The Marketer’s Guide to Measuring Inbound vs. Outbound ROI
in Digital Marketing Strategy & Trends | by Erika Levy
In the digital marketing world today, accountability is paramount. Companies expect their marketing leaders to provide quantifiable data that proves their marketing investments are bringing home the bacon and contributing to real business outcomes. However, the logistics of calculating ROI are more intricate than ever—especially when it comes to evaluating inbound and outbound marketing efforts.
The inbound versus outbound debate has been discussed at length for the past decade, often pitting the two strategies against each other. While it’s true that many traditional outbound marketing tactics—such as direct mail—have been dethroned by inbound tactics, digital outbound is emerging as an equally effective strategy that delivers real ROI.
There is no “one-size-fits-all” practice when it comes to measuring ROI. But as noted in our latest guide,“5 Steps to Soar to Marketing ROI Stardom,” achieving ROI greatness is possible with a winning strategy—and that can start with inbound and outbound marketing:
Measure Inbound by the Ability to Attract Leads
Inbound marketing has long been heralded as the king of ROI. By aligning content with the various stages of the buyer’s journey, inbound marketing is highly effective for generating qualified leads. Such examples of inbound marketing include earned social media, search engine optimization tactics and pay-per-click advertising.
Ultimately, inbound marketing ROI should be determined by the ability to attract new qualified leads. This is sometimes called first touchpoint attribution; it’s the initial marketing asset or effort that drives a prospect to interact with a brand for the first time.
Calculating it is simple—you just have to use the cost-per-lead formula:
Inbound Marketing Spend / Total New Leads = Cost-Per-Lead (CPL)
For marketing spend, it’s important to add up the total time spent writing content, configuring the website, or any other third-party expenses.
Once you are able to determine your inbound marketing spend by isolating these efforts from your other marketing efforts, you should closely review the following items in order to keep tabs on your inbound ROI:
- Month over month growth in organic website traffic
- As part of the inbound strategy, content should be optimized to provide solutions to the target customer’s search queries; this, in turn, should increase the volume of website traffic. Generally speaking, your website traffic provides a good indication of whether a brand is growing, stagnating or declining. It’s also useful for determining how effective ad-hoc campaigns, seasonal promotional activities or periodic updates have been to generating organic traffic.
- Qualified lead generation by content and channel
- While inbound website traffic is important, don’t let your inbound tactics stop there. An abundance of traffic means nothing if visitors aren’t converting into leads (and eventually into customers). Content should take into account prospect behaviors, interests, and demographics in order to build a quality demand generation strategy.
In order to get granular with ROI reporting, marketers should also closely review their ratio of qualified versus unqualified leads that their website receives on a regular basis. Qualified leads may be classified by the actions prospects take on the site, their job titles, the geographical areas in which they live, etc. Be wary: if your website brings in an abundance of unqualified leads, your CPL will increase—and your inbound ROI will take a hit. In this case, marketers should optimize their content to better align with the customer buying stages.
Measure Outbound by the Ability to Close Business
By now, you probably know that outbound marketing is ideal for general brand awareness and for broadcasting a message to your audience as a whole. Traditionally, outbound marketing isn’t mapped to the buyer’s journey—although it can be. It’s most compatible with extensive, long-lasting marketing campaigns used to re-energize previously active contacts, or to market to cold leads. Examples of outbound marketing include display advertising, emails to purchased lists or dormant prospects in your email database, remarketing and social media advertising.
When it comes to outbound marketing, ROI is determined by the ability to nurture and close leads. In order to measure outbound ROI, marketers should closely review:
- Email interaction and conversion actions
- Email marketing is one of the most cost-efficient and easy-to-use marketing strategies. However, knowing when and how to measure outbound email marketing can be tricky, especially if your email strategy is more ad-hoc than campaign driven. Marketers may choose to calculate ROI based on the final marketing email a lead clicks before making a purchase, or the entire email campaign as a whole. For nurturing leads that are already in the customer funnel, marketers can determine ROI with the following formula:
Outbound Marketing Spend / Leads Closed = Cost to Close
In this case, the marketing spend would be limited to the efforts involved with creating and deploying the email program, and the leads are those who have already opted into your marketing through some other channel. If marketing to cold contacts, marketers can use the same formula as the inbound strategy since the goal will be to pull leads from a cold list of prospects (Note: just be sure to use outbound marketing spend in the equation.)
Marketers will also want to review email engagements rates, like the click to open rate, which measures the click-through rate against the total number of opens. This reveals what percentage of people that opened the email were persuaded by the CTA and are taking the desired conversion actions.
Conversion actions are measurable events that move a prospect toward the mission-critical activities your organization has identified. Are they small victories? Yes. But they’re worth celebrating because they ultimately mean that a prospect is warming up to your brand—and with help from a demand generation agency, you can even look at this data on a more granular level. This helps determine whether your nurturing efforts are working and providing a return on the time and energy you’re putting into an email marketing strategy.
- Cost-per-click and cost-per-impression
- When it comes to remarketing, display ads or social media advertising, cost-per-click and cost-per-impression capture outbound ROI. Luckily, most advertising vendors provide reports on this data as a feature of their platform.
Most often, this type of marketing targets prospects who may have already had some sort of interaction with your brand. In that case, you’ll want to not only evaluate the CPC or CPI, but whether leads convert into closed customers immediately or soon after converting through the ad.
When it comes to providing quantifiable data on marketing efforts, company executives are typically interested in knowing the entire customer acquisition cost (CAC). However, marketers will want to get more granular to determine how to balance their inbound and outbound marketing efforts in order to maximize ROI for lead generation and nurturing; not just customer acquisition.
The ideal marketing strategy recognizes the strengths inherent in both inbound and outbound marketing and thoughtfully combines them to drive great results. The more accurately marketers track and measure their marketing efforts, the more they can refine them and make them more effective. For additional insights, check out “5 Steps to Soar to Marketing ROI Stardom” to learn how to refine your marketing ROI strategy.