Having responsibility for a marketing budget means more than just being targeted by agencies (we have to sell too, you know!); it even means more than new tools, new processes and new partners – we understand that long after commitments are made and contracts are signed, you are tasked with ensuringyour spend is delivering the desired outcome. Our belief is that you should be as accurate as possible in calculating the ROI of your marketing spend andtoday we want to share why.
Defining ROI in SEO:
A quick reminder of business 101: Return on Investment (ROI) is a metric that helps measure the profitability of your investments. When it comes to SEO, ROI refers to the value you gain from optimization efforts compared to the resources you invest in those efforts. Calculating the ROI of your SEO activities allows you to assess the effectiveness of the strategy and make data-driven improvements.
There are a few general benefits of calculating ROI that are worth us quickly highlighting(these were kindly provided by ChatGPT).
1. Tracking the Success of Your SEO Campaigns:
By measuring the ROI of your SEO efforts, you can gain valuable insights into the success of your campaigns. It helps you understand which strategies are generating the desired results and which need adjustments. This data-driven approach enables you to optimize your SEO tactics and focus on those that deliver the highest returns.
2. Justifying Your SEO Budget:
Calculating the ROI of your SEO activities provides you with the necessary data to justify your budget allocation. When you can demonstrate the positive impact of SEO on your bottom line, it becomes easier to secure additional resources or convince stakeholders of the importance of ongoing optimization efforts.
3. Evaluating the Long-Term Value:
SEO is an investment that can yield long-term benefits for your e-commerce business. By measuring ROI, you can assess the long-term value and sustainability of your SEO strategies. Understanding the impact of SEO on your revenue growth, customer acquisition, and brand visibility allows you to make informed decisions for the future.
Now, luckilyit’s a simple formula you can use to calculate ROI. The formula applies not just to SEO but can be applied to other areas of your business:
ROI = (Return – Investment) / Investment x 100%
While it’s seemingly straightforward, in digital marketing and SEO, there is debate amongst some professionals about what constitutes a return. In fact, if you have worked with an agency in the past – they may have pitched that ROI can be measured by Clicks. If we follow that logic, let’s assume your target Keyword phrase has a cost-per-click of $2.00 and you receive 5,000 clicks from your newly implemented keyword strategy,they wouldclaim your return was $10,000.
At ElasticSEO, we prioritize quality leads that convert. We feel the truest calculation (the one we want to be measured against) is converted leads. If we take that and multiply it by your Customer Lifetime Value (CLV), that gives you a great idea of what you are really getting from your SEO spend. In simpler terms, the question we like to ask is – how many customers are we bringing in and what are they worth?
To make our ROI calculation apply specifically to your SEO initiatives, we recommend using the following:
ROI = (No. of qualified Leads*CLV – Investment) / Investment x 100
Now we have the calculation nailed, time to ask the next question – what’s a good return?
It really depends. The rule of thumb in marketing is accepted as 500% being the target return on marketing spend. However, in digital we continue to see numbers exceeding 5x, in fact, in SEO, it’s not unrealistic to be closer to 10x.
We think it’s important to both calculate and benchmark the results on an ongoing basis. We could write a whole post about how longit typically takes to see results (edit: we WILL write a whole blog post about it…stay tuned), but the key takeaway for today is that keeping track of these metrics is critical. At ElasticSEO we include ROI in our monthly reporting, so you have italongside the other campaign performance metrics.
In summary, not only is it relatively easy to calculate ROI. As a budget owner, tracking ROI will help you hold partners to account and demonstrate value back to your internal stakeholders. We suggest scrutinizing the ROI figures presented by your partners and ensuring the method of calculation aligns with your business model and marketing objectives.
