Cold Calling Explained: Definition, Process, Examples, and Challenges

What Is Cold Calling?

Cold calling involves reaching out to potential customers who have no prior interaction with the salesperson, representing one of telemarketing's oldest forms. Despite its low success rate and consumer resistance, it remains a fundamental approach in sales, requiring tenacity and strategic planning. Adaptations like more personalized outreach and integration with technological methods help overcome its inherent challenges.

Understanding the Mechanics of Cold Calling

Cold calling typically refers to solicitation by phone or telemarketing, but can also involve in-person visits by door-to-door salespeople.

Successful cold-call salespersons are persistent and immune to repeated rejection. The most successful of them research the demographics of their prospects and the market in order to identify consumers who are likely to respond positively to their pitches. 

Professions that rely heavily on cold calling typically have a high attrition rate.

Challenges in Cold Calling for Sales Success

Cold calling results in varied responses, including hang-ups, terminations, and verbal attacks. According to a 2020 LinkedIn report, roughly 69% of prospects accepted a call from a new salesperson in the previous year, and 82% of those prospects were willing to meet with the salesperson who called. However, the success rate correlates to the persistence of the seller, with an average of 18 calls needed to connect with a buyer. Most sellers give up after four calls, never getting to a "yes."

Cold calling is less popular now as new methods like email, text, and social media marketing on platforms like Facebook and X (formerly Twitter) evolve. Compared to cold calling, these new methods are often more efficient and effective at generating new leads. 

Robo-calling uses automated dialing and pre-recorded messages as the newest cold calling innovation. Government regulations such as the National Do Not Call Registry have thwarted cold callers' efforts to reach potential clients en masse.

Examples of Cold Calling

In the finance industry, brokers use cold calling to gain new clients. Consider the movie "Boiler Room" in which a room full of stockbrokers crammed into cubicles call names from paper lists hoping to pitch them on obscure stocks. The movie portrays cold calling as a numbers game. The brokers receive far more rejections than acceptances.

Brokers who secure lucrative deals seldom use the cold call method.

Some brands are known for their door-to-door operations. Southwestern Advantage, an educational book publisher, employs mostly college students to canvass residential neighborhoods. Kirby Company sends salespeople door-to-door to sell its high-end vacuum cleaners to homeowners.

Navigating Cold Calling Regulations and Do Not Call Lists

The National Do Not Call Registry was introduced by the Federal Trade Commission and the Federal Communications Commission in 2003. It allowed consumers to opt out of cold calls for a period of five years. After five years, they could re-register.

By 2010, over 200 million numbers were on the registry, rising to 244.3 million by the end of 2021.

After numerous lawsuits from the telemarketing industry, courts upheld the legality of the Do Not Call Registry, making cold calling a very challenging service to continue.

But the registry only applies to households—not businesses. As a result, financial professionals can still cold call businesses. The good news is that with businesses, the payoff is potentially much higher. Although it's often hard to get through to the decision-makers at companies, going after the company's 401(k) plan or the business of a highly-paid company exec may make the added effort worth it.

Today, cold callers focus on building relationships rather than just pitching products. It's all about building relationships. Some advisors ask specific questions and offer free advice based on responses. Business owners may be concerned about the fee structure associated with their employees' retirement plans. An advisor might make suggestions of other companies to check out and offer to do some research and get back to them. This soft-sell approach has worked well for some advisors.

The Bottom Line

Cold calling remains challenging, demanding persistence and resilience from salespeople. Its effectiveness has waned with the decline of landlines and restrictions on unsolicited calls to cell phones. Moreover, door-to-door sales face reduced success as households with two incomes mean fewer people are home during the day. In response, modern marketers often turn to alternative methods like warm calling, which targets those who have shown prior interest, providing a more promising and receptive audience.