What is 'Cold Calling'

Cold calling is the solicitation of potential customers who were not anticipating such an interaction. Cold calling is a technique whereby a salesperson contacts individuals who have not previously expressed an interest in the products or services that are being offered, as opposed to warm calling. Cold calling typically refers to phone calls but can also involve drop-in visits, such as with door-to-door salespeople.

BREAKING DOWN 'Cold Calling'

Salespeople have to find prospects somewhere, and cold calling offers a ready-made method for those who lack connections or the ability to pay for other forms of marketing. Thick skin is paramount for cold calling success, as repeated rejections beat down most who try the method. Sales jobs that require going door to door or cold calling via the telephone are often plagued by very high turnover.

The Difficulty of Cold Calling

Cold calling is a difficult task in sales because of the wide variety of responses from the potential customers, ranging from simple hang-ups to verbal abuse. Further, marketing analysts estimate the success rate of cold calling at 2%, and that is for skilled and experienced salespeople. In other words, salespeople who rely on cold calling have to burn through, on average, 49 rejections for every sale, resulting in not only immense frustration but also a lot of wasted time. Warm calling, which boasts a success rate closer to 30%, is much more time-efficient.

Cold calling is becoming increasingly controversial as newer, more effective methods of sales channels become available, including email, text message marketing and social media such as Facebook and Twitter. Compared to cold calling, these new methods are often considered to be more efficient and effective at generating new leads. Moreover, increasing government regulations, most notably the National Do Not Call Registry, have hampered cold callers' efforts to reach out to potential clients en masse.

Cold Calling Examples

In finance, cold calling can refer to a method by which brokers obtain new business by making unsolicited calls to potential clients. For example, the 2000 movie "Boiler Room" features several scenes that depict a room of stockbrokers crammed into tight cubicles calling names from paper lists and attempting to pitch them on obscure stocks. The movie accurately portrays cold calling as a numbers game. The brokers receive far more "no" than "yes" answers, but the ones who are successful regularly close big deals using this method.

Certain businesses are known for employing the door-to-door cold calling model into the 21st century. Southwestern Advantage, an educational book publisher, employs mostly college students to canvass residential neighborhoods. Likewise, Kirby Company sends its salespeople door to door selling high-end vacuum cleaners to homeowners.

RELATED TERMS
  1. Warm Calling

    The solicitation of a potential customer with whom a sales representative ...
  2. Conference Call

    An event during which investors can call in to hear a company's ...
  3. Dialing and Smiling

    A telemarketing technique in which unsolicited, or "cold" calls, ...
  4. Call Ratio Backspread

    A very bullish investment strategy that combines options to create ...
  5. Earnings Call

    A conference call between the management of a public company, ...
  6. Maximizer

    A brand of customer relationship management software popularly ...
Related Articles
  1. Financial Advisor

    5 Reasons Why Cold Calling is Dead

    Is cold calling really dead? If so, what are the better alternatives?
  2. Financial Advisor

    Cold Calling Vs. Networking

    Why networking is taking over from cold calling as the best way for financial advisors to grow their client base – and where cold calling fits in.
  3. Financial Advisor

    Cold Call Without Getting The Cold Shoulder

    Learn how to warm up prospective clients to your business and your abilities.
  4. Small Business

    Six Rut-Busting Business Moves For Brokers

    Find out how to beat a plateau and boost your sales to the next level.
  5. Small Business

    Financial Efficiency: The Analyst's Guide To Time Management

    Being efficient on the job is the key to finding balance and avoiding burnout as a broker or advisor.
  6. Insurance

    Brokers: Do You Want To Sell Stocks Or Insurance?

    Know the difference between working as a broker or an insurance rep.
  7. Small Business

    What Is Cold Storage For Bitcoin And Why Does It Matter?

    With increasing incidents of hacking in the world of digital currency, cold storage offers a safe place for the cryptocurrency owners.
  8. Investing

    Top Stocks to Play a Cold U.S. Winter (MTN, CMP)

    Predicting a cold winter? Consider warming up your portfolio with these stocks.
  9. Trading

    Going Long On Calls

    Learn how to buy calls and then sell or exercise them to earn a profit.
  10. Retirement

    Write Covered Calls To Increase Your IRA Income

    Covered calls may require more attention than bonds or mutual funds, but the payoffs can be worth the trouble.
RELATED FAQS
  1. What is a boiler room operation?

    In the context of investing, the term "boiler room operation" refers to the use of high pressure sales tactics to sell stocks ... Read Answer >>
  2. Do financial advisors have to find their own clients?

    Understand why financial advisors often have to find their own clients, and identify the specific lead generation methods ... Read Answer >>
  3. What is the difference between a covered call and a regular call?

    Learn what a call option is, what two strategies call options can be used for, and the difference between a covered call ... Read Answer >>
  4. Under the Telephone Consumer Act of 1991, a telemarketer must provide which of the ...

    The correct answer is d. All the choices except II are specific requirements of the Act. In addition, the law places time-of-day ... Read Answer >>
  5. How can I generate a yield from stocks in the Internet sector that do not pay a dividend?

    Discover how to generate a yield from an Internet stock that does not pay a dividend. This method is a potent tool for traders ... Read Answer >>
  6. Where can I buy covered call ETFs (exchange-traded funds)?

    Learn where to trade covered call option strategies, and how covered calls work including the type of risk associated with ... Read Answer >>
Hot Definitions
  1. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  2. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  3. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  4. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  5. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  6. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
Trading Center