If you don’t know your ROI (Return On Investment), you could be spending much more than you actually have to, ultimately cutting into your revenue. While inbound marketing is a great method to increase your bottom line, you’ll want to use the following formula to help substantiate its cost.
The Role of Analytics
Before you can start getting a handle on your inbound marketing ROI, it should go without saying that you have to have software that can track your website’s analytics and those of any email or social media campaigns you’re running.
Basically, any tactics you’re using for the sake of ROI must be monitored, tracked and measured. Without analytics software, this will be impossible.
How Much Does It Cost You per Customer?
First, we need to know how much your company has to spend in order to attract your customers.
To do this, you’ll take the number of new customers you’ve attracted over a given period of time. Obviously, you want to pick a relatively stable period of time when you were already using inbound marketing. Don’t go back 12 months if eight months ago you hired 30 new people.
Now, you need to calculate all the costs related to those customers. Sales and marketing costs is an easy one. Make sure you include employee salaries though, but only for that time range, not the annual sum. Take time to make sure you include all relevant expenses.
The first equation for finding your inbound marketing ROI, then, will be dividing all those costs by the total new customers you were able to attract during that time period.
Next, we need to find out how much your customers are really worth. This is where you need your analytics and annual reports. You want to find how much customers spend a year, on average, and how many years they tend to stick with your company.
If you haven’t been in business long enough to get a strong grasp on these numbers, there should be plenty of resources online related to your industry that will fill in any gaps.
These numbers give us the following equation: annual amount spent by your customer x expected lifespan of each customer.
Deriving Your ROI
With the above two equations answered, we can now get a sense of what your inbound marketing ROI is. All you have to do is take the first number—how much each customer will provide you over the course of doing business with your company—and subtract from it the first number, how much it costs to acquire each one.
Then divide that number by the lifetime value of your customers and you’re finished. If you’re interested in finding your payback value per year, just divide the acquisition costs by how much a customer is worth, annually.
Keep in mind that this is only an estimate, though it should still give you a pretty good idea about your ROI. Inbound marketing ROIs tend to differ widely across industries and even businesses, though, so it’s a good idea to run these numbers. Trying to rely on public figures most likely won’t cut it.