Tuesday Marketing Notes (Number 105—December 11th, 2007)
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The Rule of 45: Predicting Sales Results From Inquiries
by James Obermayer
The Rule of 45 is the basic measurement premise from which you can measure the effectiveness of virtually all lead generation programs. It is a steady, reliable rule which simply says that 45% of all inquiries (not just qualified sales leads), will buy from someone.
The timeframe for this purchase is usually, but not always, within 12 months. Your own market share is projected as a percent of the buyers. I have been involved in over 100 "Did You Buy Studies" on a variety of products, and the Rule of 45 is consistent.
If you follow up with 100% of the inquiries, the biggest variable in this formula is the time needed to reach the 45% threshold. Every product has a typical average time frame for the majority of the interested parties to make a decision. For consumer products, this could be a few months; for B2B products the Rule of 45 is completed within 12 months.
On average, the following rules apply:
- Within 3 months 10%-15% of the business to business prospects will buy someone’s product;
- Within 6 months, 26% will buy someone’s product;
- Within one year 45% will buy someone’s product
While time is a pacing item, the most influential issue for a company to attain its fullest share of the marketplace is the follow-up by the salesperson. Follow-up only 25% (a consistent number I hear from many companies), and you’ll only compete in 25% of the available deals.
How important is this variable? The following example shows what happens when sales follow-up dips to 25%. First, let’s look at the potential in a group of 1000 inquiries if follow-up is 100%
1000 Inquiries X 45%% = 450 potential buyers
X Follow-up of 100% and you still have 450 buyers
X 25% market share = 112 buyers
X ASP (average sales price) of $10,000 = $1,120,000 in sales
Reduce the follow-up to 25% and this is the result:
1000 inquiries, x 45% x 25% Follow-up X 25% X $10,000 = $280,000
Pretty brutal, isn’t it? Spend 2%-20% of yearly revenue on marketing and because of poor follow-up your sales will be 25% of what could have been. This calls for a mandate from sales management: 100% sales inquiry follow-up is part of every salesperson’s job description. It can be a condition of employment.
James Obermayer is CEO of the Sales Lead Management Association www.salesleadmgmtassn.com and is also a principal with Sales Leakage Consulting. Obermayer is a thought leader who has authored three published books and over 80 articles in the business press.FAQs
The marketing mix, also known as the four P's of marketing, refers to the four key elements of a marketing strategy: product, price, place and promotion.
What are the content questions? ›
Content questions are used to ask the person being addressed to supply missing information so as to make a certain proposition true.
What is the price in the marketing mix? ›
Pricing in the marketing mix
Pricing is one of the four main elements of the marketing mix. Pricing is the only revenue-generating element in the marketing mix (the other three elements are cost centres—that is, they add to a company's cost). Pricing is strongly linked to the business model.
What is marketing mix answers? ›
Definition: The marketing mix refers to the set of actions, or tactics, that a company uses to promote its brand or product in the market. The 4Ps make up a typical marketing mix - Price, Product, Promotion and Place.
What are the 7 steps of the marketing mix? ›
Since then, the theory has been expanded into the 7 P's of marketing. Which are: Product, Price, Promotion, Place, People, Packaging, and Process.
What are the 4 F's of digital marketing? ›
The 4 F's of Digital Marketing—Focus, Foundation, Flexibility, and Feedback—emerge as pillars that elevate campaigns from ordinary to exceptional. In this article, we delve into each F, unraveling the secrets to achieving digital marketing excellence.
What are the 7 C's of digital marketing? ›
We can remember them as the 7 C's of digital marketing: Customer, Content, Community, Context, Convenience, Cohesion, and Conversion. These seven things help marketers make and improve their digital marketing plans.
What are the 3 C's of digital marketing? ›
The 3 C's of digital marketing are Content, Channels, and Consistency. These three elements are essential for any successful digital marketing strategy.
What are the 5 main questions? ›
As far back as 1913, reporters were taught that the lead should answer these questions:
- Who?
- What?
- When?
- Where?
- Why?
- How?
Open, Closed, Probing
Open questions however, lead to more complex and extended answers. Probing questions are quite similar to open questions, except that they seek to build on what has been previously discussed. We use these three types of question every day in conversation.
The 5 P's of marketing – Product, Price, Promotion, Place, and People – are a framework that helps guide marketing strategies and keep marketers focused on the right things.
Which is the most important P? ›
Marketing has 4Ps too: Product, Place, Promotion and Price. The most important P (arguably) is Price. Why? It's the only one that brings in money.
What is the goal of marketing? ›
The purpose of marketing is to reach your target audience and communicate the benefits of your product or service — so you can successfully acquire, keep, and grow customers. So, your marketing goals must relate to the specific business objectives your company wants to achieve.
What is marketing mix 4 P's explain in detail? ›
What are the 4 Ps of marketing? (Marketing mix explained) The four Ps are product, price, place, and promotion. They are an example of a “marketing mix,” or the combined tools and methodologies marketers use to achieve their marketing objectives. The 4 Ps were first formally conceptualised in 1960 by E.
What is marketing mix 4 P's? ›
The four Ps of marketing—product, price, place, promotion—are often referred to as the marketing mix. These are the key elements involved in planning and marketing a product or service, and they interact significantly with each other.
What are the 4 P's of the marketing mix with definitions? ›
The four Ps are a “marketing mix” comprised of four key elements—product, price, place, and promotion—used when marketing a product or service. Typically, successful marketers and businesses consider the four Ps when creating marketing plans and strategies to effectively market to their target audience.
What are the 4 pillars of the marketing mix? ›
The 4Ps of Marketing, often referred to as the Marketing Mix, are Product, Price, Place and Promotion. Consideration of these four elements should form the basis of any good marketing strategy.
