When it comes to a search marketing agency, clients want to know their return on investment (ROI.) Calculating your SEO ROI can be tricky, especially if you’re new to the calculations. This article will cover how to measure ROI and how to calculate it. For answers to additional questions, contact an SEO Design Chicago representative.
How to Measure SEO ROI
Many search marketing agencies that provide SEO services have reported ROI in several ways. One of the questions marketers ask is whether or not a program delivers a return on our investment or ROI. This is when measuring the contribution of a given marketing program is important.
Now you might be wondering how hard measuring marketing the ROI of your marketing programs is. There are some challenges that arise when figuring out the ROI:
- Knowing when to measure: When it comes to investing, the future can be uncertain. The wanted results may not come for a while–whether it’s five months or five years–but marketers need to decide where they want to invest their budget today.
- Multiple influences: When it comes to investments, different marketing programs affect each individual differently, so it can be a challenge deciding which programs can have the most impact.
- Extraneous variables: Factors outside of the marketing’s control can greatly impact the program results. This can significantly impact the ROI.
Search marketing agencies that provide SEO services have traditionally reported ROI in different ways. One method that has been used is looking at search engine ranking for SEO ROI. If a company can get a client to do well in organic SERPs (search engine results pages), that indicates that their job is done. Unfortunately, that method isn’t exactly SEO ROI.
SEO Return on Investment
Traditionally, it has been difficult figuring out the return on investment or ROI of SEO. In order to calculate the ROI of anything, SEO included, you need to know both the return and the investment.
When it comes to the investment for SEO, you will need to keep in mind that SEO is the process of earning visibility and not purchasing it. This makes calculating ROI a little more trickier for SEO, but not impossible.
The process of calculating the value of SEO is a little different depending on how you make money from your website.
True SEO ROI
True SEO ROI involves driving targeted traffic from SERPs, regardless of the length of the keyword tail. It also includes targeted referral traffic, meaning traffic that fulfills the purpose and goals of the website, such as repeat traffic, purchases, newsletter signups, registrations, subscriptions, or community involvement.
Reporting SEO ROI can be hard because you have to connect the links that have been built with the website and search engine referral traffic, then you have to connect that data with conversion results. Even though Google Analytics can help you do this, the data is still difficult to analyze and report.
True SEO ROI can also show you how effective an SEO campaign is. An example of effectiveness of the true SEO ROI calculations is if a campaign is focused on building links on the client’s online store, then an SEO ROI report would show the client how successful they were in that campaign. That client’s SEO ROI report could include a list of inbound links that resulted in purchases, including the details from related organic search engine traffic that resulted in purchases (whether they were matching or similar keywords used in the anchor text or within the context of the pages that the links were built on).
When it comes to SEO ROI reports, the reports should focus on and report specific key elements, such as:
- Overall increase in conversion over time
- Overall increase in unique users and traffic
- Conversions related to the campaign
- Overall increase in search engine traffic
- Conversions related to search engine traffic
When Should I Measure SEO’s ROI?
As a rule of thumb, you should measure SEO’s ROI on a monthly, quarterly, and yearly basis. Because SEO is a long-term strategy and generating results takes time, you most likely won’t see a positive ROI in the first three to six months of measuring your ROI. After these first few months, your SEO can start delivering a return and will continue to provide one.
What is a Good ROI?
There is no right answer to this question. A good SEO ROI will depend on your business.
Because each company is different, assigning an average or good SEO ROI is difficult. Each business invests different numbers into SEO, and the values vary from one business to another.
Before your business starts to optimize your site for SEO, it is a good idea to start thinking about an ideal ROI for your business. The number you come up with can help serve as a benchmark for your business to measure against itself. For better results, you should start with a small percentage and then work towards a larger percentage as you begin to gain data.
How to Calculate ROI
You might now be wondering how to calculate ROI. Calculating ROI might sound intimidating, but it isn’t as bad as some might think.
Calculating ROI is relatively easy, especially if you’re doing Pay-Per-Click (PPC) advertising. For instance, if your revenue is higher than your spending, then your client is getting a return on their investment. Even though the ROI is simple to figure out ROI for PPC, the same cannot be said for SEO. This is when calculating the ROI becomes a little tricker.
There are several versions of the formula for ROI. The two most common are as follows:
ROI = Net Income / Cost of Investment
ROI = Investment Gain / Investment Base
When it comes to calculating the SEO ROI, you can use the formula:
ROI = (Gain from Investment – Cost of Investment) / Cost of Investment
The most commonly used ratio is the ROI formula first version (the net income divided by the cost of investment). To make the formula seem easier, you can think about the ROI formula by taking some kind of benefit and dividing it by the cost. When a person says something has good or bad ROI, you should ask them to clarify how they measure the ROI.
Why Use the ROI Formula Calculation?
ROI calculations can help an investor decide whether or not to take an investment opportunity. The ROI calculation can be an indication of how the indicated investment has performed. When an investment shows a positive ROI, it can attract an investor to the value of the investment. When the ROI is negative, the investment could deter the investor.
The ROI formula calculation can aid an investor with separating low-performing investments from high-performing investments. This is of benefit to the investor and portfolio managers because they are able to optimize their investments.
Benefits of the ROI Formula
There are several benefits the ROI formula gives, which investors should be aware of.
- Simple and easy to calculate: the ROI formula is often used because it’s easy to use. This is partly because there are only two figures that are required–the benefit and the cost. There is also not a strict definition of “return”.
- Universally understood: ROI is a concept that is universally understood if you use the metric in conversation.
Limitations of the ROI Formula
Even though there are benefits to using the ROI Formula, there are also some limitations.
The first limitation has to do with the fact that the ROI formula disregards the factor of time. In other words, a higher ROI number doesn’t necessarily mean a better investment option. Two investments that have the same positive ROI can produce very different outcomes through time. For example, if two investments have the same ROI, the first investment may take two years to be completed, while the second investment may reach the same outcome in five years. When the factor of time is added, an investor can easily see which one is the better option.
The second limitation to the ROI formula is that it’s susceptible to manipulation. In other words, the ROI calculation will be different between two people because of what ROI formula was used to complete the calculation. For example, a marketing manager might use the calculation shown above, without accounting for additional variables, such as sales fees, taxes, legal costs, etc., while the second person might take those variables into consideration. An investor needs to look at the true ROI, which accounts for all other variables when an investment increases in value.
SEO agencies, like SEO Design Chicago, can help you as you calculate your ROI. We can also aid you with understanding what your ROI calculation is telling you.
Ready to Calculate Your SEO ROI?
Now that you know more about the basics of ROI and how to measure or calculate it, you’re ready to use ROI in your business investments. SEO Design Chicago can help you with all of your ROI needs and questions, whether you’re figuring out how to measure your SEO ROI or you have a question about calculating an SEO ROI.