Inbound marketing has become something of a buzzword in most marketing departments today. It brings clients to you through the use of online marketing tactics such as pay-per-click, search engine optimization, content marketing, and more.
Many marketers today are wondering, “What’s the ROI of inbound marketing?”
ROI is usually much higher for inbound marketing than for outbound marketing techniques, including higher lead generation, increased traffic, and increased sales revenue. The precise figures will depend on how much you invest and how well you utilize inbound marketing techniques.
Calculating the ROI of Inbound Marketing
It can sometimes be difficult to see the ROI of inbound marketing, so it’s important to keep track of the right metrics. Some statistics you’ll want to keep track of include website traffic, lead generation, and sales revenue. You can, of course, be more specific and keep tabs on new leads, leads qualified by sales and marketing, and opportunities.
You’ll also want to track the cost of acquiring a customer as well as the customer lifetime value. Ensure these two are evaluated in ratio to each other. A high customer value and a low cost for acquisition indicate you’re achieving a higher ROI.
What about Outbound Marketing?
Outbound marketing techniques have largely been displaced by inbound marketing, and for good reason. While some companies are always going to purchase glossy ads in magazines or advertise on giant billboards, the fact of the matter is these methods are expensive. Television ads cost thousands of dollars, and then the ad itself must be produced. Magazines and newspapers can run in the thousands too.
The average cost per lead with these methods can be quite high, around $350 per lead. It’s also quite difficult to get a lock on exact ROI figures. Since outbound marketing focuses on the wide broadcasting of the message, it’s difficult to quantify anything beyond the number of people reached.
This means you can’t measure how many people take action once they see or hear the ad. What is known is that most people who see a magazine ad or hear a radio spot don’t act. Since campaigns are expensive with relatively low results, your cost per lead increases.
Comparing ROI for Inbound and Outbound
Perhaps one of the reasons marketers love inbound so much is because it can be measured. Unlike traditional outbound campaigns, you can actually see the impacts of the campaign. Advanced metrics can help you track where visitors to your website are coming from, while other information will help you sort them demographically.
Inbound can be proven to work, which is the first major difference.
Comparing the ROI of inbound to outbound marketing becomes a bit like comparing apples and oranges then. The ROI of inbound marketing can be calculated precisely, while any ROI measurement for outbound techniques is likely to be nothing more than an educated guess.
Why Inbound Marketing Works
It’s easy to say inbound marketing’s ROI is higher than the return on investment for traditional techniques because you can actually measure it, but this dismisses the other facts of the situation. Inbound marketing is also more effective than outbound marketing.
Today’s buyers have changed, and they want different things. Many of them get around 57 percent of the way through the buying cycle before they talk to a sales rep, and most prefer to get their information from articles and videos online versus reading ads.
Inbound marketing is uniquely positioned to appeal to these customer attitudes. Content marketing supports the lead’s desire for information, while social media helps get the word out at a low cost.
It’s easy to see why the ROI of inbound marketing would be so much higher than that of outbound, even if outbound ROI could be measured accurately. The cost per lead with inbound is usually much lower, leading to higher ROI, even with the same results. Since you get better results as well, the ROI of inbound marketing is even higher.
Posted By Author 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.