It Doesn’t Add Up! Beware The Inbound Marketing ROI Calculator

August 8, 2019

whole brain marketing blog author


Posted by Greg Linnemanstons

IM_ROI_Calculator

ROI from your marketing efforts is no longer “nice to have,” it’s an expectation. More and more CFOs are demanding a data and evidence-based view of marketing — relevant and actionable web analytics, meaningful and timely business development scorecards — so you’ll develop strong and accurate marketing budgets that include executive team buy-in supported by objective payback predictions and results.

After all, isn’t that what you appreciate about inbound marketing? You can monetize your funnel and assign customer lifetime value to leads. When your marketing is a measured, empirical process, you can objectively measure and predict marketing’s impact on revenue and margins

However, with inbound marketing ROI now top of mind, many marketers are falling victim to the allure of instant gratification; i.e., marketing ROI calculators. Some agencies that are trying to be your new partner are oversimplifying the process of measuring ROI. Contrary to what you may be hearing, it’s not as simple as punching in some numbers and dates and — PRESTO! — reliable ROI.

What is true: attribution and ROI analysis are much more approachable these days. Firms selling marketing tools and services (such as HubSpot partners like us!) are eager to shout the praises of inbound marketing ROI from the mountaintops. Perhaps it’ll inject confidence into prospects that their spend will be rewarded.

It’s easier to feel confident about attribution thanks to digital marketing channels. Technology has changed everything, including how marketers can now understand, in real-time, what’s effective and what’s missing the mark. So, ROI should be seen as an ongoing continuous improvement activity, not a final destination. It’s really not a one-time, plug-the-numbers kind of process.

Here’s an example. Early in its partner program, HubSpot provided partners with an Inbound Marketing Assessment (IMA) tool that calculated ROI using a relatively simple data set: expected revenue per customer, gross margin, closing rate. As a directional tool, the IMA could quickly tell leadership if their margin per customer was significant enough to invest in more opportunities to close.

That’s great, but it assumed every customer was identical, each started and stayed at a constant revenue, and there was no churn. That’s the problem. No business is as simple as typical ROI calculators require.

Most businesses have multiple revenue streams (for instance: stock OEM equipment, custom equipment, subscription maintenance service, parts, emergency repair service, used/reconditioned equipment), customers naturally grow by buying more and different products/services, churn is inevitable, and so on. While calculating ROI is worth every minute of effort put into it, it’s neither simple nor easy.

Understandably, most business leaders want to understand ROI as intimately as possible and use it for future decision-making. After all, implementing inbound is a large commitment, both financially and for the business’ culture.

Understanding ROI includes dissecting the company’s business model, practices, and performance with the goal of uncovering all the pros and cons that will affect the returns they’ll realistically achieve. Plus, it means the expected adds and subtractions must be properly accounted for upfront.

Doing ROI in the weeds (and properly) helps leaders feel confident that they’re making the smartest, most thoughtful decisions today and moving forward. Beware of anyone professing that their inbound marketing ROI calculator is comprehensive and reliable. It usually doesn’t add up to a successful evaluation of your inbound marketing efforts.Speaking of successful marketing efforts, nothing speaks louder than sharing results with your internal team. Our guide, The 6 Marketing Metrics Your Boss Needs To Know, will walk you through the critical steps of proving your ROI. Click the button below to access your copy.

The 6 marketing metrics your boss needs to know



Topics: Inbound Marketing



whole brain marketing blog author
Written by Greg Linnemanstons

With 18+ years in senior management roles at Fortune 500® and medium-sized companies, Greg has deep marketing and sales experience with CPGs and manufacturing. He leads strategic initiatives with clients and is involved in developing client inbound marketing plans. Greg holds an M.B.A. from Northwestern's Kellogg School of Management and a B.A. in Economics from Lawrence University.

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