Archive for June, 2012

12
Jun

How Do You Figure Out Return on Investment for SEO?

   Posted by: rwcustom    in SEO

How Do You Figure Out Return on Investment for SEO?

This is one of the most common questions we are asked in the SEO industry. How can we possibly justify spending all of this money if there is not a sure way to track return on investment? Easy answer: there is a way to figure ROI—in fact, there are a few ways. However, it’s more of a complex theory of Return-On-Investment, which is why many small business owners continue to resist investing in SEO today. However, figuring SEO investment is only as difficult as you want it to be.

The principle behind website return on investment is that you must measure your success…in fact, measuring your business and your industry, is the only way you can possibly understand where your profits and losses are coming from. Many small business owners are merely eschewing their responsibilities to track their success, line by line, day by day. Measuring profit and loss only by sales and expense statements is very limiting and not at all an accurate reflection of long-term SEO success.

How to Figure Out Return-On-Investment for Online Marketing

Tracking ROI can be as simple as tracking the percentage increase in traffic or revenue. It’s fairly easy to count up the cost of your sale or to buy software that itemizes these results for you. You start your journey by calculating the total revenue you have made (from all applicable avenues) and then subtract the cost of SEO investment. Obviously, if you’re spending a huge investment in SEO and not wielding any extra profits, then there is a major flaw in the SEO strategy which could be anything, including:

• Poor call to action or a lack of emotional connection to the viewer
• Unclear or confusing subject matter
• Pricing problems
• Poor keyword choices
• Search Engine penalties
• Low quality links or a bad web hosting company
• Too much competition for your keywords
• You’re too impatient
• Marketing approaches and writing style
• Headlines and subheadings
• Website formatting and layout

Yes, one challenge in SEO is having the patience (not to mention the capital) to invest in SEO for the long-term. This is because sometimes search engines do take their sweet time indexing a new site. If the site is new or rarely updated, the search bots will not check for new content every day. For that matter, sometimes new trends in SEO take a few months to develop. SEO algorithms also change on a frequent basis.

It is often recommended that you create a company profit and loss sheet for the past six months and projects for six months down the road. In essence, you are buying/writing content and links today to see profit tomorrow. Therefore, try to view SEO marketing as an ongoing need.

How To Figure Out Return On Investment for SEO

It’s even more complicated when you have to track ROI by only SEO and website and “metric” data. Sometimes it’s not a matter of tracking hard sales. The best strategy is to record all of the data you can get your hands on and then start creating a list of productive company goals. For example, you could start assigning a monetary value to data such as:

• Your total traffic on a daily, weekly and monthly basis
• Your number of conversions (viewers who becomes paying customers)
• Signing up for a newsletter
• Signing up for a free membership
• New “leads” (contact information left behind)
• Total page views or total site hits
• Total unique visitors
• Total social media “likes” or respond postings

Once you identify the key data (i.e. conversions or total traffic) you can attribute a revenue number to that item. Here is common example. You might assign five bucks for revenue per conversion. With that number, you could project: 50,000 incremental visits at an average conversion rate of 5% (which you observe through metric) and five dollars of RPC. Therefore, it’s 50,000 x 5% x five dollars per conversion. In this case, your figure would be $12,500.

Another method of tracking ROI in SEO is the Cost Per Lead or Cost Per Sale method. You can figure this out by determining the cost of each customer. For example, if you spend ten hours in one week then that will eventually turn into 250 hours over the next six months. Now compare that with your gross profit: $2,000 or $500 net gross. So the gross divided by the total hours would be equal to $2 per hour. Realistically speaking, are you making back the time-money you are putting into your SEO work?

One more formula to consider: the average customer lifetime value, assuming you acquire some lifetime customers. Let’s say each customer spends an average of $50 on your site each time they visit. However, they only order five times out of the year. Further research reveals they only stay loyal to your company for about two years. Still, each customer (on average) manages to bring in two more referrals. Thus far, you have $50 x 5 (five times a year) and x 2 (for two years). Each lifetime customer is worth $500. Now, counting the referrals, you have made $1,500 according to your “customer lifetime value” formula.

Other Items to Consider in How to Figure Return On Investment

However, you can’t stop there. There are many types of ROI formulas you can look into. For instance:

• How many keywords are actually driving traffic? (And most likely, you are paying an SEO company by the number of keywords, which each encompass a page) This is what you call “conversion rate per keyword”)
• How many landing pages are driving traffic to your site?
• Are your sales/leads increasing or decreasing? How much success can be directly attributed to your online campaign?
• How have your overall sales and leads changed over the last six months and what specific SEO campaign can that success/failure be linked to?
• SEO vs. PPC vs. Email vs. Banner Ads
• Search engine rankings and how your site moves in SERPs
• What other websites are sending you traffic and what is the conversion rate?
• Incoming links
• Pages indexed through the top search engines

SEO marketing is all about close tracking and goal setting. This is the only way you are ever going to “see” Return-On-Investment…by looking for it between the lines. It’s up to you to determine just how important ROI tracking and investigating is to your brand. Don’t give up too early just because you don’t understand where the money is going and where your customers are coming from. Talk to an SEO custom writing firm that can help you understand!

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