling)isthelatestinnovationincoldcallingwherebyalgorithmsautomaticallydialandproducepre-recordedmessages.Governmentregulations,suchastheNationalDoNotCallRegistry,havenegativelyimpactedcoldcallers'effortstoreachpotentialclientsenmasse. Scamartistsfrequentlyusecoldcallingasamethodtodefraud,whichfurtherhamperstheeffectivenessoflegitimatecoldcalling. ExamplesofColdCalling Inthefinanceindustry,brokers usecoldcallingtogainnewclients. Considerthemovie"BoilerRoom"inwhicharoomofstockbrokers,crammedintotightcubicles,callnamesfrompaperlistshopingtopitchthemonobscurestocks.Themovieportrayscoldcallingasanumbersgame.Thebrokersreceivefarmorerejectionsthanacceptances.Thosewhosecure lucrativedealsseldomusethecoldcallmethod. Somebrandsareknownfortheirdoor-to-dooroperations.SouthwesternAdvantage,aneducationalbookpublisher,employsmostlycollegestudentstocanvassresidentialneighborhoods.Likewise,KirbyCompanysendsitssalespeopledoor-to-doorsellinghigh-endvacuumcleanerstohomeowners. ColdCallsandDoNotCall In2003,theNationalDoNotCallRegistrywasbornfromtheFederalTradeCommissionandtheFederalCommunicationsCommission.Thisallowedconsumerstoopt-outofcoldcallsforaperiodoffiveyears.Afterfiveyearstheysimplyhadtore-register.By2010,theregistrytopped200millionnumbersandbytheendoffiscal-year2021,therewere244.3millionactivelyregisterednumbers.Afternumerouslawsuitsfromthetelemarketingindustry,courtsupheldthelegalitiesoftheDoNotCallRegistry,makingcoldcallingaverychallengingservicetocontinue. Buttheregistryonlyappliestohouseholds—notbusinesses.Asaresult,financialprofessionalscanstillcoldcallbusinesses.Thegoodnewsisthatwithbusinesses,thepayoffispotentiallymuchhigher.Althoughit’softenhardtogetthroughtothedecision-makersatcompanies,goingafterthecompany’s401(k)planorthebusinessofahighly-paidcompanyexecmaymaketheaddedeffortworthit. Coldcallerstodayknowthatpitchingaproductisafool’sgame.It’sallaboutbuildingrelationships.Someadvisorsusethestrategyofaskingspecificquestionsandofferingfreeadvicebasedontheresponse.Maybethebusinessownerisconcernedaboutthehigh-feestructureassociatedwithhisemployees’retirementplan.Theadvisormightmakesuggestionsofcompaniestocheckoutandoffertodosomeresearchandgetbacktothem.Thissoft-sellapproachhasworkedwellforsomeadvisors,especiallythoseearlyintheircareers. ArticleSources Investopediarequireswriterstouseprimarysourcestosupporttheirwork.Theseincludewhitepapers,governmentdata,originalreporting,andinterviewswithindustryexperts.Wealsoreferenceoriginalresearchfromotherreputablepublisherswhereappropriate.Youcanlearnmoreaboutthestandardswefollowinproducingaccurate,unbiasedcontentinour editorialpolicy. U.S.SecuritiesandExchangeCommission."ColdCalling." FederalTradeCommission(FTC)."ComplyingwiththeTelemarketingSalesRule." LinkedIn."ColdCallingStatisticsThatYouNeedtoKnow." RainSalesTraining."5SalesProspectingMythsDebunked."AccessedDec.19,2021. FederalTradeCommission."NationalDoNotCallRegistryFAQs." SouthwesternAdvantage."America'sOldestEntrepreneurialProgram." KirbyHome."StillDoor-to-Door." FederalTradeCommission."NationalDoNotCallRegistryOpens." FederalTradeCommission."FTCReleases2021DoNotCallRegistryDataBook." FederalTradeCommission."NationalDoNotCallRegistryTops200MillionPhoneNumbers." CompareAccounts AdvertiserDisclosure × TheoffersthatappearinthistablearefrompartnershipsfromwhichInvestopediareceivescompensation.Thiscompensationmayimpacthowandwherelistingsappear.Investopediadoesnotincludealloffersavailableinthemarketplace. Provider Name Description RelatedTerms HowWarmCallingHeatsupSales Warmcallingisthesolicitationofapotentialcustomerwithwhomasalesreporafirmhashadpriorcontact.Itistheoppositeofcoldcalling. more BoilerRoomDefinition Aboilerroomisanoperationthatfeatureshigh-pressuresalespeoplepeddlingspeculativesecurities.Readhowtospotandavoidboilerroomscams. more TelecommunicationsConsumerProtectionActof1991(TCPA) TheTelecommunicationsConsumerProtectionActof1991(TCPA)isaU.S.lawcreatedinresponsetoconsumerconcernovertelemarketing. more GoodCustomerServiceMatters Customerserviceisthedirectone-on-oneinteractionbetweenaconsumermakingapurchaseandarepresentativeofthecompanythatissellingit. more WhatisClientFacing? Clientfacingreferstothepointofdirectcontactandinteractionbetweenabusinessanditscustomers. more ActivityQuota Anactivityquotaisaminimumlevelofsales-orientedactionsthatmustbemetbyasalespersonduringagiventimeperiod. more PartnerLinks RelatedArticles FinancialAdvisor HowtoFindClientsAsaFinancialAdvisor LifeInsurance BestWaystoFindLifeInsuranceLeads Careers ADayintheLifeofaFinancialAdvisor Brokers IsYourBrokerLegit?6StepstoTake Entrepreneurs 8MostSuccessfulProductsFrom"SharkTank" PracticeManagement 9ClientEventstoGrowYourFinancialAdvisorPractice