It’s 2020 and SEO is still such an integral part of marketing a business online. But there are a plethora of shady and mediocre SEO companies out there: how can you tell if SEO is worth the investment?
Well, SEO is like most other marketing tools. It is designed to increase your revenue. And that is the best way to measure the ROI of your SEO campaign.
So, when predicting the ROI of SEO, you need take into consideration:
- Lifetime value of a customer (on average)
- Your profit margins
- Number of qualified leads
- Your average close rate
The ROI of SEO (and what it isn’t)
The ROI of an SEO campaign should be measured by in terms of revenue. However, too often bad SEO companies try to argue that ROI of SEO is page rankings.
Now part of any SEO strategy is to get as many valuable keywords on page one to try drive traffic to a website. However, if that traffic gets to a website and does nothing, then it is not good traffic. There’s something missing in the SEO Strategy.
Arguing that page rankings is ROI becomes problematic when you realize ranking on page one is not synonymous with converting traffic. That is, getting on the first page of Google is only half the battle, the other half is keeping them on your website and convincing them to convert.
Another problem with measuring keywords ranking well on page one as success is: which keywords are ranking on page one? Are they relevant to my business? If someone in my area searches that, are they expecting to find my site?
Because if people aren’t looking for your business, then those keywords are useless. The value isn’t in how many keywords your ranking for; it’s how many of those keywords are generating leads.
What is the lifetime value of a customer?
Calculating the average lifetime value of a customer is important for all marketing efforts.
If it costs you $50 to acquire a customer and their first purchase is $160, many would say that is either not good because it’s barely profitable, breaking even or going backwards. But if the lifetime value of the customer is, for example, $80,000 is $50 really so bad?
Hopefully, you said it isn’t.
Knowing the lifetime value of a customer will make it easier to calculate the ROI of SEO.
Measuring the ROI of SEO
There 3 elements in measuring the ROI of SEO:
- Referral traffic
Referral traffic comes from other sites you have links on. This is why a linking outreach strategy is necessary. Traffic from reputably websites tells Google your site can be trusted for a particular product or service.
- Targeted traffic
Targeted traffic are people who have searched for your website using keywords. They are also people who come to your site because they’ve subscribed to your email newsletter, or are returning to your site straight from their browser.
A successful SEO strategy is one that encompasses both short and long-tail keywords. These keyword variations should cater to patients either deciding to purchase or are browsing. Both kinds of traffic are useful when calculating ROI.
- Conversion rates
Conversion rates can be organized by where the sales came from. You should be able to tell how many leads came from search engines, how many from ads, social media and email campaigns.
To calculate the conversion rate of your website, simply divide the name of sales (or leads) by the amount of traffic and that will give you a standard rate.
Predicting the ROI of SEO
To predict the ROI of SEO you need to know the following numbers:
- your profit margin per customer
- average amount of qualified leads
- average conversion rate of your website
- average close rate of sales
- Monthly search volume for target keywords
- Ranking goal (this needs to be realistic)
- Approximate click-through rate for that keyword
- A customer’s lifetime value (on average)
If, for example, a keyword has 2000 searches a month, and that keyword is ranked second on Google with a 20% click-through rate, you would expect to see 400 new visitors a month (or 4,800 a year). If your website conversion rate is, say, 3.5% on average you’d expect to see 168 leads.
If the average number of qualified leads is 45% than you’re looking at about 60 leads. For a close rate of 40% that’s 24 sales. Let’s say the average lifetime value of a customer is $80,000, then our predicted lifetime value of those clients is $1,920,000. With a profit margin of 35%, you’re looking at making $672,000 in profit.
Keeping in mind this profit will spread over two to four years you’re looking at between $336,000 and $168,000 a year in profit.
Except there’s one fee missing from this equation. The cost of a high-performing SEO company. To carry on the example, we’ll say the cost of hiring an SEO company to help you achieve this is $66,000 a year ($5,500/month).
So, the profit would be a $102,000. That’s still not bad, right? By our math that’s an increase of 170% per year.
And that’s just for one keyword in the first year. Which sounds amazing, doesn’t it?
What the right SEO strategy can do for you
The above example sounds amazing because that is what happens when you do SEO properly.
SEO is no longer just getting a bunch of keywords on the first page of Google. There’s too much data, too many tools, and high-quality SEO agencies for that to be all there is.
The right SEO strategy can increase your profit margin exponentially year on year. Which means you need to avoid those cheap SEO agencies that don’t offer the sort of services that will help you achieve the best results.
Finding the right SEO agency for you is as simple as talking with Ally Digital Media, we can help you find the best SEO solutions to suit you and your businesses’ needs.