How to Calculate ROI on SEO
5 Steps To Setting Up Your SEO Strategy So You Can Evaluate ROI
- Determine your most profitable products and services.
What makes you the most money? How do customers find those moneymakers? Are you selling mostly locally, or nationwide? The first step to a successful SEO strategy is to determine which of your products and services are most important to your business and try to design around those offerings.
Suppose you’re a construction company that sells roofing as a service. Chances are, you’re making more money on roof installs than roof repairs. First and foremost, a sound strategy would be to optimize for keywords relevant to “roof installers” in your geographical area.
- Determine “baseline” site traffic.
You must establish a “baseline” traffic level so you can answer two questions:
- how much traffic was my site receiving before the SEO began?
- how much traffic is attributable to my SEO efforts?
- The “baseline” is the amount of traffic your website already receives and is the amount of traffic for which SEO efforts must not receive attribution. In other words, if your website has been generating 1000 monthly unique visitors on its own for the past two years, then this is the “Baseline” and has nothing to do with the SEO efforts employed. You’ll likely continue getting that traffic even if you do nothing. You must also determine a baseline for other important metrics, including tracked phone calls, website form submissions, and “walk-in traffic.” This will become more important when we get into the nuts and bolts of determining ROI.
- Establish your most important search terms.
Continuing with our prior example, let’s assume our roofer wants to sell more roof installs. The next step is to determine the search terms and keywords that will likely bring target customers to the website. Those search terms should be listed in an initial ranking report to provide a baseline understanding of where you currently stand on a search results page.
- Continuously Evaluate SEO improvements.
Now that you’ve determined where you stand currently, it’s time to get to work on your SEO strategy. Strong SEO can take months and years to develop, so patience and commitment are the keys to success. Each month you’ll need to track where you rank in relation to what was established on your “Initial Ranking Report.”
How can ROI be tracked?
First of all, let’s start with some assumptions:
- People research online when they are purchasing products and services, including yours. (i.e. your customers are using the internet often)
- Since people are shopping online for products and services, it’s important that your website be part of the conversation and be visible in relevant search results.
- Since you want your website to be visible, you also want people to visit it.
- Search Engine Optimization increases website visibility, which ultimately increases hits (for most businesses).
- Since people use the internet, and website hits are important, it is assumed that increased website hits ultimately deserve partial attribution for increases in overall revenue. This is the most important item to understand and agree on before delving into SEO.
In short: Increased website hits = increased revenue.
The ROI Calculation: It all starts with an increase in website traffic.
Earlier we discussed the “baseline traffic level,” and we used 1,000 unique monthly visitors as the example. Now, let’s take that 1,000 unique visitors and compare it with the other metrics that are important to your business, such as,
- Tracked phone calls
- Website form submissions
- “Walk-In” traffic
Since we’ve established that website visitors = revenue, we can assume that an increase in phone calls, form submissions and “walk-in” traffic can be partially attributed to an increase in website visits. There might be other factors that affect the number of people who walk into your establishment, but the website is the primary driver. So, if your monthly unique website hits rises to 2,300 over a one year period, and your other metrics increase as well, the increase in those other metrics can be attributed to your SEO strategy. When you determine a closing rate on the other metrics and a “revenue per customer,” you can easily determine an ROI on your SEO.
Here’s an example of some basic site analytics:
Website traffic above baseline: 1,300 unique visitors (130% increase)
Tracked Phone Calls: 23 over baseline (73% increase)
Form Submissions: 17 over baseline (82% increase)
Walk-In Traffic: 67 over baseline (43% increase)
Overall closing rate: 10%
Lifetime revenue per customer: $623
Now it’s just a simple calculation:
Total New Opportunities (107) * Closing Rate (10%) * $623 = $6661
Top Line Revenue Growth
Monthly SEO Spend: $1,500
Monthly Return Attributable to SEO Efforts (after investment): $5166
ROI % = 344%
It might seem crazy, but this type of return is not atypical when it comes to evaluating SEO spend. This is especially true if you have a higher closing % or higher lifetime revenue per customer.
Common valid questions about this formula
“I don’t really believe the SEO was solely responsible for all these increases. We’ve been doing lots of things to collectively help our business. How can I account for those items in this ROI calculation?”
The easiest way to account for other items in this formula is to work cohesively with your SEO company to agree on those differences ahead of time. That way, there are no surprises or disputes regarding attribution.
Some situations that can throw off the SEO ROI calculation include:
- An overall increase in business in the marketplace: You know the old saying – “Rising tides lift all boats.” A strong SEO strategy can’t take credit for all increases in site traffic, form submissions, etc. To plan for this, perhaps everyone agrees to an 80% attribution in favorable market conditions. For instance, if the government releases a new tax credit for metal roof installations because it believes they’re good for the environment, we can assume our roofer would sell more of them regardless of SEO. Therefore, SEO can’t take credit for all additional hits and sales. So what’s the right attribution percentage? It doesn’t really matter, as long as it’s consistent and everyone agrees to it.
- An increase in other advertising: If a business decides it will do a lot of TV or radio advertising in a given month, assume it will create an increase in website traffic. How much? Undetermined. However, simply accounting for these additional advertisements will go a long way in helping everyone come to a mutual agreement on the SEO strategy’s ROI.
“What if I’m getting an increase in web traffic but nothing else is increasing?”
If your website isn’t converting visitors into leads, consider reading next month’s blog article which will discuss conversion optimization. Or read this month’s article on the Top 3 SEO Steps Almost Everyone Overlooks.
SEO is a great way to increase your business’ visibility and bottom line, but beginning a strategy without proper planning is likely to result in failure. Unfortunately, most SEO campaigns don’t really start bearing fruit until 6-12 months after inception, so it’s important to stick with it!