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An inbound marketing investment includes producing content, building landing pages, social promotion, as well as the tools, people, and time spent on your efforts. Sounds costly, right? According to Hubspot, inbound marketing results in a lower cost per lead than traditional outbound techniques; in fact, inbound strategies deliver 54% more leads to your marketing funnel than outbound methods. Nonetheless, 73% of CEOs feel that marketers lack credibility because they aren’t directly correlating marketing activities to revenue.
“When asked to increase their Marketing ROI, they tend to understand it as cost cutting through better economies of scale or negotiations with their third-party partners and agencies, instead of top line growth generation: more revenue, more sales, more prospects, more buyers.” - Fournaise Marketing Group
So, how can inbound marketers demonstrate a meaningful impact on the business?
Start with your goal. You must align all methods to that goal. What does your company want? To make money. How can marketers help your business make money? By creating campaigns that attract net new customers and the type of brand loyalty that leads to recurring revenue.
1. Lead Attribution. Where are you mostly likely going to acquire a quality lead? Inbound marketing draws leads from social media, email, search, and blogs. By measuring conversion by source, you can measure the effectiveness by channel and pinpoint where you should double down on your marketing activities (and budget).
2. Cost per Lead (CPL). How much must you spend in order to gain that new prospect? CPL varies by lead source (social, SEO, email, outbound strategies) and business model. You can optimize your content or landing page to attract more leads. Examples: value of the offer, design and placement of your CTA, or design of your landing page.
Cost per Lead = Cost of Generating Leads / Total Leads Acquired
3. Customer Lifetime Value. How profitable is this particular customer to your company? If you know your customer value, then you can estimate repeatable business you’ll generate from a given customer, as well as how much you should allocate to acquire a new customer.
Customer Lifetime Value = Gross Margin x Repeat Transactions x Average Retention Rate
4. Cost per Customer Acquisition. How much did you spend to convert that lead to a customer? At a healthy business, the customer lifetime value will exceed the cost per acquisition. In order to learn if you’re acquiring new customers in a cost effective way, determine the following:
Cost per Customer = Total Spend to Convert Lead / Total Customers Converted
5. Lead Conversion Rate. How many of your leads turned into customers? Perhaps your leads are converting because you've managed to get compelling content to the right audience, or your sales reps are simply masters at closing. Often, the conversion process leans heavily on the coordination between marketing and sales. Check out the sales process map in this Guide to generating leads and closing deals.
Conversion Rate = Total Conversions / Total Leads
6. Marketing ROI. This is the ultimate measure of the success of your campaigns and will determine where your execs will invest.
ROI = (Customer Lifetime Value - Cost per Customer) / Cost per Customer Acquisition
Now you’re armed with the important KPIs that your management team will evaluate before investing any capital in your marketing program. While inbound marketing can also lead to brand awareness and increased traffic, these benefits will follow if you’re committed to tracking meaningful KPIs that help predict revenue.
Want to learn more about Inbound Marketing? Don’t miss our webinar with HubSpot on Thursday, July 25, “Secrets of Successful Inbound Marketing: How to Prove Your ROI”, to discover in depth Inbound Marketing tools and learn what successful Inbound Marketing looks like. Register now!
