So you want to know what you’re getting out of your SEO investment? You don’t want to call meetings or travel across town, listen to industry jargon, or ask lots of questions, and that’s fair. Well here is a step by step guide on how to calculate your Return On Investment (ROI) of Search Engine Optimisation (SEO) so it’s as easy as counting the tills at the end of the day.
What is the ROI of SEO and how to calculate it
First of all, if you haven’t already got an account set up with Google Analytics, you’ll need to sign up, or if you do have an account, sign in. Google Analytics is free to use so don’t worry you won’t have to pay for it. Once you’ve done that, come back to THIS EXACT SPOT and keep reading… nice, well done. To avoid the risk of any uncertainty, let’s break down the subject matter.
ROI, meaning what you’re getting out of your investment, or in simpler terms how much, Bang you’re getting for your Buck.
Businesses can calculate their ROI with different contributing methods. Analyzing their search engine rankings (how far up their website is after a keyword search).
Counting Organic traffic, which is the number of people that visit your site naturally without advertising. Your organic traffic will go up the higher your ranking is.
Businesses calculate the ROI using the ROI of SEO formula:
(gain from investment – cost of investment) / cost of investment
with the data received from Conversion Tracking.
Step 1: Calculate your ROI of SEO by Setting up Conversion Tracking
So now you have your head around some of the techniques, let’s put it into action. You have your Google Analytics account set up in another tab, and that’s great, now you have to set up your conversion tracking. Conversion tracking allows you to see all the different avenues of revenue that you have on your site.
There are two different examples where this may differ.
If you are an E-commerce store, you can apply E-commerce tracking, which is very accurate.
For Service Provider or lead-based companies, you can use customer data to set up conversion goals. For example, Lead-based submissions to be allocated dollar figures to the goals.
Lets set up conversion tracking for your specific business.
Ecommerce Conversion Tracking
The most accurate, informative way to set up your Conversion Tracking by following Googles Guide on how to Set up Ecommerce Tracking.
Follow the link and use the step by step process to make this happen.
Once you’ve set up your conversion tracking, go to the Ecommerce Overview on Google Analytics. You will see all the sales that have occurred and every detail about these sales individually. See below:
This report will help you attain data for calculating your ROI of SEO and also calculate the success your business is achieving.
Lead Generation Conversion Tracking
Setting up conversion tracking for lead generation businesses is a bit more complicated. These businesses don’t always make sales directly on their websites, making the data less accurate. It’s not all doom and gloom, you can still get great data, just not as great. It’s like driving a Ferrari, not a Lamborghini… depending on your preference.
Here is how you do it. On Google Analytics, go to Admin > View > Goals. Then you need to set up a value for every conversion on your site. You can do this by analyzing your customer data to find the dollar figure.
Now figure out the number of leads converted into sales. E.g., if you receive 200 lead forms per month and 50 of those leads become customers, that goal has a 25% conversion rate.
Calculate the average dollar figure for each sale or the lifetime value of a customer. If all the leads that sign-up spend between $180 and $200, your average value is $190.
Calculate the dollar figure of each lead by dividing the total value of conversions by your original number of leads. Using the values above, if you earn 50 customers and they each spend $190, you make $9,500. Divide that $9,500 by your original 200 leads and each lead from this goal is worth $47.5 on average.
Follow these steps for every avenue of revenue on your website. Enter the goal and the value to store the data. Once you’ve tracked these conversions for a month or so, you should have enough information to start calculating your SEO’s ROI. You can view this data by looking at the conversions report on Google Analytics and clicking Conversions > Goals > Overview and you’ll see something like this:
Step 2. Measuring your ROI of SEO Using a Formula
Now you know how much revenue your website has earned over the last month. You can now use the formula to equate your SEO’s ROI. (gain from investment – cost of investment) / cost of investment. Use the data from below as an example.
Gain from Investment: $503,456
Cost of Investment: $20,000
($503,456 – $20,000)/$20,00
24.55 x 100
That’s a vast 245.55 % return on investment for the company! Now, don’t go firing anyone if you can’t see a profit in the first couple of months. Keep in mind that SEO is a long term investment and it may take a while to start seeing results like the example shown.
Frequently Asked Questions about the ROI of SEO
When should I measure the ROI of SEO?
The ROI of SEO is usually measured monthly, quarterly, and annually. It’s easy when all the systems are in place. Once you have set up your conversion tracking system and have wrapped your head around the formula, then you can watch your return as much as you like.
When will I see Return On Investment?
Keep in mind that SEO is a long term investment and that you may not see a return in the first six months. Analysing data in those first six months may be the equivalent of watching grass grow. Have faith in your digital marketing team, let them work their magic, and enjoy looking at your return after that 6-month mark. But if you like watching grass grow, that’s fine too.
How much return should I see?
The ROI is different for every business. Some Businesses will spend tens of thousands of dollars on SEO because of their size and reach online. Other small businesses will spend less. There is no average return but it is great to have an idea of how much you want to see on your ROI of SEO. Having a figure in mind will give your digital marketing team a goal to work towards. Keep in mind that being realistic is key, but also updating your goals once you reach them is essential.