<img height="1" width="1" style="display:none" src="https://www.facebook.com/tr?id=1021636444570495&amp;ev=PageView&amp;noscript=1">

The Economics of Inbound Marketing

By John McTigueAug 23, 2009

If you're looking for a fun article or video about Inbound Marketing - this ain't it. If you're a business owner wondering how the heck you can improve sales, and what it will cost, you've come to the right place.

If you've read any of our blogs or perused the Web site, you'll know what Inbound Marketing is about - creating and sharing great content that attracts leads, then converting leads to customers. What throws people off is that the attraction part involves social media promotion, and many business people think that's a waste of time and money. The common myth is that Inbound Marketing and its associated social media tactics are "soft sciences" that can't be translated into hard dollars. Nonsense.

Let's look at this like any good CFO would - let's create an income statement and see what goes into each side of the equation.

Revenues

  • Sales from Inbound Marketing
  • Factors: Web traffic, lead conversion rate, conversion to customers, repeat business
  • Influencers: Content quality, publication rate, social media quality, social media quantity, social media engagement quality & quantity, inbound links, website design, SEO on-page, calls-to-action, landing pages

Expenses

  • In-house Labor
  • Outsourced Labor
  • Software License Fees
  • Website Fees
  • Graphics/Media Costs
  • Events, Direct Marketing

The name of the game is finding the right mix of cost factors (expenses) that optimizes sales from Inbound Marketing. This is what we call Inbound Marketing Strategy. It's not going to be the same for every company. Here's a typical scenario that should help you think about the economics:

Company: Small Business With Limited Available Manpower and Experience in Inbound Marketing.

Current: For the sake of argument, this company provides services valued at $5,000 per service call. Each new customer on average needs two service calls per year or $10,000 gross revenue. Currently the website produces no new leads.

Strategy: Client will need to outsource Inbound Marketing labor plus pay fees for website design and Inbound Marketing software, plus some additional fees for graphic design, events and special promotions. Total annual commitment: $30,000 - $40,000 (this is just an example, but not unrealistic). Break-even results from 3-4 new leads converted to customers per year. With a well-run Inbound Marketing program, this should be doable within 1-2 months on average. Net profit: 10 months @ 2 leads/month = 20 leads = $200,000.

Summary: These factors will vary from company to company by products and services offered, historical marketing efforts, manpower and expertise, industry and market. It's also important to consider that with a successful Inbound Marketing campaign, it may be possible to scale back on other forms of marketing, which goes right to the revenues side of the equation. Success in Inbound Marketing is directly correlated with quality and quantity of the content and social media interactions, i.e. you get what you pay for. So, the next time a marketing company or consultant puts a proposal on your desk, think about the economics of Inbound Marketing and ask questions.

Additional Topics:
The Author

John McTigue

With over 30 years of business and marketing experience, John loves to blog about ideas and trends that challenge inbound marketers and sales and marketing executives. John has a unique way of blending truth with sarcasm and passion with wit. You can connect with John via LinkedIn, Twitter and Google Plus.
MORE FROM THIS AUTHOR >