Inbound Marketing Cost: How to Determine Your ROI

  

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Image: Geek and Poke

Key Takeaways:

1. Inbound marketing results are easy to measure;
2. Determining key baseline values of your company web activities allows for simple ROI calculations;
3. Positive ROI on the activity makes further investments justified.

Every business needs to know how their efforts to promote themselves are adding to the bottomline results of the company and so often there's a disconnect between what your online development program is and the contribution it makes to your business. This results in a reluctance to expend resources, whether time or money, that will generate a solid ROI. For the most part it's because there is uncertainty as to how to measure what's happening online. Enter analytics programs! The truly wonderful thing about online development is that unlike a conventional media activity like print or television etc. everything you do on the internet can be measured with 100% accuracy, allowing for crystal clear analysis of what is working and what isn't. The old phrase "I know 50% of my advertising is working, I just dont' know which 50%." doesn't apply to the internet! What is a reasonable inbound marketing cost? It will vary for each business, here we want to explain how you can evaluate what the ROI from an inbound internet marketing program is for your company.

5 Steps to calculating the ROI of inbound marketing: (we assume you can attribute an average revenue value for a new client)

1. Install an analytics program on your website- Analytics are critical to this project. Without them you're blind as to what's really happening on your website. there are many free analytics programs available, Google Analytics is no doubt the most popular, but Sitemeter and other companies offer great free tools as well.
2. Establish baseline measurements- Once you've installed the programs code on your website, it's important to get some baseline understanding of the activity. The time it takes for this process will vary depending on how much activity there is on the website. A lot of activity = less time, and less activity = more time.
3. What to measure- Just like any marketing activity you will want to know: A- How many people (visitors) are we reaching? B- How many of those are converting to leads? C- How many of those leads are converting into customers?
4. Calculate a dollar value for each of these metrics- In order to be able to calculate the baseline numbers you will need to know what dollar value to assign to each of these through simple calculations, see the example below.
5. Re-calculate the values after initiating inbound marketing- Finally, as you undertake various inbound marketing initiatives, calculate these numbers again to see the ROI.

Example: (very simple)

Current monthly inbound marketing cost- $10 (WAY LOW!)

Monthly visitors- 10

Monthly leads- 2

Monthly new clients- 1

Value of new client $100

If this was the case on a month to month basis then:

Visitor value is revenue divided by the number of visitors: $100/10 visitors = $10/visitor.

Lead value is revenue divided by number of leads: $100/2 leads= $50/lead

With these baseline measurements it is now very easy to establish the ROI of your future inbound internet marketing efforts. Each time a new visitor comes to the website it has a value of $10, each new lead a value of $50. If you invest in a new $20 inbound marketing program that generates 20 new visitors and 4 new leads, your ROI is:

20 visitors x $10/visitor / $20 investment = 10 fold ROI

or

4 leads x $50/lead / $20 investment = 10 fold ROI

or

$200 new revenue / $20 investment = 10 fold ROI

Of course these are overly simplified numbers, but this straight forward math is true regardless of the numbers. So where to start, get the analytics installed on your website. By doing this you'll be able to begin arming yourself with the information you need to evaluate the inbound marketing cost for your company and with the ROI you'll easily be able to justify your investment. Any questions? We're here to help and hope this does get you started today!

We're at the edge of the future!