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The Economics of Inbound Marketing: Lower Costs, Higher Conversion

Let’s face it, in days past, a good many marketers conveniently sidestepped economics, accounting and all that mathematical stuff that violated the romantic idea that advertising was a creative art form. 

We rather study subjects like psychology, philosophy, design, history, drama and creative writing. Or at least we used to. As such, in the offices in back where they tend to house the "creatives," nary a spreadsheet is present. The creative team would sooner stick hot knitting needles in their eyes than answer to a slew of statistics.economics - inbound marketing

Things changed.

The Internet became an unstoppable force. The economy became an undeniable disaster. And business leaders became sticklers for a pesky little thing called ROI.

A simple question like “What kind of return are we getting on our marketing spend?” could silence a conference room faster than a tray of glazed donuts. Creative types floundered. Number crunchers rose to power.

For companies big and small, across an uncountable number of business categories, outbound marketing (direct mail and broadcast for example) began to lose its luster. Marketers needed to learn what it takes to spit, polish and shine the top line, the bottom line, and shrink the size of the line items in between where companies calculate their costs.

Inbound marketing emerged.

With inbound marketing, the age-old practice of pursuing new business by buying media time and space began withering away. The objective changed from finding customers to employing Internet-based tactics to allow customers to find you.

We can theorize endlessly about what’s going on here, but if you prefer to cut to the kill, you simply examine the numbers. In marketing today, you embrace economics or you embrace unemployment.

It’s not nearly as scary as it may sound.

The numbers prove which marketing tactics are more effective.

As you might expect, after that lengthy preamble, I’m not going bore you with theory. I’m going to lay numbers on you. Powerful numbers. Real numbers, from the most recent annual State of Inbound Marketing Report delivered by HubSpot.

Help yourself to the generous heap of background info, takeaways and charts they present. I’m going highlight the stats that have even bean counters going gaga for the blogging, content marketing, SEO, and social media tactics that constitute inbound marketing.

Lower cost per leadOrganizations allowing inbound marketing to dominate their marketing spend experience a 61% lower cost per lead than those sticking mostly with outbound marketing. In dollars: average cost/lead for inbound = $135; outbound = $346. Surveys from 2010 and 2011 returned virtually the same result. This metric has become a constant.

Higher conversion ratesAre lower cost leads lower value leads? On the contrary, the data collected revealed leads coming by way of online search are EIGHT TIMES more likely to close than outbound leads. Leads from inbound links (online referrals) are FIVE TIMES more likely to convert. Think about it. The prospects came to you because of research they’ve done, things they’ve read, information exchanges they've had. They’ve been searching for you. There’s no need to introduce a glossary of online marketing terms here. We’re talking simply about trust.

Where will you invest your marketing dollars?

HubSpot asked this question, of course. 47% of the sizable sample reported a year-over-year increase in inbound marketing budgets. 42% were unchanged. They picked the brains of the 47% pool by asking why the budget increase or shift? The number one answer: it’s proven successful.

Want to know the respondents’ favorite media channels? The correlation between content generation volume and customer acquisition? B2C vs. B2B metrics? Favorite social media? Effectiveness by industry? Greatest sources for leads? The report covers all this and more.

Does size matter? It does and it doesn’t. It seems small business plan to spend 43% of their lead generation budgets on inbound marketing—compared to 21% for large businesses.

Herein lies one of inbound marketing’s greatest charms. It’s the great playing field leveler. While smaller companies clearly can’t shell out the kind of money large companies do to buy media, they can compete for eyeballs to any degree they choose.

Earn an A in economics.

Lower marketing costs. Higher conversion. True or false? Inbound marketing delivers the more attractive approach for the management of your marketing dollars.

Class dismissed. We’ll see you online.

If you have questions or comments, please share them here. And if you’d like to learn more about preparing your website for making good grades in economics, read "21 Pointers to Sharpen Your Website." 



Join The Conversation

  • FeldmanCreative's picture
    Jul 16 Posted 5 years ago FeldmanCreative

    Thanks Patina. Yeah, in inbound the idea is to outsmart and outwork the big guy--not outspend. It's fun to see all the success stories about companies who have.

  • Jul 16 Posted 5 years ago Patina Marketing


    Great article.  In particular I loved your statement about Inbound marketing leveling the playing field for small companies.  It is important for small businesses owners to realize that they can target customers online with the right content, consistency and inexpensively.  - They really don't need to spend money on large marketing campaigns just because their bigger competitors are doing just that.  

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