The Innovative Marketer's Blog

Your Marketing Budget Isn't Going To Fix Your Business (how to fix it)

Posted by Kevin Jorgensen

It’s that time of year. No, not the holidays, budget time. With few exceptions, companies are either making budgets for the coming year or doing mid-year corrections (you do make mid-year corrections, don’t you?) to their marketing and sales budgets. It’s an odd sort of dance. Usually sales goes first, because after all, they are traditionally the group that has to “commit to the number”. So sales makes a forecast based on a lot of assumptions. The sales number is an attempt to commit to the smallest number sales thinks it can get away with so that the big commission accelerators for going above plan kick in sooner. Pretty sneaky.


Then it’s marketing’s turn. Marketing is sneaky too. Marketing uses the most favorable industry benchmarks it can find and tells management how much it will need to spend to create the leads that sales says it needs to make the revenue forecast. The marketing budget is nearly always too large for the committed revenue (profits won’t be where management told the board they would be…oops!) so management then arbitrarily slashes the marketing budget, increases the sales forecast and proclaims how wonderful the coming year will be… but no one is really bought in, everyone wonders how the promised ROI is going to materialize and the stage is set for another 12 months of finger pointing.

And so it goes.  I thought inbound marketing was supposed to change all that. Cure the insanity. Disrupt the madness. What happened? Very simply, organizations are still asking the question: How do I know that inbound will pay off? We want proof before embracing inbound marketing as a way of doing business, so we hedge our bets with one foot in the inbound camp and most of our day-to-day activity doing things the old way. Is this wise?

The data is pretty clear. Many businesses have used inbound to increase traffic, leads and sales. More than 93% of companies that employ inbound marketing increase their traffic. Forty percent increase their traffic by 75%. And 84% of companies increase their leads within the first seven months. So we can begin with the assumption that inbound marketing does work. But beyond these general observations, there are serious considerations that business owners, executives and marketers must know about proving the ROI of inbound marketing.

One critical thing prevents you from proving a positive inbound marketing ROI

This is the point in the blog where you’re probably expecting some cool, secret tool tip or analytic trick for discovering the hidden ROI in your marketing efforts.  Not gonna happen. The answer to proving positive ROI from inbound marketing is much simpler than that. And much harder.

According to marketing expert Marcus Sheridan, @TheSalesLion, if you’re not seeing a positive ROI from inbound marketing, something is amiss in your organization. In other words, all the evidence shows that inbound marketing works. If it’s not working for you, look in the mirror. The problem could be bad strategy, or poor tools, or flawed technique to prove ROI. Could be. But the biggest reason for poor inbound marketing ROI is, according to Sheridan, a lack of buy-in from executives and employees. What?

Inbound marketing isn’t a job that one person does or something you outsource to an agency and forget about. Just like quality isn’t something that the quality control team sprinkles on your product as it goes out the door.  If inbound marketing is not fully embraced and owned by the organization, a lack of positive ROI isn’t due to a failure of the principles of inbound marketing. The lack of positive ROI occurs because you haven’t really done inbound marketing in the first place. Only when the entire organization from the CEO to the quota-carrying sales person and everyone in between, is bought in, do you have a solid foundation to start measuring results. In other words, making one person responsible for creating content, posting it on your website and Tweeting it three times a week or even hiring the best marketing agency from the HubSpot partner directory while everyone else in the organization continues to abuse prospects with cold calls, spammy emails and billboard websites, isn’t going to create any kind of sustainable positive ROI from inbound marketing.  Your organization has to embrace inbound marketing as the way it does business. Inbound marketing is a mindset that your organization has to own. That’s the hard part.

Four tips that Marcus Sheridan offers to help an organization own inbound marketing:

  1. Provide initial and ongoing workshop training. This gets everyone on the same page, keeps them focused and ensures that inbound becomes the defacto way of thinking about your prospects and customers. This kind of infusion of inbound marketing principles also gives organizations direction: You can’t just wake up one day and say “let’s all blog,” and expect to be successful.
  2. Insource expertise. While a top-notch inbound agency may create amazing content for you, your own employees are the best subject matter experts when it comes to your prospects and customers. That’s not to say that every employee has to be training to receive the next Pulitzer, but tap their specializations and personal experiences to influence incredible content that attracts prospects, even if someone else ends up doing the writing or scripting and shooting the video.
  3. Make inbound tactics required. When was the last time you didn’t run payroll and told the staff you forgot but it’ll be done soon, just be patient? Inbound must be treated like payroll; there can be no question that it will get done regularly, completely and on-time.
  4. The CEO must be bought in. Complete buy-in from the leader of the organization—daily, demonstrable, sacrificial support… not dipping toes in the water or just talking about it at company meetings and then going back to business as usual. It’s the only way to be sure you’re measuring ROI on a healthy inbound program.

With these things in place, you’re ready to start thinking about ROI.  The best framework for thinking about ROI is created by beginning with the end in mind. Work backward from the Key Performance Indicators (KPIs) that matter.

Building Your Inbound Marketing ROI KPIs

Do you need to generate $750,000 in revenue? Acquire thirty new customers? Sign up 1,300 new monthly subscribers? What are the clear, measurable goals that matter to the organization?

As an example, if the KPI you’re going to measure is 200 new customers this quarter, work your way back to the number of leads you need as follows. Estimate or use historical data to establish your sales qualified lead-to-customer conversion rate. Let’s say it’s 20%. Working backward up your sales funnel, your sales-qualified-lead KPI to convert 200 new customers is 400 sales qualified leads. Where are you going to find 400 sales qualified leads?

From your inbound marketing activities, of course. Again, working backward up your marketing funnel, estimate or use historical data to determine your visitor-to-sales-qualified-lead conversion rate. If the conversion rate is 5%, then you need 8,000 visitors to reach your customer goal. Funding activities like developing an inbound marketing strategy, blogging, premium content offers, lead nurturing, social media advertising and marketing, and budgeting for tools like HubSpot, if your organization has 100% embraced the inbound marketing mindset, will get you there.

4,000 Marketers Can't Be Wrong Free Report: "State of Inbound 2015" Learn the Techniques of the World's Best Inbound Marketers

Once you have goals and KPIs, you can determine how your results measure up. Hubspot, Google analytics and your CRM are great for tracking the important metrics to establish cause and effect and make sure you’re on target at each step in the process for attracting and converting visitors into customers. If your KPI is customers, inbound marketing played a role if it generated visits, leads or closed customers. By assigning a value to each new customer or incremental sale, you’ll be able to determine just how much to attribute the value of the result to the influence or activities of inbound marketing. In other words, you’ll be able to calculate inbound marketing’s ROI.

So as you embark on the seasonal tradition of budgeting, consider whether your budget and inbound marketing activities reflect a mindset where your company is budgeting 3 – 5% of revenue or a mindset where your company is budgeting 100% of behavior? If you’re only thinking about inbound marketing as a 3 – 5% activity, whether you’re doing it yourself or working with an agency partner, you’ll never see a consistent, positive ROI. However, if you’re organization chooses to own an inbound mindset with 100% of its policies and operations in the coming year, using a strategy to focus your efforts, you’re in the right place to budget 3 – 5% of revenue and expect and measure more sales qualified leads and a positive ROI.

Topics: Inbound Marketing, B2B Sales and Marketing