– 95% of marketers use search engine marketing for inducing loyalty among their existing customers. – Regalix
– 81% of B2B purchase cycles start with web search – Ernest
These statistics are testaments that both customers as well as businesses have embraced web search openly and warmly.
This doesn’t however mean that businesses and SEO companies have understood exactly how it adds to their dollar value. Some companies lean towards paid search as they can find out easily what they are getting against their dollar; however, a surprising report from Digital Marketing Philippines showed that only 44% of companies say they can measure paid search ROI effectively.
However, SEO companies are accountable to show clients what they are delivering against their invested dollar. Some clients ask for expected ROI even before they become our clients as the conventional ‘traffic and rankings’ answer doesn’t ring any bells for them. This is known as an estimated ROI report. So if we can’t give the same old standard traffic and rankings guesstimate, what do we do when the client is asking for the return on spent SEO in dollars?
A good SEO agency can tell you if your SEO campaign will be successful or not and back their claim with numbers. If you are not doing the same, chances are your client is going to another agency, tomorrow if not today.
So how do you show them the money?
There is a huge difference in the way we calculate the ROI of organic and paid search (for obvious reasons).
In this article, I am going to briefly discuss both of them but let’s first get the calculation of organic search ROI out of our way and then we will see how to calculate ROI for paid search.
How to Measure Organic Search ROI?
It is very difficult to find the overall cost of an SEO campaign as it involves many measurable and non-measurable activities. But for the sake of understanding, let’s say your overall cost is $5000 which includes content, keyword planning, etc. Now find out your websites’ conversion rate, average order value and average cost per sale.
Feed all these numbers in the calculator (as shown in the illustration above).
I am predicting the conversion rate to be a modest 8%, average order value at $50 and cost per sale at $20. We can expect at least a 20% hike in website traffic after the SEO campaign, which means there will be an additional 960 visitors on the website after SEO activities.
Your additional profit in the first year is approximately $23,800. This profit is excluding the cost of sale and SEO cost. The profit increases the second year as you start reaping rewards from your existing organic SEO campaign.
Now I will be using another tool to measure the ROI in percentage.
You can use the tool or measure it using this formula:
Total profit – Cost of SEO / Cost of SEO
23800 – 5000 / 5000 = 3.76 or 376%
So if the client is investing $1 in SEO, he or she can expect $3.76 in return.
This is a very modest example with average figures. A good SEO company can easily see better results with more increase in conversion rate and website traffic.
How to Measure Paid Search ROI or ROAS?
Thanks to Google Analytics, we can easily measure orders, subscriptions, downloads, social followers, etc. However, return on paid search investment is another matter altogether. Even though it is considered easy to measure the ROI of a paid search campaign, it’s surprising how many marketers and advertisers fail to do it effectively.
ROI for paid search is actually known as Return on Ad Spend or ROAS. It has a different formula than ROI calculation:
Profit resulting after paid search campaign / Cost of paid search campaign = ROAS
Usually the ROAS is negative or not quite high but you should strive for an ideal ratio of 1:1, which means if you spend $1 on advertising, you get $1 in revenue. If your ratio is not as favorable, I suggest you read the following tips.
Tips to Boost ROI / ROAS
One of the most important ways to boost the ROI of your organic search campaign is to invest considerable time in finding good quality. Make sure you use keyword-optimized content on your website, blog and other content channels.
As for paid search, here are some quick tips. However, bear in mind that the tips mentioned here are just the tip of the iceberg (no pun intended). If you want more in-depth reading, here is an excellent post on boosting the ROAS of your paid search campaign; you should definitely read it if your adword campaigns are faltering. Meanwhile here’s the gist of the article.
- Try to find long-tail keywords to reduce the cost of your campaign and deliver quality results.
- If your Quality Score is below 6, improve your ads and landing page quality as well as narrow down your keyword groupings.
- When it comes to paid search success, relevance is the deal-maker or deal-breaker, so make sure your keywords are relevant to your landing page and overall campaign.
- Always keep an eye on lost impression share, as it will give you an idea about budget constraints or low ad rank. You can then tweak your campaign and ensure better ROAS.
- Keep reviewing your negative keywords as using them liberally can thwart potential visitors and using them sparingly can lead to increased cost of the campaign.
- Always strive for better conversions rather than traffic volume, as traffic volume doesn’t necessarily translate to a better ROI.
If you are not an agency and are doing SEO in-house, I suggest you hire a good agency to set up your SEO campaign, as it will help you lay a strong foundation for the future of your website. This will be the best return on your investment and you will reap the rewards for years to come.