Throw Out the Book on ROI for #Inbound Marketing
Guest post written by Allen Narcisse, the COO and Co-Founder of Ebyline. Allen founded the company in Los Angeles in 2009, and since then has provided a platform connecting companies with freelancers to create exclusive, high-quality content. Follow Ebyline on Twitter.
For many businesses, “ROI” is the somewhat vague acronym of choice for gauging value and impact. If any marketing or business pursuit isn’t generating a “sufficient” return on investment, it’s regularly considered not worth doing. Jobs are often on the line if programs fail to meet certain benchmarks. But while it’s incredibly simplifying to boil all of your business endeavors down to a simple value calculation, when it comes to inbound marketing you are missing the boat by thinking purely in terms of monetary ROI.
Approaching your inbound marketing goals through the traditional ROI lens of money invested and money earned will lead to a failure to realize the full potential value of inbound marketing, confusion over the various marketing inputs, and misguided analysis of the success or failure of a given campaign. While ROI is a convenient tool it isn’t entirely appropriate in a marketing context, and taking into account other factors will more properly frame the value of your marketing efforts.
In this article, we’ll take a look at the idea of return on investment and reveal the ways in which it fails to deliver when used in a marketing context. Then we’ll evaluate the hidden costs and benefits of inbound marketing that can deliver a more comprehensive picture of overall value.
The Definition of ROI
In order to have a real discussion of the value of the concept “return on investment” when it comes to marketing, it’s best to start on the same page about what this phrase really means.
ROI is a combination of two ideas traditionally found in a more finance-oriented context focused on making a one-time expenditure that can be clearly tracked from Point A to Point B. An investment is an expenditure of money based on the belief that said expenditure will yield a return, or some amount of money that exceeds the initial expenditure plus any additional incurred costs. The return on investment is simply the ratio between money spent and money earned.
Understanding this traditional application of return on investment is the key to seeing why it isn’t particularly helpful when it comes to inbound marketing. ROI historically refers to investments that have a clear start and end date, and have a conveniently bounded set of monetary inputs and outputs. Unfortunately, neither of those things are entirely true when it comes to inbound marketing.
Marketing is an ongoing project, and even a campaign with a start and finish will yield returns well past the finish date. Even more problematic to leveraging a term like ROI, much of the value that businesses realize from inbound marketing goes beyond the obvious math of dollars invested and dollars returned.
Monetary Returns Aren’t The Whole Story
The dreaded “bottom line” has dominated the thinking of business owners and marketers for far too long. Obviously, assuming the standard constraints of a for-profit organization, all marketing efforts must be done with the ultimate end goal of profit in mind. But by positioning monetary ROI as the be-all and end-all when it comes to evaluating the success of a marketing campaign, business owners have pigeon-holed their marketing programs and limited their creativity in ways that have clearly negatively impacted potential business development.
We’ve established that ROI needs the following two elements present to be truly effective:Consider those two statements in the context of a traditional inbound marketing campaign. While most campaigns have an identifiable start date, pinpointing the date at which that campaign no longer yields value can be significantly trickier. Even if the marketing campaign in question runs for a clear period of time (for example, three months), the value tail of that campaign can significantly exceed the time period over which money was actively invested into it. This gets even trickier when trying to apply ROI to an ongoing content based marketing project like a company blog.
- A date of initial investment, and a clear end date of that investment on which the ROI can be calculated
- Returns from that investment which can be clearly quantified in terms of dollars and cents.
Things go entirely off the rails for ROI when trying to simplify all the incredible results a business can receive from an effective inbound or content marketing campaign down to dollars earned. To quote Albert Einstein, “Not everything that counts can be counted, and not everything that can be counted counts.”
The Currency of Clout
At its heart, inbound marketing is about building a relationship with your customer. Inbound marketing leverages many avenues to build this relationship, including providing customers with great content (blogs, eBooks, whitepapers, infographics), presenting them with a transparent face for your organization (social media), and making your business more accessible (well designed landing pages, search engine optimization, clear calls to action). These elements work together to increase the overall appeal of your business and provide the customer with something in exchange for their time.
There are two ways to think about the timeline and value of inbound marketing. Traditionally one might talk about inbound marketing as an ongoing process fundamentally oriented around identifying prospects, nurturing them towards a decision, and eventually converting them into a lead. While this is certainly the case, there’s a simpler way to think about it:
The core purpose of inbound marketing is to build trust with your audience, which increases your overall influence and clout while becoming a reliable resource of both products and information. Just as different brands can be rich or poor when it comes to their bottom line, they can be rich or poor in clout as well.
Clout is based off of something relatively simple: Do your customers trust you, and do they have a reason to follow your various recommendations. Clout is often built through inbound, thought-leadership oriented marketing activities. Influence is built slowly over time, and often comes from a backlog of good content, great design, and sound business practices. These things take a while to manifest, which is one of the central reasons that it’s difficult to track an appropriate ROI for thought-leadership based activity over a given span of time.
To use a metaphor, think of these marketing activities not as taking a bucket of water from the river, but more as placing a stone to dam the river itself. Over time those stones add up, and get you more water than you can possibly drink. But, to return to our core point, every single stone has a relatively low individual ROI.
The Multitude of Signposts
It should be increasingly clear that dollars and cents aren’t the only way to understand the value of effective inbound marketing. It’s not impossible to demonstrate that a given marketing campaign is having an impact, it’s just not necessarily easy. In addition to dollars spent and dollars earned, here are some metrics that can give a strong sense of whether or not your marketing campaign is achieving the results you’re looking for.
Conversions: Rather than being laser focused on bottom line, sometimes it’s best to broaden the definition of success a bit. Conversions focus on a given intended action, which aren’t always purchase based. Sometimes these could be a sign-up for a program, clicking a link to get additional information, or sending in their contact information as a subscription to a mailing list.
Through breaking your campaign down by conversion path and using basic analytics software to understand what your best points of conversion are, it’s possible to pinpoint the strong and weak links in your marketing campaign and better optimize your core strategy.
Social Media Followers: It’s important to keep in mind that a follower is not a customer. Some followers are customers, and some followers are not. In general, a follower is significantly more likely to be a customer than a non-follower, and a follower is dramatically more likely to interact with your brands social content than a non-follower.
Enough about what followers are not, followers are powerful social influencers and proof points online. Increasing your number of social followers increases your clout online, and indicates to others that there’s value in doing the same. If a follower likes your article or product, comments on your blog, or engages you through a social post, it encourages others to do the same. This improves your traction over time online, and increases your overall reach. Growing a following is a gradual process, but can be sped up by introducing thought structure to an informal environment. Follower growth over the timeline of a given campaign is one indicator of overall success that will eventually only have a positive impact on your bottom line.
Bounce Rate: The value of understanding your site’s bounce rate and how to minimize it is simple: people who stay on your site for a longer period of time are more likely to do something there. Hopefully, this something includes purchasing a product or service, but interacting with your blog or posting a rating on a product can also have a very positive impact. Even if a person doesn’t give you money (thereby escaping easy measurability through traditional ROI) their mere presence improves your internal data and demonstrates interest from the market.
This prospect will be more likely to share their interest in the site and return in the future if they’re not immediately leaving upon accessing your site. A low bounce rate is also a good indication that nothing on the page is repelling visitors. If you’re having issues with your bounce rate, consider removing audio and video that starts up upon the site opening or any oppressive pop ups. These things are often named the most frustrating and annoying elements of internet browsing by frequent web users.
SEO Ranking: Given the increasingly crowded nature of the Internet, it’s often the case that simply finding your page is half of the battle. Search rankings are similar to Internet real estate; a good ranking is similar to having a prime store location. It doesn’t mean that people will buy, but it certainly increases the likelihood of them walking into your store. Like clout, SEO is increasingly difficult to increase the smaller and newer the business in question happens to be. To improve your SEO, consult expert tips and stay current on Google updates.
The Cost of Not Investing
There’s a final element that ROI fails to take into account which has significant consequences for inbound marketers: the cost of not investing, which can also be thought of as the consequences of stagnation.
As we’ve gone over in some detail, when it comes to inbound marketing efforts oriented around thought leadership efforts and community building it’s often difficult to determine whether they’re generating “sufficient” ROI to be “worthwhile.” This can be quite frustrating, and on the surface make it appear that inbound marketing isn’t truly impacting ROI.
What the most simplistic form of monetary ROI fails to take under consideration are the real costs of not investing. In the online business community, the earth is constantly shifting around you as markets become increasingly competitive. It’s no longer enough to simply have a website and a good product; successful businesses fight tooth and nail for visibility. If you choose to simply not engage in basic content marketing and inbound marketing practices because they aren’t obviously contributing to ROI, you’re opening the door for your competitors to steal your audience through effective programs.
The presence of a blog, social account, and so on are necessary steps for businesses in the modern age. They aren’t negotiable programs that can be cut based on insufficient ROI. The awareness and credibility these efforts grant you more than compensates for their out of pocket cost.
In short, in addition to measuring growth, the consequences of not doing something need to be measured as well to get a broader picture of true ROI. One way this can be done is to check your top conversion paths on Google analytics. If your direct traffic dominates the others, the cost of stagnation will be relatively low. If referral traffic or campaign traffic is comparably high, the cost of stagnation will be high. Search traffic will depend on the activity of your competitors as well, and so will require a bit of paring to truly isolate the effects of an individual marketing campaign.