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Why ROI from Inbound Marketing Should Never be Classed as an Expense

[fa icon="calendar"] December 01, 2015 - Fred Thompson

Chart showing investment trends and how to get ROI from inbound marketing

Marketing costs are an expense, right? Guess again. Getting ROI from inbound marketing or from traditional marketing is a foreign concept in some circles. Most businesses realize the importance of marketing. But from that point on business leaders disagree.

A great divide occurs between those who view marketing as an expense and those who view it as an investment. It’s tempting to shrug off marketing initiatives as part of the normal day to day grind of business activities but it’s a mistake to do so.

The primary basis for the division between the expense camp and the investment camp hinges on measuring return on investment. Those who view marketing as a business expense usually don’t track ROI from their marketing initiatives. Marketing campaigns often aren’t tracked for the simple reason they’re hard to track accurately or worse, they’d show negative ROI anyway. C-level executives don’t want to hear bad news so no news at all can seem like a good idea—but as you know, it’s really not.

Investment

Marketing and customers, for that matter, should be treated as commodities. If you’re spending any dollars on marketing, the customers you acquire from those marketing efforts are a commodity for you. You’ve make an investment in something that will produce a return (profit / cash) for you. The KPI, Customer Acquisition Cost is the money you have spent to acquire, or buy, one customer. What that customer is worth to you will depend on another key KPI: the customer’s lifetime value (LTV).

Risk

Every investment assumes some risk. According to an article in Harvard Business Review, before you invest in anything you should predetermine four metrics:

  1. Initial cash outlay.
  2. Cash flow from the investment.
  3. Minimum return required.
  4. The payback or ROI.

No matter what your investment—whether it’s a new facility or the purchase of a new machine—it’s important to assess your potential return. For example, if you purchase a new machine it’s easy to know cost (fixed asset cost + FTEs + maintenance + average up time) and the revenue you expect to gain from that investment.

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What if marketing tactics could perform the same way? What if you could plan for the cost of marketing buy in and the return you should expect? My business philosophy dictates, you should, and you should not invest in any marketing initiative unless the potential ROI looks very promising.

Traditional marketing efforts often based on fluff rather than hard metrics. Traditional marketing, while hard to track results, often misses the mark at the core of its process. Traditional marketing philosophy is self or brand-centric. In this philosophy, if I promote my brand (skills, capabilities, capacity, track record, etc.) thus making myself look really good, customers will be attracted and I’ll get sales.

The truth is this outdated philosophy actually will work—but at what cost? Remember, we’re talking about ROI. You can spend money on any form of advertising and get results. You may lose your shirt in the process—it’s that which we’d like to avoid.

ROI

The ROI from Inbound Marketing you can achieve is remarkable. And there are reasons for this:

  • Primarily through awesome content marketing, Inbound attracts customers rather than repels them.
  • Inbound beautifully manages the critical middle of the customer funnel.
  • Inbound efforts can be tracked with an almost limitless and easy to digest array of metrics.

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Not only are metrics available to track ROI from inbound marketing, we’re also able to forecast ROI using a tool developed by MIT and your key KPIs. If you’re considering hiring an agency let’s connect and you’ll see some amazing value!


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Topics: Construction Marketing

Fred Thompson

Written by Fred Thompson

Fred Thompson is the owner of New Destiny Media; Fred loves working side-by-side with business owners to create successful marketing campaigns that grown their business. When Fred is not working, he is spending time with his three very active children at home. He is an avid problem solver (MacGyver), Loves anything Martial Arts related and Social Media gets him excited about work.