Your Marketing: An Investment or an Expense?
While your CPA may disagree, we like to think of conventional or outbound marketing as an expense, and we think of Inbound marketing as an investment.
Why? (Advertising vs publishing)
Whenever you run a conventional marketing campaign, you may see results. But once you stop the campaign, the results also stop. You run some ads—they even could be PPC ads—and they pull while you’re running the ads. Stop running the ads, the ads and the results disappear.
Inbound marketing for construction companies means publishing, not advertising. When you publish, you’re not sticking something on someone else’s media like a magazine, you’re putting the content on your website or your social media channel. You control everything: The content itself, frequency, longevity, keywords, and target audience—everything. One good blog can get thousands of views, driving lots of traffic to your website where some of that traffic will become customers, generating very postive ROI for your business.
Want lots of convincing? Check out one of Hubspot’s blogs on this: 93% of Companies Using Inbound Marketing Increase Lead Generation [New ROI Data].
We’ve seen both the construction and professional (B2B) services industries begin generating quality traffic within the first few months of onboarding.
Working with the Numbers: Tracking ROI
Whether you’re the boss or not, it would be good to be able to show some numbers (maybe to show the boss, too). One of the benefits of Inbound is that there are an amazing number of metrics that can be tracked.
Knowing how many leads land in the top, middle, or bottom of your funnel will ultimately provide you with numbers for your marketing ROI. With the numbers in hand, you then can decide where to throw future marketing efforts, targeting what’s working to gain by making it work even better.
1) Customer Acquisition Cost (CAC)
You’ll need to factor in all your sales and marketing expense, including fully loaded FTEs. Simply take these costs and divide by your total newly acquired customers over the same period.
2) Ratio of Customer Lifetime Value to CAC (CLV to CAC)
For marketing for construction companies you need to estimate the value of a customer and compare it to what it cost you to acquire that customer.
The importance of CLV is to arrive at the value of one new customer. To calculate CLV, simply take the revenue an average customer pays you over a certain period, generally the entire lifetime you are engaged with that customer. Since construction sales normally are massive big ticket sales, your CLV could equal one large sale but, on average, probably it will be more than one sale.
Say your inbound spend is $5,000 / mo. That’s $60,000 per year.
Over the course of one year, you had 5,000 visitors to your website. Of those, 100 became leads, and you closed one major sale at $500,000 gross revenue. (I don't know how that number sounds to you, but don't forget, construction sales tend to have a long lead to sales cycle, so some of those leads acquired in year one, if properly nurtured, could become customers in year two.)
Your CAC is then the $60,000 you spent to acquire that one customer through Inbound.
Let's calculate ROI from this: (CLV $500,000 x 1 (the number of new customers) – your inbound spend of $60,000 / Total inbound budget ($60,000) = CLV to CAC ratio of 7.33.
So you gained $7.33 of total revenue for every dollar you spent.
Take that number and compare it with other marketing investments you are or have been making.
CONCLUSION: There is one highly positive consideration I mentioned at the very beginning of this article: That is, your inbound spend tends to roll forward year after year (because you are spending on publications, not on advertising, per se).
In year two of an Inbound campaign, the blog articles that you published in year one still will be generating new leads. Ever see a conventional ad campaign do that?
Key take-a-ways from this blog article:
- Because of its long-term positive marketing ROI, Inbound marketing is your best marketing investment.
- It’s important to track results so you can budget accurately and fix what’s not working.
- The cost to acquire a new customer needs to be significantly lower than the revenue that customer produces, otherwise your marketing literally will sink your business.