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What Are the Real Costs of Inbound Marketing?

By Jarrick CooperJun 10, 2016

inbound-marketing-costs

Having trouble wrapping your mind around the numbers? Admittedly, this can be kind of tricky. The cost of inbound marketing depends on the organization and its strategy.

How much content will you be creating, and what kind? How many people will be contributing? What infrastructure do you need to put into place before you can formally begin your inbound initiative? How much of your marketing budget will you be investing in paid media? And, more importantly, how much of your total revenues should you actually allocate to inbound marketing?

There are a lot of variables here: You must be flexible in your approach because the market keeps shifting, and there will be some opportunities you'll want to seize sooner rather than later. You could miss out on some great prospects if you aren't agile.

So how much does inbound marketing cost? Let's take a look.

If you want to learn more about the costs of inbound marketing, how to budget for it, tools you can use to promote content and how to measure ROI, get your copy of the Inbound Marketing Buy-ins, Budgets and Best Practices eBook.

How Are Marketing Budgets Being Spent?

Let's take a moment to understand how companies are spending their marketing budget.

According to Content Hook, the top six elements of an average marketing budget are:

  1. Content creation (13.3 percent)
  2. Traditional advertising (11.5 percent)
  3. Online advertising (11.1 percent)
  4. Events (10.9 percent)
  5. Website development (10.5 percent)
  6. Public relations (9.6 percent)

It's not hard to see how content is the foundation of each of these channels.

Interestingly, the Content Marketing Institute found a correlation between inbound marketing effectiveness and the amount of budget that was allocated to it. On average, the most effective B2B marketers allocated as much as 42 percent. Overall, however, the average spend on inbound marketing was 28 percent. This suggests that you need to buy into the strategy to see it work for you.

Revenue-to-Marketing Budget Ratio

Marketing budgets will depend heavily on industry, size of organization and the amount of brand equity of a company. For example, a startup-level company will need to invest 10 to 15 percent of anticipated revenue, while a more established company with large revenues can allocated 2 to 4 percent of revenues.

However, the following breakdown has become an accepted industry standard for determining marketing budgets at various stages of growth.

  • Less than $5 million in revenue: Budget 7-8 percent
  • $5 to $10 million in revenue: Budget 6-7 percent
  • $10 to $100 million in revenue: Budget 5-6 percent
  • $100 to $300 million in revenue: Budget 3-5 percent
  • More than $300 million in revenue: Budget 3-4 percent

Again, this is a general overview, but it helps us in terms of comparison. You can determine whether you're overspending or underspending by examining what other organizations in other industries are doing.

Beware: Some of the biggest opportunity costs often come from underspending.

How to Budget for Content Creation

Based on these examples, if a $100 million company budgeted 5 percent of revenues for marketing, it would have $5 million to spend on marketing. But then the question becomes how to break it down between owned content and paid media.

According to McKinsey & Company, on average, 50 percent of a marketing budget is spent on content, and 30 percent on paid media. Half of $5 million is $2.5 million, and 30 percent of $5 million is $1.5 million. The other 20 percent, by the way, would simply fall under "other."

With these numbers in hand, you could determine exactly how many articles and case studies could be produced, how many podcast episodes and videos could be made, and so on.

Your paid media budget would go toward search ads, social media ads, content distribution networks and the like. The exact breakdown would depend on how effective each channel is for your particular audience.

The Cost of Inbound Marketing

Consider these seven main areas of inbound marketing when determining your budget.

  1. Inbound strategy and analysis. If you want to improve your results, you must analyze your current strategy along with the strategy you want to implement and adapt according to your findings.
  2. Content creation. Quality content is the key to inbound marketing success. From idea generation to publishing, content creation is a multi-step process.
  3. Social media publishing and monitoring. Social media requires constant attention, and it has come to the point where customer service and social more or less go hand in hand.
  4. PPC campaigns. Paid media is a key component to successful content promotion.
  5. Search engine optimization (SEO). Optimization is a long-term strategy with many moving pieces.
  6. Email marketing and lead nurturing. You must communicate with your leads and customers through email.
  7. Campaigns and other projects. Whether it's a contest, a giveaway or a new app, inevitably there will be projects outside the usual scope of inbound activity. Spend depends on the size of the project.

The exact steps and strategies will vary from company to company, and this will also influence budgets

For a more specific breakdown of our services and pricing, take a look at our Frequently Asked Questions page.

Final Thoughts

In the end, every company requires a customized approach to inbound marketing based on revenues, marketing budget and business objectives.

It's important to see inbound marketing as an ongoing strategy with considerable merit because it helps you build trust with your audience. Inbound marketing is not a campaign, it's not social media marketing and it's not a way to cut costs. There certainly are expenses associated with inbound marketing, but the results—especially the lower cost of customer acquisition—are worth the effort.

PIVOTING YOUR PLAN with Inbound Marketing

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The Author

Jarrick Cooper

Through the years, Jarrick has taught himself graphic design and Web development before going on to become a marketing director for various industries, including commercial and municipal lighting, real estate, hospitality and golf. Jarrick prides himself on being a “jack of all trades” and loves to use his creative and business skills to help companies and marketers develop strategies that facilitate growth and drive sales.
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