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Why Inbound Marketing Will Cost More

Marketing

Why Inbound Marketing Will Cost More image 3391266858 65078cd42d nInbound marketing leads, according to Hubspot, cost 62% less than leads from outbound marketing. But don’t expect that cost advantage to last.

One of two things is happening:

  1. Inbound isn’t really more cost effective. Maybe Hubspot’s sample is biased or methodology is bad, but for whatever reason, the 62% isn’t true.
  2. Inbound really is more cost effective today and early adopters are reaping the benefit.

If reports of inbound marketing’s cost effectiveness are wrong, then inbound today may be far more expensive than Hubspot’s research indicates. If not, it will be soon.

The Cost of Inbound Marketing: An Economics Primer

Remember the old supply and demand curves from Economics 101? Here is the Cliff Notes version you need for today:

  • Price will eventually be set where the supply and demand curves meet in a competitive market. Supply increases as cost increases, while demand decreases.
  • Inbound and outbound marketing can be substitutes for each other.
  • The utility (value) of perfect substitute products will eventually be equal as demand shifts from one product (outbound) to another product (inbound) in order to equalize value. This shifts the demand curve for inbound curve for inbound out, increasing the cost marketers are willing to pay, until the value of outbound and inbound are inequilibrium.

How Inbound Marketing Costs Will Increase

If inbound is more cost effective, investment will shift from outbound marketing to inbound marketing. As investment shifts, we will see at least three changes that drive up the cost of inbound marketing:

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  1. More Content. When more content competes for attention, marketers need to produce more content, produce higher quality content or invest more in promoting their content in order to get the same attention.
  2. Better content. As marketing content competes for attention and at least some marketers increase quality, the overall standard for content quality will increase. Good enough content will no longer be good enough!
  3. Shorter Forms. Forms are a barrier to attention. As competition for attention increases, companies will drop or shorten forms, making it more difficult to capture leads.

What Happens When Inbound Costs More?

If inbound marketing and outbound marketing have the nearly the same return, smaller marketers may choose to focus on inbound or outbound marketing.

Larger marketers will almost certainly view it as part of the full marketing portfolio, with inbound and outbound marketing working together.

In short, inbound will become one more valuable tactic in the B2B marketer’s portfolio rather than an opportunity that stands on its own.

Your Turn

Will the return on inbound marketing be in line with outbound marketing over time or will inbound always have a cost advantage. Share your view in the comments below or with me on Twitter (@wittlake).

Comments on this Article: 2

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  1. Your “economic analysis” assumes everything else remains equal and the overall market is not changing. Yet the market is changing a lot, with consumers gaining more and more control over how we market to them – this is increasing the costs of doing paid or traditional marketing. Both technology (caller ID, spam filters, ad blockers) and legislation (email privacy laws, do not call lists) are making traditional marketing more difficult and expensive, and in some cases illegal. On top of that, you ignore the damage you can do to your brand by cold calling and spamming and using other annoying forms of advertising. In economics this would be something like a negative externality or uncaptured cost, which should be factored into the true cost of doing outbound. For every 100 people you cold call, you might get through to 3 of them, but you also run the risk of annoying the other 97. What is the cost of that negative brand image?

    In short… what is your argument? That eventually the benefits of inbound will not be that big so we might as well throw up our arms in despair and just keep cold calling all day long? I believe marketers are better than that. I aspire to make marketing a noble profession, something that you say proudly and people think that we add to the value of society and don’t annoy people, trick people or spam them into submission.

  2. Mike, thanks for taking the time to comment. The point is pretty simple, my writing over-complicated it:

    As more dollars shift to inbound, the cost of inbound marketing will go up.

    I believe this is important today because marketers are benefiting financially from being early adopters of inbound marketing and it is feeding a hype cycle around inbound. A portion of that advantage will go away as larger investments in inbound increase competition and reduce cost efficiency. This is similar to the early adopter benefit marketers saw in online advertising 15 to 18 years ago. I continued to support online as the cost increased, I expect to continue supporting inbound as the cost of driving results here increases as well.

    Over time, the economic perspective holds as long as inbound is significantly more cost effective. The core of the economic argument requires

    (1) that funds can be shifted (they can be, but it definitely takes time and there is a switching cost)
    (2) that market participants can measure both inbound and outbound in order to optimize between them (it can be, albeit imperfectly)
    (3) that they are substitutes (they are, but definitely not perfect substitutes, and this is a key reason why most marketers will choose to use both) and
    (4) that the market will seek equilibrium.

    Other changes you reference that decrease the effectiveness of outbound marketing will widen the gulf between inbound and outbound, all else equal, and will likely accelerate the changes referenced in the post.

    One point bears clarifying. Is the alternative telemarketing and spam emails? NO. Both inbound and outbound marketing can be and should be respectful of the audience.

    I share your aspiration, to see marketing as a noble profession. Some days, I’m proud to be in marketing, but there are definitely days I’m not. I think my long-time Twitter bio sums it up: “Belief: Marketing should serve and respect the audience.”

    Thanks again for the comment and for sparking a post-as-reply. I look forward to seeing marketing become, as you put it, a noble profession.

    – @wittlake

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