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The Flaw In Calculating Inbound v. Outbound Marketing

by Trish Bertuzzi on Tue, Jul 28, 2009


Mike Damphousse of Green Leads wrote a great post on Inbound v. Outbound Marketing and really got me thinking. Here is an excerpt:

This past week I was reading HubSpot's study on the state of inbound marketing, and understandably, with HubSpot being in the inbound marketing business, the study showed that the marketing spend on inbound marketing is rising. It also determines that the price of an inbound generated lead is 3x less than the price of an outbound generated lead, $84 versus $220. (Inbound: SEO, SEM, Blogs. Outbound: Telemarketing, Email, Events).

(Trish here:) What a great piece of data! I would be interested in knowing what you the readers calculate for these numbers. If you have them, please share. Also, bigger question, do you differentiate the costs associated with your inbound v. outbound leads?

Back to Mike:

I accept that, and I truly believe there is a place for inbound marketing in all of our marketing budgets. I do, however, challenge the value of that inbound lead versus the value of the outbound lead, and that was not discussed. In simple terms, how far along is each of those generated leads in the pipeline and what is the value of that lead against the amount you have invested in it so far?

The question we should ask ourselves is how many $84 leads does it take to get to pipeline, an active sales opportunity, and how many $220 leads does it take to get to pipeline.

In my own business, where we do about equal billing on inbound/outbound spending, we have found that the increased quality of the outbound leads justifies the expense. For argument's sake, let's just say it takes 10 inbound leads to get one pipeline opportunity, and 3 outbound leads to do the same. That's $840 for inbound, $660 for outbound. We attribute it to the fact that the outbound work does much of the screening and vetting and sometimes even the first steps of selling, thereby increasing the quality of the lead.

(Trish here again:) Hmmm...this got me thinking. I don't track cost per lead (I know...shoot me now), but I do track lead sources closely. Here are my results 2009 YTD for New Business.

Inbound

25%

Outbound

14%

Referrals/Partners/Networking

61%

So, what does this tell me? Well, our inbound efforts will yield long tail results - that I know for a fact. But, even though the debate rages around inbound v. outbound and the cost/budgets associated with each, good old fashioned personal/professional networking is the lead source that will drive the most business.

I have a great mentor, a gentleman by the name of Bill Drummey.  He networks like no one I have ever seen - he returns every phone call, he stays in touch with past employees, he is a Master Networker and a great guy to boot!  He told me very early on in my career that a good investment would to be spend a part of every day networking and I took him at his word and it has paid off for my business. 

This leads us to the big question:
Are we getting so caught up in the inbound v. outbound debate that we are forgetting the basics of good old fashioned human interaction? 

Developing relationships with people you respect and then sharing information with them so that you become a trusted advisor and they can potentially refer you?  What part of budget goes into that bucket or how much time do we tell our salespeople to invest there?

On Mike's blog, there are some great comments but I think a comment by Justin Hitt sums it up beautifully:

It doesn't matter where customers come from, as long as you are profitably bringing them on board and providing value worth having.

For best b2b sales results, it is all about building a portfolio of lead generation activities then optimizing the numbers. Leads don't mean anything if they don't convert into profitable customers.

By tracking lead source and campaign you'll know which profitable customers came from where, but that doesn't mean you only do b2b lead generation in that channel. Instead you've established a baseline for comparison.

Smart guy Justin.  Now, where do you weigh in?

(Photo credit: Mundoo)

Topics: target marketing, lead generation

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