Manufacturing vs. Distribution: Which Sector Sees Better Returns from Inbound Marketing?

November 14, 2016

whole brain marketing blog author


Posted by Jamie Cartwright

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With any new marketing strategy, you'll undoubtedly face questions about the efficacy and ROI of your invested efforts. Often, we hear executives express doubt about inbound marketing, saying "that won't work in my industry! Our sector is different."

And it's true, we don't advise using inbound marketing for all industries. If you're in a CPG sector or retail, it's very difficult to show clear ROI for inbound marketing; other branding strategies likely work better, and we wouldn't try to steer you away from that.

But for many industrial-category companies, inbound marketing stands as the most efficient way to generate leads for your sales team. If you're in equipment manufacturing, distribution, construction, engineering services, or many other business areas, it's amazing how quickly inbound marketing pays for itself.

The question I'd like to tackle today is just how quickly inbound marketing pays off across industries. When we compare manufacturing and distribution, which sector sees the most rapid returns? Which sector is a more natural fit for inbound marketing?

Read on for the latest lead generation analysis and anecdotal evidence.

Tying New Customer Revenue to Inbound Marketing Lead Generation

To show the ROI of an inbound marketing program, the key is to be able to track your leads' progress from orgination to close of sale. When you can assess how many leads it takes to generate one sales win, then you'll be set to demonstrate ROI.

What ROI Trends Do We See in Inbound Marketing for Manufacturing Companies?

In equipment and machinery manufacturing, an individual sale might be 5 or 6 figures. One more machine built in a year, whether customized for line assembly or just a standalone tool, might easily make up the annual growth a small niche manufacturer is seeking.

If you represent a somewhat larger equipment company, your forecasted growth need might be 5 or 10 new customers for the year—as long as your existing customers still make their orders.

This is the situation where inbound marketing ROI makes the most sense: where a few new customers are needed, and thus, the level of lead generation you need from inbound marketing is relatively low. You don't have start generating thousands of new leads from your target sectors, you just few hundred.

What About Inbound Marketing ROI for Distributors?

In distribution, deals tend to work differently than in manufacturing. The situations where inbound marketing works best for industrial distributors is where your distribution isn't piece-by-piece, it's recurring, comprehensive plan.

Often, distributors offer engineering services along with the parts and products they provide, and they package the services and parts as whole solutions. When distributors sell based on solutions, their sales tend to be larger, more considered purchases, rather than small transaction purchases. This is the prime situation for inbound marketing.

The more considered purchase the better. So, when distributors need just a few new customers in a year because, then inbound marketing makes just as much sense for them as it does for a heavy capital equipment manufacturer.

Transactional vs. Considered Purchases: The Right Way to Evaluate Inbound Marketing ROI

 

To really describe the ROI of inbound marketing, you should evaluate your sales funnel based on whether your sales are more transactional or more heavily considered (and that's a sliding scale, not an either-or).

When your funnel is like most manufacturers and distributors, it's going to be something like this:

Imagine you're just looking for approixmately 12 new customers, which means generating 17 qualified leads, 250 initial leads, and 5,000 inbound visitors. In that case, if the 12 customers are all worth 50k for the year, then your inbound marketing program would need to cost less than $600,000 in order to show minimal ROI—and believe me, a solid inbound program costs way less than $600k.

A more transactional inbound funnel looks far different. Imagine you need as many as 300 new customers this year, because each is worth just $1000. In that case, you need to generate a lot more traffic because it's going to take more traffic to generate those 300 customers. Generally, the cost of that traffic—especially using non-paid tactics—maybe the same as a company with a more considered purchase, which means there's less return for your investment.

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Topics: Inbound Marketing



whole brain marketing blog author
Written by Jamie Cartwright

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