Venturing into digital marketing without tracking your strategy’s impact is like sailing into unknown territory with your eyes closed.
The same goes with your SEO strategy, it’s CRUCIAL that you know its return on investment. Otherwise, you could be flushing money down the drain with the hope that it will one day boost your digital marketing efforts.
If you’d like to get to the bottom of the question, ‘Exactly, how much am I gaining from search engine optimization?’ here’s a simple formula to follow:
From the formula, it’s clear that you need to know two values:
- Gain from investment
- Cost of investment
Calculating the Cost of Investment
Calculating the cost of investment is relatively easy. Depending on whether you hire an SEO agency or do it in-house, here’s how you can arrive at the final cost of the SEO investment.
Allocate your investments strategically by considering :
- Internal Staff: Consider the salaries, benefits, and any training expenses associated with in-house employees dedicated to SEO.
- SEO Agencies and Freelancers: Account for the fees paid to external agencies or freelancers for their SEO services. This may include monthly retainers, project-based fees, or other agreed-upon payment structures.
- SEO Software: Include the costs associated with tools and software used for SEO analysis, keyword research, and performance tracking.
- Content Distribution and Link-Building: Factor in any expenses related to content distribution, outreach efforts, and link-building initiatives.
Consider a scenario where your internal SEO team consists of two employees with an annual salary of $50,000 each, benefits costing an additional $10,000, and training expenses totaling $5,000. If you also collaborate with an SEO agency on a monthly retainer of $2,000 and invest $500 monthly in SEO software, your total monthly investment would be $8,500.
Calculating the Gain From Investment
This involves quantifying the positive outcomes and attributing a monetary value to these achievements. Follow this step-by-step guide on how to calculate the gain from your SEO investment:
1. Identify Key Performance Indicators (KPIs)
Start by identifying the key performance indicators (KPIs) that align with your business goals. These could include:
- Organic Traffic Growth: Measure the increase in the number of visitors coming to your site through organic search.
- Keyword Rankings: Assess the improvement in rankings for target keywords on search engine results pages (SERPs).
- Conversion Rates: Evaluate the percentage of website visitors who complete desired actions, such as making a purchase or filling out a form.
- Economic Value of Organic Search Traffic: Quantify the revenue generated by users who come to your site through organic search.
2. Assign Monetary Values
For each identified KPI, assign a monetary value to reflect its impact on your business. Accurately assigning values to conversions is the linchpin of calculating ROI—it transforms metrics into meaningful insights for strategic decision-making.
This step may require collaboration between marketing and finance teams to determine the worth of specific actions. For example:
- Assign a value to each conversion based on the average order value or customer lifetime value.
- Estimate the value of improved keyword rankings by considering the potential increase in organic traffic and conversions.
- Determine the economic value of organic search traffic by analyzing the revenue generated by users acquired through SEO.
3. Use Google Analytics and Other Tools
Leverage tools like Google Analytics to gather data on user behavior, traffic sources, and conversion metrics. Set up conversion tracking to attribute specific actions to your SEO efforts. Analyze the “Conversions” and “E-commerce” reports to quantify the monetary value of conversions.
4. Consider Non-Monetary Benefits
While monetary values are crucial, don’t overlook non-monetary benefits that contribute to your business objectives. Enhanced brand visibility, improved user experience, and a loyal customer base can be challenging to quantify but are integral components of the gain from your SEO investment.
Let’s delve into a real-world scenario to see how the Gain-from-Investment formula translates into tangible figures:
Consider a hypothetical scenario where your SEO efforts have led to a 20% increase in organic traffic, a 15% improvement in conversion rates, and a boost in keyword rankings, resulting in an estimated 25% increase in revenue. Assign monetary values to each of these improvements and sum them up to calculate the total gain from your SEO investment.
Once you have the gain from your SEO investment, compare it against the previously calculated cost of investment. This allows you to assess the profitability of your SEO strategy and provides the data needed for the ROI formula.
Say your gain from investment totals up to $20,000. Using the supposed cost of investment value from before ($8500), your ROI would be
As a percentage, this return on investment is 1.35 x 100 = 135%c
Making Sense of Your ROI Figures
In general, a positive ROI is considered good, indicating that the benefits gained from SEO efforts exceed the costs incurred. However, what constitutes a “typically good” value for SEO ROI can depend on the objectives set by the business.
A commonly cited benchmark is a 5:1 ratio, meaning that for every dollar invested in SEO, the business gains $5 in return. However, this figure is not universal, and what is considered a satisfactory ROI may differ based on the nature of the business and its particular circumstances.
That being said, it’s important to set realistic expectations aligned with your unique business objectives and market dynamics.
Please note also that SEO is often a long-term strategy, and results may take time to materialize.
Optimize SEO Effectively with Don Creative Group
Continuous improvement is the heartbeat of digital strategy. If you’re seeking tailored insights and strategies, Don Creative Group is poised to elevate your digital marketing endeavors.
Right from the start, we focus on making sure your plan gives you the best results.
We create bespoke strategies for each business we work with. If you want to know more about how we can help your business be more visible online, contact us today.