How to Improve Your Marketing ROI with Inbound Marketing
Apr 09, 2012 6:00 AM - Posted by Brad Smith
Internet marketing is all the rage today.
People love to hail that “Content is King”, and social media is the Second Coming.
But what does it mean in dollars and cents?
Why is it really important? And how does it work?
It turns out, there is some truth in the hype. Inbound marketing creates a marketing asset that appreciates in value over time, and scales more effectively than paid channels or outbound marketing.
But it’s not that easy. There’s an important caveat that you need to beware of for it to work correctly.
Let’s take a look, and see how blogging really pays off.
The Magic of Compounding Interest
Compound interest is one of the most important concepts in finance.
And it’s one of the biggest benefits of investing (in anything).
When you have simple interest, you receive (or pay) interest based only on the principal amount.
But compound interest is calculated on the previous interest payment + principal. So your interest begins to earn interest.
For example, if you have an account with a $1,000 balance, and 20% simple interest per year, then you would have $1,200 at the end of the first year, and $1,400 at the end of the second.
But with compounding interest, you would have $1,440 at the end of the second year, because your interest is compounding (on itself).
You start to get more value (money), with the same input.
Blogging (and inbound marketing) appreciates in value like compounding interest. Each time you add a new blog post, the other existing blog posts all gain value.
And the marketing ROI of your effort scales better than traditional “outbound” marketing.
Let’s see why.
The Plight of “Outbound Marketing”
Traditional “outbound” marketing and advertising relies on renting attention and interrupting people to get your message across.
It’s very effective when it works correctly on a huge scale. But it’s also very expensive, and out of reach for most people.
The first problem is that it doesn’t scale very well. If you want to reach the same number of people next month (and bring in the same number of sales), then you need to spend the same amount.
It’s a fixed ratio. So if you want to use advertising to grow, then you need to have the capital up front to keep up with the fixed ratio.
The other problem is that these traditional channels are actually losing value.
The whole purpose of a media asset (like a television network) is to get attention and sell ads against it. When there were only 50 television channels, then TV ads worked really well (because everyone was watching them). But now there’s thousands. And there’s also thousands of other alternatives to divert your attention.
People’s attention (and the audience for traditional mass media) has become fragmented, and it’s now distributed more evenly across the long tail.
So the ROI doesn’t make sense anymore (especially for companies outside of the Fortune 500).
Why Inbound Marketing Works
But “inbound” marketing is different.
“Inbound” marketing pulls the customers in by providing value. It takes advantage of users’ intent and gives them something of value in exchange for their attention.
And it’s very specific. You don’t need a huge audience anymore. You just need the right audience.
A blog is just a medium or platform to help you build an attentive audience. So you blog about your customer’s problems and you’ll start to build a loyal following. And then your blog writer can actually start to drive business from this audience.
Better yet, you don’t have to “pay a toll” every-time you want to reach them. You just hit Publish.
But wait a second… if you’re reaching less people, how are you going to build a growing company?
By taking advantage of this opportunity, and focusing on increasing the lifetime value of a customer.
Now that you know why a blog appreciates in value, let’s look at how.
How Your Blog Grows Year-After-Year
There is one important key to a successful blog:
Your future traffic should come from the actions of your past traffic.
That means every-time someone visits your site,
- They subscribe for more updates
- They share your posts or tell their friends
- They recommend your content and link back to your site
All of these activities help new people discover you (mainly through SEO and social media).
So when you reach a certain scale, there’s no fixed ratio between your effort (input), and the audience that begins to build. Your audience will grow organically at a faster pace, without you personally having to do anything.
So your cost to acquire each customer falls dramatically.
And your marketing ROI goes through the roof.
This all sounds great. But as always, it’s not that simple.
If your business, or product/service is just like everyone else, then none of this will work. You might as well go back to traditional outbound methods.
Here’s how to tell:
- Your business is a commodity.
- You compete on price.
- You don’t have unique positioning
- You sell generic services and products
- You’re reliant on sales channels
But wait a minute… some of these things don’t sound like marketing?
They are. Everything is.
Marketing isn’t an isolated event that you slap on your product at the end of an assembly line. It’s baked into the whole process. And it’s an essential component of your business’s strategy.
So if you don’t have a strong core business or product/service to begin with, then your inbound marketing isn’t going to work either.
Investing in blogs and other online inbound channels will give you a better marketing ROI in the long run.
Although they’re indirect, they scale better and don’t lock you into a fixed ratio of expense-to-sales.
But it’s only as good as your business or product/service. The success of your inbound marketing hinges on your company’s ability to please your customers.