Measuring your SEO’s return on investment (ROI) is an excellent method of verifying the impact of your SEO. At Lilac James, we have many companies that seek our services to help improve their search rankings, digital profile, leads and sales. Helping them see a return on their investment and added value is very important to the Lilac team. Today we will go in-depth on how to calculate your SEO’s ROI whether you have an e-commerce or brochure website.
What is SEO ROI?
SEO ROI is the return on investment from search engine optimisation. It is a little tricky to understand at first but can be measured. Businesses calculate SEO ROI by examining search rankings, organic web traffic and conversions. Understanding how it is generated and how all this increases revenue is crucial in your calculations.
How to Calculate SEO ROI?
To calculate any ROI, you need to know two figures: return and investment. Firstly, investment is the amount of money that you are willing to invest in obtaining visibility across SERPs. Most commonly this can be in the form of paid advertising and fees associated with a service. However, SEO is the process of earning visibility, not purchasing it.
This can make it a little tough to calculate the value of the investment but not impossible. The return is the amount of value your business has received from SEO in the form of boosted search rankings, organic traffic, and conversions.
Typically, ROI is determined through a simple calculation of Revenue – Cost and then Divide that by the overall Cost.
(Revenue – Cost) / Cost
However, when it comes to SEO you want to modify this formula slightly to Organic Revenue – cost of SEO and then divide that by the overall cost of SEO.
(Organic Revenue – Cost of SEO) / Cost of SEO
Seems simple enough but let’s take a closer look at how we can calculate the ROI for SEO together.
Step 1 – Conversion Tracking
Ecommerce Sites
The first thing that you must do is set up conversion tracking in Google Analytics. This will help you determine the overall success of your website and help monitor the SEO campaign. Having this all set up will give you access to the conversion rate, transactions, total revenue, and much more.
Lead Generation
This is a little more complex but can be easily achieved. First, you will need to determine what action clients are taking on your website and attach a value to that. This could be a simple form, contact page, newsletter, etc that you assign a value to when customers complete it.
We strongly recommend that you consider the goals of your business and enter these into Google Analytics. Once in this section, you can go into further detail of the goal and place an estimated numerical value to it. If you are not sure how to do this for a lead, then take a look at the process below that features some basic examples. Hopefully, this will provide some guidance in calculating lead value and ROI of SEO.
Lead Generation Value Guide
How many leads make sales?
If you receive 200 leads/month and 50 of those come from customers, you will have a 25% conversion rate.
The average value of each sale
If a lead converts you need to attach a value to it. For example, each customer may spend £200 so your average value is £200.
Determine each leads value
Using all the information above you can easily calculate this. Imagine each customer spends £200 and you make £6000. Simply divide £6000 by the number of leads you receive per month (200) to get the following result: 30. This means the value of each lead is £30 on average.
Use this formula for each goal to get an idea of the value to attach to it.
Step 2- Analyse Conversions
Once you have tracked your conversions for a few months you can begin to examine the data and see the ROI of SEO. Breaking down your conversions report in Google Analytics can help see the number of conversions through paid search, organic search, social media, referrals, and much more.
Find the value of these conversions which will be the revenue generated from each search channel. Once you have access to this information you can begin to simply calculate your ROI.
For example, if your revenue from organic traffic is £50,000/month and your SEO service was £5,000/month you would apply the formula already discussed.
Organic Revenue: £50,000
Cost of Investment: £5,000
(£50,000 – £5,000) / £45,000
£45,000/ £5,000
9*100
900%
This means that the SEO ROI for this example is £45,000 or 900%. What is important to remember is that this figure is more focused on the optimisation of an entire website. If for instance only specific pages have been optimised, then your calculation needs to be more refined. Taking this analysis more granular and viewing which specific pages optimised have boosted traffic is much more complex but can be achieved.
How Long Does It Take to See Results?
This is a common question that we see here at Lilac James and the answer is usually the same. SEO is a long-term investment and often results can take at least 3-6 months before you see anything noticeable. After this initial period, traction will pick up and consequently exponential growth.
Final Areas to Consider
Most companies often have revenue as their end goal for any SEO campaign. This is understandable as money is the lifeblood of business. However, there are some other KPI’s (Key Performance Indicators) that should be used to measure SEO success. These KPIs are determined by your company’s goals and the strategy deployed to achieve it.
For instance, examining the difference of website rankings, traffic, and conversions after SEO work has been initiated should never be overlooked. Increased levels in this area can be invaluable to a business, boosting areas such as brand and overall digital profile. We have had many clients that have seen both a positive ROI on their SEO and positive signals in their KPI’s.
If you found this article insightful then be sure to give it a simple like across social media or share with others! If you would like to speak with the Lilac Team about how SEO can benefit your business, then contact us today. We offer a free consultation and report to help you understand how your business’s online presence is performing, and how it can be improved.