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Mike Lieberman, CEO and Chief Revenue ScientistThu, Jun 9, 2016 10 min read

Inbound Marketing Answers: What's The Right Ratio Of Earned Vs. Paid Media?

Inbound Marketing Uses Pay-Per-Click, But How Much Is Enough?

Inbound Marketing Balances Earned And Paid MediaSince the beginning of time, business leaders have been searching for the “one single marketing tactic” to trigger an avalanche of leads for their businesses. When TV became popular, it was advertising; when the internet debuted, it was search; and when social media emerged, it was Facebook and LinkedIn.

Today, you can argue it’s inbound marketing or content marketing or marketing technology. If we buy HubSpot or Marketo, we’ll get all the leads we need. I know we’re all looking for the path of least resistance, but in this case, there is no easy way to do it – generating leads is complex and difficult.

Inbound marketing, specifically, is about the size of your brain, not the size of your wallet. If you’re smart enough and experienced enough, and if you have the right assets combined in the right configuration, you can create a repeatable, scalable and predictable lead-generation machine.

But, what if you have a big brain and a bigger-than-most wallet? How can you combine two approaches to produce even better results?

The answer is using paid media and earned media in combination, but doing it in such a way that the two approaches complement each other instead of duplicating your efforts.

You need to balance paid media and earned media in your inbound marketing program so that you're doing active pay-per-click (PPC) campaign management instead of just paying for pay-per-click impressions.

Marketing Is A Scientific Equation

The days of creative marketing are gone. Today, agencies don’t get fired because their creative is stale; they get fired because their recommendations are not producing results. The marketing you should be doing is a math exercise, and you should be backing into it based on the revenue goals for your business.

I’ve written about this over and over again. How many new clients do you need, at the average revenue-per-new-client rate, to hit your company’s revenue targets this year? If you don’t know that number, you’re never going to hit your goals. Let’s say it's 100 new clients.

What’s your close rate? Not your assumptive close rate, but your actual close rate? Prospects often tell us they have a 50% close rate, and a few months into our engagement, we find out it's really more like 20% or even lower. If you had 10 sales opportunities – qualified prospects who are considering hiring you – in a room, how many of those 10 would turn into new customers for you? That’s your close rate.

If your close rate is 50%, then you need 200 sales opportunities to get 100 new customers. Before a prospect can become a sales opportunity, it has to be a sales-qualified lead. The percentage of sales-qualified leads that turn into sales opportunities is usually around 50%, which means you’ll need 400 sales-qualified leads. To generate that many leads, you’ll need about 4,000 marketing-qualified leads, because only about 10% of marketing-qualified leads are sales-qualified.

4,000 leads sounds like a lot, but in reality, it’s not – it’s about 333 leads a month. It only becomes an insurmountable number when you don’t know how to get there. And knowing this number is a mandatory step in determining the right ratio between paid and earned media.

What Tactics Produce What Results?

Now that you know the magic number for leads, you have to compare your desired state to your current state. How many leads are you generating today? Zero, 20 a month, more? What other numbers are contributing to that level of performance? These other numbers could include website visitors, website conversion rate or referrals, or offline marketing activities such as trade shows. These are all important to creating your baseline.

Once you know the baseline, you start adding tactics. The quantitative contribution of each tactic will add to the delta between where you are today and where you need to be. If you’re currently getting 20 leads a month and you need 333 leads a month, you need a program that’s packed with lead-generating tactics.

Start with earned-media tactics, because these will cost you less and produce better results over the long term. Upgrading your website to increase your conversion rate, creating content to drive more visitors to your site, posting on your social media accounts to attract more visitors, increasing the frequency of emails to your prospects and current customers, and connecting with influencers to help them tell your story – these tactics might be enough to get you the visitors, conversions and leads required to hit your target lead numbers.

If that’s the case, you won’t need any paid media, but what if you're still short? What if you come up with 233 leads and you need 333 leads? Now you start looking at supplementing those leads with paid media.

Apply The Same Mathematical Approach To Paid Media

Once you know how many leads you need, you can back into how much you're willing to pay for those leads, and what type of paid media program is required to fill in the delta. For instance, you might be able to get 50 extra leads a month from a LinkedIn PPC campaign that costs $500, and 50 additional leads from a Google PPC campaign that costs $1,000.

Do you invest the $1,500 to test both campaigns, or do you spend $1,000 on LinkedIn for the 100 leads you need and pass on the Google PPC program, to see if a lower-level investment can produce the results you require? Keep in mind that even with AdWords programs, you don’t actually buy leads – you buy clicks to your landing page. You still need to make sure your landing page converts those new visitors into sales-qualified leads, that the leads get turned into sales opportunities and that the opportunities turn into closed business.  

Both Google PPC and social media PPC provide you with an opportunity to focus only on the people who fit your target personas. Google does this via the search terms they’re using and the copy in your ad, and social media does this based on the profiles of the people using the platform. If you apply inbound marketing principles to this outbound tactic, you can see even better results.

How To Make PPC Inbound

Offering content instead of discounts or sales messages; using educational copy instead of promotional copy in the ads; bringing people to a dedicated landing page instead of sending them to your home page – all of these tactics increase the chances your ads will produce the results you need to complete your lead-generation program profile.

By balancing paid media with earned media in these ways, you’ll optimize your efforts around inbound while supplementing those efforts with the more costly paid media. As the earned media continues to increase its contribution to your results over time, you can consider reducing the paid media accordingly. This is another benefit of having the earned media working in conjunction with the paid media programs.

7 Undeniable Reasons Your Enterprise Needs Inbound MarketingStart Today Tip – You can’t do any of this without the numbers, so get those locked down first. Once you know where you are today, what you need and the tactics required to get you to your lead goals, you’ll be in a position to evaluate paid media opportunities, set those budgets, create those program performance goals and start testing your program options. The selection of PPC types is up to you. Just make sure you keep an eye on those programs – they tend to require continual care and feeding to produce optimal results.

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Mike Lieberman, CEO and Chief Revenue Scientist

Mike is the CEO and Chief Revenue Scientist at Square 2. He is passionate about helping people turn their ordinary businesses into businesses people talk about. For more than 25 years, Mike has been working hand-in-hand with CEOs and marketing and sales executives to help them create strategic revenue growth plans, compelling marketing strategies and remarkable sales processes that shorten the sales cycle and increase close rates.