Inbound Marketing vs Outbound Marketing

Posted by Rainier Sky on May 10, 2011

Inbound marketing is getting all the buzz these days. Done well it can be quite efficient and effective at achieving measurable results for all kinds of organizations, but let’s not rule out traditional or outbound marketing altogether.

First, let’s make sure we are all on the same page. There have been different definitions for inbound and outbound marketing over the years, but there is general consensus for the contemporary meanings. Inbound marketing is the act of making it easier for a brand or product to be found by customers who are already seeking it, whereas outbound marketing is making your customers aware of a product they may not know they need. So, when and why would you use one instead of the other? Here’s my take on the subject.

Inbound Marketing

There is an intrinsic advantage to marketing to customers who have already identified a need and are seeking a solution. Theoretically, all you have to do is make it easy for the customer to find your product or service. This typically involves leveraging a website, blog and various other online resources that can all be managed for much less cost than traditional or outbound marketing vehicles. Our modern definition focuses on three key tactics that typically produce synergistic results when employed simultaneously.

• Content Generation – The first thing you need to be visible on the Web is a lot of content. Search engines prefer sites that offer a lot of information, particularly if its recent or fresh. Using software known as crawlers that visit and read sites regularly giving more credit to sites that are updated frequently. Content also comes in many forms, including blogs posts, images, videos, whitepapers and e-books. The top  search engines allow users to search for each type of content individually, so it’s best to use a mix of all.
• Search Engine Optimization – SEO is the act of increasing the visibility of your content so your customers find it near the top of organic or unpaid search results. This requires content written and/or edited to increase its relevance to specific keywords, editing Website code to removing barriers that can limit a search engine’s ability to index or reading the site, and increasing the content’s credibility or authority by generating backlinks to it from other websites.
• Social Media – Facebook, LinkedIn, Twitter, MySpace and other social media can all be leveraged to promote your content. Search engines assess your site’s authority by the number of related sites that link to it. If someone else in your industry thinks that what you have to say is important, then so will the search engines. Of course, no one is going to see your links on social media if you don’t have any friends or followers so you also have to make the effort to develop and maintain them.

By leveraging online resources we avoid much of the expense of traditional media and achieve much greater efficiency. So why not just focus on inbound marketing, well that brings us to the other half of this article.

Outbound Marketing

The challenge with inbound marketing is that you can’t expect customers to seek something they do not know they need. Most products and services require some of form of outbound marketing to build awareness. Organizations also should not overlook the long-term return on investment that outbound marketing can generate.

According to studies by Nielsen Analytic Consulting, the average short-term return on marketing investment is a meager $1.09 for every dollar invested. Broken down by medium, online ads (which have a greater tendency towards direct response) returned an average of $2.18, magazine ads $1.12, public relations $1.05, television $.94 and newspaper ads a paltry $24. With such low responses it’s easy to see why inbound marketing is getting so much attention, but the numbers look a lot better when you consider the response on a longer term. The return on marketing investment for magazine ads jumps to $1.57, public relations up to $1.90 and television advertising up to $2.16. According to Nielsen, marketers can generally expect around 1.5 times higher long-term ROI compared to the short-term return. Why you may may ask? The reason is that these and other outbound tactics are more effective at building long-term brand loyalty which leads to repeat business, higher perception of value, greater customer satisfaction and the holy grail of all marketing – word of mouth advocacy.

Of course marketing should be both effective and efficient, and many outbound tactics are dependent on a level of volume and high dollar sales that don’t apply to every situation. Consider a television ad targeting a high income individual with significant disposable wealth. such as a spot you may have seen recently from Ameriprise, Charles Schwab or Edward Jones. These broad targeted spots may reach only a very small percentage of qualified prospects, but smart companies like these recognize a small volume can still be profitable for high ticket items like financial services. Major consumer products companies like Clorox, General Mills, Proctor & Gamble and others see value from the perspective of repeat sales that might extend over the course of an entire lifetime.

Direct marketing is another outbound discipline typically requires high volume to be efficient. Its high upfront costs also prevent many organizations from implementing programs at volumes that produce statistically valid results, so they end up learning nothing from their efforts. The average response rate with a purchased prospect list is just 1.38 percent according to the Direct Marketing Association (DMA), and a quality list can cost you $400 to $700 per thousand (CPM) with a minimum purchase of 5,000 addresses. Sound targeting and segmentation can significantly improve results, but organizations may have to test several list before finding a source that performs well. Having the communications piece professionally designed and written can also improve results, but it too adds to the cost. So, you can imagine the kind of long-term return on investment that direct marketing requires.

A better approach for smaller organizations is to simply do their own direct marketing. It might not be as efficient, but it can still be effective. With a basic data base or, preferably, contact management software a small organization can build its own list with resources they may just find online or at their local library. Coupled with a valuable call to action and personalized follow-up, the DMA reports the response rate on such “house” lists improves more than double up to an average 3.42 percent.

The moral here is that no one marketing strategy is right for every organization. Give us a call. We can help.

 

Thanks for reading,

Kevin Bush, Principal & CEO
Rainier Sky Marketing & Public Relations

 

 

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