• Marketing

How to Measure The ROI For Your SEO Campaign (Plus Formulas)

  • Uday Tank
  • 6 min read
How to Measure The ROI For Your SEO Campaign (Plus Formulas)

Intro

Pop quiz: What's the most important number when it comes to SEO?

Is it conversions?

Click-through rates?

Traffic?

All of these metrics are important. But, they don't really give you the big picture of what's happening with your website long-term.

There are other figures that inform most of your marketing decisions. In fact, these numbers provide helpful insights into how well your marketing budget is working and where it works best.

Those numbers relate to the return on your SEO investment, aka ROI.

Search engine optimization is an ongoing process that takes a little trial and error to perfect. Whether you're an SEO novice or a seasoned marketer, it's important to calculate your search engine optimization ROI so that you can allocate your marketing budget more efficiently.

ROI vs. KPI: How They Inform Your SEO Strategy

Without a means of measuring returns, tracking your metrics is like staring at a full bowl of alphanumeric soup and trying to make sense of what you see. To the uninitiated, it's a jumble of letters and numbers, lines and graphs, and the dashboard for each marketing platform tells a different story.

Some numbers, like traffic and click-through rates, measure how well your current SEO strategy is working to get eyes on your web pages. Others, such as time on page and cart abandonment, help to calculate the level of engagement and customer satisfaction.

All of these metrics relate to SEO to some extent. But, they're KPIs that provide a snapshot of how well your efforts are doing at the moment. They're based on short-term results indicating the success or failure of specific marketing strategies.

Your ROI is part of your long game.

Content is the story you tell. When it's strategically SEO-oriented, search engines are able to evaluate it for things like relevance and align it with user intent. The goal is to direct users to the content they want in as few clicks as possible.

Marketers, content creators, and other stakeholders construct marketing content with an eye toward improving their KPIs so they can meet benchmarks that help them reach their goals.

The point is to elevate your place in the SERPs so more people can find your content.

Key performance indicators reveal how well your marketing efforts are paying off in specific areas. They're directional metrics that mean nothing unless you understand how to interpret and use them.

Calculating the return on your investment lets you know how much it costs you to get there based on your KPIs.

Say, for example, that you spend $10,000 on targeted ads. Looking at your analytics later, you discover that your traffic increases during the period the ads are running, and you increased revenues by 10% over the same period the previous year.

How much of that $10,000 helped you achieve those gains, and how much could be attributed to other marketing techniques or platforms? The answer will help you decide how much to spend on social media ads in the future or if you should focus on other forms of marketing, like email or sponsored ads on Google.

With the information obtained by calculating the ROI for that ad spend, you're able to put things in perspective and make data-driven decisions on budgeting and resource allocation in the future.

With SEO, it's a little more difficult to determine your ROI.

SEO ROI and How it Impacts Your KPIs

You don't know how much revenue you've earned by the amount of traffic your website receives. You can learn how much your traffic has increased. But, you won't know how much of your SEO budget directly impacted that increase or how much of your traffic translates to sales.

SEO ROI and How it Impacts Your KPIs

This can be different for each campaign, but it's also impacted by your audience base and business model.

For example, a retail brand that sells beauty supplies directly to consumers would calculate ROI based on product sales. An ISP providing high speed internet near me would calculate ROI based on the number of users they get. Brands would calculate ROI differently if their business model is a salon. Perhaps their main metric is an increase in bookings or total revenue generated per booking. The base KPI is different again if the business is an online review website that compares various beauty brands. In that case, the KPI might be traffic volume.

What is the primary metric you use for measuring the ROI of your SEO campaigns?

Aside from the metric you use, another consideration is whether ROI is being analyzed retroactively or used as the basis for budgetary forecasting.

In any case, you need to do a little math to help you figure it out. Don't worry. There are basic formulas for gauging SEO ROI that you don't need to be Einstein to understand.

For example, you can get a fast baseline for SEO ROI by calculating the cost of your targeted keywords in AdWords and measuring that against your anticipated traffic. However, you can drill down and get a more granular picture by using a simple formula.

Max Roslyakov from SEMRush uses the above valuation as the basis for determining ROI in relation to conversion rates and customer acquisition costs (CAC) using this formula:

ROI = ((Value-Costs)/Cost)*100

The answer will provide you with a percentage. The other figures are estimations based on the platform's normal conversion rates using the numbers from past performance over a set time period or seasonal trends.

But what if you want to look at your actual ROI rather than calculating a forecasting ROI?

Areas of Focus to Increase Your SEO ROI

Your numbers mean different things, and SEO performance ultimately depends upon the totality of your optimization rather than one specific component.

For example, elevating your rank depends on your overall web presence and authority as on which keywords you use and how strategically you place them. If you're shelling out money on PPC, it's a little easier to calculate your ROI based on CAC or spending in relation to sales.

The answer is a little harder to find with organic traffic unless you know how and where to look.

Target Your SEO Strategically

These days, SEO investment can come from many different facets. For example, if you're a large enterprise that outsources digital marketing to freelance agencies on Nicelocal.com, your cost will be the amount you pay the marketing firm.

However, in-house teams will add things like staff salaries, software, and other hidden costs to the mix.

The more narrow your strategy, the easier it is to calculate the ROI of your SEO spending. Increase your ROI by using highly targeted keywords and phrases that have high interest/low competition. This allows you to attract qualified leads that are easier to convert in a shorter amount of time, providing a lower CAC and higher return for your efforts.

Determine Which Conversion Tactics Provide Economic Value

This is an area of focus for websites that don't generate sales directly from their website. If traffic doesn't automatically result in revenue, how do you determine the ROI of your SEO?

By determining which aspects of your conversion translate to economic value in relation to your investment.

Conversions, in this sense, mean that organic traffic is completing the desired action that brought them into your sphere of influence. Are you looking for qualified leads? Subscribers? Bookings?

Break down these elements into the value they provide in relation to your ultimate goal of converting leads to customers, and then assign an economic value to each. Use that valuation to determine the ROI using the ROI = ((Value-Costs)/Cost)*100 formula.

Set Conversion Tracking on Your Analytics Dashboard

This is an automated way to perform the same function as measuring ROI in the previous tip. Websites that involve direct sales can set up their Google Anaytics for eCommerce by setting up eCommerce Tracking on their dashboard. Once that's enabled, you can get an overview of the reporting by following the menu selections thus:

Ecommerce Overview (Conversions > Ecommerce > Overview

For websites that measure through metrics other than sales revenues, you'll need to assign each component an economic value, as mentioned in the previous tip. Then, you'll set up these values as goals in the appropriate section by following this navigation: Admin > View > Goals in Analytics.

Set Conversion Tracking on Your Analytics Dashboard

If you set a goal of gaining 100 unique visitors per day, and 25 of those visitors make a purchase, your conversion rate for that goal is 25%. Next, you need to place a value on each conversion and multiply that number by the total number of conversions. This will provide you with an average value per conversion.

For example, if your efforts convert 25 customers, the average dollar amount spent per customer will provide you with the average value per sale.

Using the figure from the value per conversion, divide that number by the total number of leads generated to get an average value per lead.

Using simple numbers to illustrate, if each of the 25 converted leads spends $100, your total revenue from these leads is $2,500. Dividing the resulting total by the total number of leads in the example, 100 leads, will provide you with an average value of $25 per lead.

The numbers will be less precise than using actual sales numbers, but it will give you a clearer picture of your ROI than just guessing.

These conversion rates and ROIs can also be set by the marketing channel. In each case, the ROI can be determined using the traditional investment ROI calculation and plugging in the numbers:

(Revenue – Cost)/Cost of Investment = X

Multiply the X by 100, and you'll have your ROI expressed as a percentage.

Final Thoughts

Leveraging the power of SEO will improve your traffic and reach. However, your strategy is only as strong as your search engine optimization game.

ROI is one of the most important metrics you have at your disposal. Learning to calculate and maximize the return on your SEO investment pays exponential dividends while saving time and money.

Measuring your ROI provides you with insight and actionable data. These formulas will indicate where your SEO is working so that you can redouble your efforts where they doing the most good.

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