How to Measure Return on Investment From SEO?
| February 28th 2022
Return on investment, otherwise known as ROI, is a crucial key performance indicator (KPI) that determines how much profit has come out of expenditure. It is vital for measuring success over time, and equips you with the knowledge you need to make important decisions.
In terms of investment in digital marketing agency, such as SEO, ROI is important because it has the power to enhance your online visibility, increase enquiries and sales, and grow your business. But how to measure SEO return on investment so that you can see its true value? That’s precisely what we’ll be looking at in this post.
In measuring the success of an SEO campaign, KPIs such as ranking positions and web traffic are often used. But you shouldn’t stop there. You should also be looking at the actual financial value that finance SEO is bringing to your business. Its return on investment.
Why measure SEO ROI?
The average business receives 53 per cent of its traffic through organic search. Whilst you should most certainly be measuring SEO KPIs like ranking positions, web traffic, sales and conversions, the ultimate measure of success has to be whether you have received a good return on investment.
If you don’t know how much you are getting back for every pound you invest in SEO, then you won’t be empowered with the knowledge you need to decide which marketing channels are working and could be scaled up, and which could be cut back.
It has never been straightforward to measure SEO ROI accurately, because organic online visibility is earned over time, rather than purchased like PPC. Also, unlike PPC, there is no ‘cost per click’ with organic SEO. However, there ARE ways to measure how your SEO investment with an organic SEO company is doing. Calculators at the ready, let’s take a look.
How to calculate SEO return on investment
Firstly, you need to calculate the cost of your SEO investment. These could be:
- In-house SEO resources – if anyone within your organisation is contributing to your organic search success, include the cost of their time. Whether it’s copywriters, developers or strategists, be sure to note their input and how it translates financially.
- External SEO resources – if you use an SEO agency, include their monthly retainer costs or anything ad-hoc they charge you for SEO.
- SEO tools – don’t forget to include any technology costs you incur that are associated with SEO. These may be analytics and tracking tools, keyword research tools and SEO plugins, for example.
Now combine all these costs, and you have your ‘investment’ element.
Next, you need to track and measure the value of your conversions. This will vary in line with the type of website you have, whether it’s lead generation or ecommerce.
Tracking lead generation conversion values
Leads can be slightly trickier to track than actual sales, because they don’t always have an associated value. However, using Google Analytics, you can actually assign a conversion value by setting up ‘custom goals’.
Goals can be the likes of enquiries, free trial signups or customer acquisition, for example. For these goals, you can assign a monetary value. Then, every time a goal completion is tracked, that value will be assigned.
For acquisitions, the best way to work out the value to assign to a conversion is to use the customer lifetime value x lead conversion rate calculation. Customer lifetime value is the average amount a customer will spend over time. Lead conversion rate is the percentage of leads you generate that convert into sales.
So for example, if the average lifetime value of a customer is £30,000, and your conversion rate is 10 per cent, then your acquisition goal value should be £3,000.
Tracking ecommerce conversion values
The easiest way to track conversion values from your ecommerce sales is to set up ecommerce tracking in Google Analytics. This will directly provide you with the metrics you need.
Now you have both metrics, you are ready to calculate your SEO return on investment. And it’s quite a straightforward process.
The formula you need is:
Value of Conversions minus Cost of Investment
Cost of Investment
Here’s an example…
Over six months, your SEO campaign generated revenue of £100,000.
The associated costs were £20,000.
The calculation is as follows:
£100,000 – £20,000 = £80,000
£80,000 divided by £20,000 = 4
This means that for every £1 you spent on SEO in the six month period, you saw a return of £4. So your SEO ROI in this case is 400 per cent.
Empower your decision making with knowledge of SEO ROI
Being aware of the value of your SEO is very empowering. As well as reassuring you that your investment is sound, it can demonstrate how an increased investment could further increase returns.
Do make sure that you calculate your SEO return on investment on a regular basis, as costs can vary, even from month to month.
Are you looking to increase your online visibility through an organic SEO campaign that offers a high return on investment? At Figment, that’s exactly what we specialise in. Making sure our clients enjoy a good SEO ROI has always been at the forefront of our efforts.
If you’d like to talk to us about how we can help boost your sales and grow your business through a value-added SEO campaign, you are welcome to get in touch with our team.