The dollars and sense of inbound vs. outbound marketing.

The economic downturn over the past few years has driven many talented yet unemployed people to start their own businesses. These folks take their years of experience and offer it to other businesses through their own specialty consulting or service firm — a firm that they must then market.

Just such an individual contacted me last week. He wanted to generate leads and business via outbound email marketing; however, after learning that he has a few clients, a relatively short buy cycle and a very limited budget, I recommended that he use inbound marketing and supplement it with personal outbound phone calls to his highly targeted B2B market.

OUTBOUND
Email marketing is relatively low cost when a company has built a pipeline of leads and handles its own email distribution via marketing automation. But for outbound marketing (that is going to a targeted B2B list) the costs add up fast.

Quality outbound email marketing lists (those that are made of real subscribers to an online publication and are therefore fully opt-in and have been profiled) cost from $400-$700 per thousand. Most of these top-quality lists require a 5000-name minimum, which raises the list cost to $2000 to $3500. Marketing professionals, including me, recommend testing more than one list at a time. Testing allows marketers to learn which list performs best and gives them the insight to improve the success of each subsequent marketing effort. Testing just two lists brings the cost up to $4000-$7000. If a marketer wants to maximize the success of the program, the message should be written and designed by professionals, which adds to the cost as well.

As a result of these higher upfront costs, many marketers avoid the outbound direct mail channel. Yet it is still one of the most powerful channels for B2B lead generation if done according to best practices. That means that, for lead generation, the mailing quantity must be large enough to deliver a response rate that is statistically valid so the results are repeatable on future mailings. In the B2B world this could be a minimum of 10,000 prospects at a typical cost of $1 each and up. For companies selling high-end enterprise systems, this approach is affordable and productive. But not for small start-ups.

INBOUND
Inbound marketing, on the other hand, is very affordable for the small and start-up business. Good-quality Web site SEO can be obtained for as little as $250 per month. Pay-per-click ads — depending on the market, keywords, etc. — can range from as little as $250 to $1000 per month or more. The same general costs apply to content syndication. Social media costs little in dollars but can cost much in time for a one-person business if done properly. There are many other elements in a comprehensive inbound marketing program, but, for small start-ups, it’s a cost-effective option.

OUTBOUND AGAIN
In addition, however, I recommended that this new business owner not wait exclusively for inbound efforts to make his phone ring. I advised him to identify companies that meet his very targeted profile and pick up the phone and call them or send them individual letters.

As I’ve said many times before, no single marketing approach can stand on its own, B2B marketers. That’s why dollars and sense enter into our marketing decisions.

How to handle new B2B leads.

There’s hardly been a single marketing conference that did not have at least one session on getting marketing and sales to work better together. Everyone agrees that there have been huge gaps over the years between what sales wants and what marketing delivers. There’s way more intelligence about it today. But I must take my hat off to Ardath Albee of MarketingInteractions. She wrote a guest article for the BMI (Business Marketing Institute) that appeared in its August 18, 2009, Tuesday Marketing Notes. Entitled “The Payoff for B2B Content Marketing is Movement,” it is the all-time clearest and most accurate description of what should happen after a lead is obtained and why that I have ever read. Please, marketers, print it out, share it with everyone in marketing AND everyone in sales.

 Then, for more valuable detail about mapping content to buying stages, see an article by Russell Kern written for Target Marketing magazine called “Leverage the B-to-B Buy Cycle.” Follow what you learn and you’ll never have to attend another sales vs. marketing session again.

Doing marketing math avoids painful experiences.

The wonderful gentleman who recently gave us a tour of the Seamen’s Bethel in New Bedford, Massachusetts gave us a look into some interesting history of the area. It was about the poor, often uneducated farm boys in the mid-1800s who were wooed into signing up for a whaling voyage with the promise of riches amounting to (what sounded like) a substantial share of the money that voyage produced.

Often 18 to 36 months in length, these voyages meant long hours of backbreaking work that ultimately wore out the seaman’s boots and clothes, which they had to replace with purchase from the on-board “slop shop.” These purchases used up the seaman’s entire take, leaving him with nothing upon his return.

If these poor boys had had the ability to do more than simple math, they could have realized how little they were being promised and could have avoided the painful experience altogether.

In marketing, doing the math also avoids painful experiences.

Marketing campaigns require a lot more than knowing your budget and how many sales that budget needs to generate. When planning a marketing program, it’s critical to run these numbers:

1. Is the universe large enough to deliver the numbers you need? Say, for example, you are marketing to Fortune 1000 companies and ultimately want the campaign to produce 30 sales or 3%. If, on average, your sales force closes one sale out of 10 meetings, then you need 300 meetings to close 30 sales. Is this reasonable? Or do you need to broaden your prospect universe?
2. Can your sales force handle the inquiries your program will generate? If you are inviting a prospect base of 10,000 to participate in a survey (which can generate 5% to 25% response rates) and you want your sales force to personally contact each participant, can they handle that kind of volume?
3. What do you have to spend to generate those leads? Reaching CEOs usually requires the use of a more costly delivery method such as FedEx® or a dimensional mailer that can get past the gatekeeper and grab attention.
4. Are you prepared to spend what it takes to reach this target group effectively?
   How many inquiries will you generate?
5. What is your cost per inquiry?
6. How many of those inquiries do your sales force typically close and what is your cost per sale?
7. What are the average response rates from the channels you plan to use?
8. What is your average profit per sale?
9. What is the average lifetime value of a customer?

No marketing plan is complete unless it addresses all of these critical numbers.

For the formulas and proper calculations, I recommend Direct Marketing: Strategy, Planning, Execution by Edward Nash. This classic direct marketing book does an excellent job of covering the math of direct marketing. Although it primarily addresses direct mail marketing, the concepts apply no matter what channels you use.

The cost and time of reviewing your numbers will be well worth your while and can avoid a long, painful voyage that ends in disappointment.

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