It is a given that you will need to demonstrate the ROI (return on investment) from your SEO activities, just like you would with any other marketing effort. Any marketing plan that receives funding, whether internally or through an outsourced team, must demonstrate its worth. However, all too frequently, SEO monitoring is simply limited to measuring key performance indicators (KPIs) such as website traffic and SEO ranking positions.
Of course, the cost of increasing your organic search traffic will vary substantially depending on whether you employ a marketing agency, an in-house marketer, or do it yourself. And don’t forget that agency prices also have a pretty wide range.
So is it worth the investment? You can only answer that question using facts, which is why quantifying the ROI of your SEO efforts is important.
Why Measuring SEO ROI is Important
Most businesses report that they drive over half of their traffic from organic search.
For this reason, it's critical that you really grasp the financial value that the channel is bringing to your company.
While traditionally used SEO KPIs such as sales and conversion rates are important to track (in fact, they're needed to indicate progress), achieving a good ROI is the ultimate measure of success.
It is hard to identify which if the channels in your marketing plan are working best and which should be scaled up unless you know exactly how much money is returned for every dollar invested in your approach.
These are the metrics that your board will be looking for. After all, people at the top want to know what their investment is producing in terms of cash in the bank. When you can demonstrate a good ROI, you're demonstrating success and getting buy-in to your marketing strategy from stakeholders across the organization.Many people have struggled for years to correctly measure their SEO ROI.
PPC has easily identifiable cost-per-click charges, so you can readily identify the spending over a specific time period. This is often the cost of running the advertisements plus agency costs, or the cost of your internal staff if you manage campaigns in-house. Simply put, it is simple to calculate an appropriate investment value.
SEO, on the other hand, is a little more difficult to quantify because the channel is all about obtaining organic visibility rather than purchasing it. There is no set fee for each organic click. But that’s why we’re here.
How to Calculate the ROI of SEO
Calculating the ROI of SEO is relatively simple - though it differs according to whether or not you make sales directly via eCommerce or converting leads. In this article we’ll be discussing lead-based business models.
1. Set up Conversion Tracking
Setting up conversion tracking in Google Analytics is the first step in calculating your ROI from SEO. This allows you to track all revenue-generating conversions on your website.
It's a little more difficult to acquire precise data on how much income you produce if you don't make direct sales on your website. The most precise estimate is obtained by assigning monetary values to each of your on-site conversions based on previous sales data.
In Analytics, go to Admin > View > Goals and set goals for each of your on-site conversions. These goals can range from contact form submissions to free quotation requests, and even phone calls if you have call tracking enabled on your site.
Then, in the Goal Details box, give an estimated value for each of these conversions.
These figures may not be exact, but if you have any analytics data to work with, you can get a good idea.
- Determine how many leads turn into sales. For example, if you receive 100 leads each month and 25 of those leads convert to customers, your goal has a 25% conversion rate.
- Calculate the average price of each sale. If each of your leads spends $200, your average value is $200.
- Calculate the worth of each lead. Divide the total value of conversions by the initial number of leads to determine the value of each lead. Using the figures above, if you get 25 clients and each spends $200, you will earn $5,000. Divide $5,000 by your initial 100 leads, and each lead from this goal is worth an average of $50.
2. Sort Your Conversions by Channel
After a month or two of tracking conversions, you should have enough data to begin calculating your ROI from SEO.
The quickest way to accomplish this is to go to Conversions > Multi-Channel Funnels > Assisted Conversions and look at the Conversions report.
Select “Conversions” at the top of the report to see all of the conversions on your site within the time period you specify, organized by the channels that drove them.
The Organic Search channel comprises all people that found your site via search engine results such as Google and Bing, meaning that you can attribute such conversions to your SEO strategy.
3. Formula for SEO ROI
Once you've identified how much income your SEO strategy earned over a certain time period (usually a month or quarter), you can compare that amount to your SEO expenditure during that time period to calculate your ROI.
The following formula is commonly used by businesses to determine the ROI of SEO:
(Return from Investment – Investment Cost) / Investment Cost
If your company already has a technique for assessing the ROI of other marketing channels, you can use the same approach for SEO.
Some businesses, for example, measure ROI based on the net profit from each sale rather than the overall revenue. Use the same values for your SEO approach or else your comparison will be distorted.
If you don't already have a technique for estimating marketing ROI, you can use the Investopedia formula: (Return from Investment – Investment Cost) / Investment Cost. Then, multiply the result by 100 to get your ROI in percentage terms.