How can I calculate ROI for SEO?

March 22, 2018
 

30-second read:

There are no guarantees in SEO-ROI forecasting, but there is a solid methodology that uses current visits, conversion rate and order value to establish the dollar value of your current traffic. It plots this against the estimated cost of recommended SEO fixes to reveal how much more traffic you need to achieve positive SEO-ROI in your campaign.

 

The full version:

It’s a well-known problem: establishing the return on investment (ROI) for search engine optimisation (SEO) is tricky – especially for sites that do not offer e-commerce.

We’re prepared to go out on a limb to say that any SEO provider who makes blanket upfront guarantees that they can deliver a certain increase in your site traffic for a certain dollar figure is being deceptive (or doesn’t know what they’re talking about). In fact, the SEO industry has been fighting against these sorts of claims by shonky providers for over a decade.

Even for sites that do offer e-commerce, any decent SEO-ROI projection first requires that your SEO provider has full access to the site’s data and that the site is already properly optimised for conversionsWhy? Well at Mash, we typically look at three factors to calculate a projected ROI for a certain SEO budget:

  1. Current average organic visits over a set period
  2. Current e-commerce conversion rate
  3. Average order value.

We’ll see why these three factors matter through the rest of this article.

ROI of 19.7% from a $10,000 SEO campaign – an example

Let’s work through how we do it. First, let’s make up a client called Fashion Boots Online (FBO). Let’s make it a mid-sized e-commerce footwear retailer whose site traffic is not seasonal, let’s also say it has the following three factors:

  1. Average of 10,000 visits over 3 months from organic searches
  2. E-commerce conversion rate of 0.68%
  3. Average order value of $176.

What we do next is conduct SEO research on FBO’s behalf. Let’s say, our research finds that FBO needs $10,000 worth of SEO work. Therefore, our SEO-ROI break-even point is $10,000 – our SEO campaign must generate sales for FBO that are above that figure. How does this translate for FBO?

57 sales to break even

At $176 average sale value, 57 is the number of additional orders required to pass $10,000. (Okay, so $176 X 57 actually works out to $10,032, but you can see where we’re coming from). Now, we have to think about 57 sales in terms of site visits…

8,383 organic search visits to reach 57 sales

How did we get that figure? Well, 57 sales divided by the conversion rate of 0.68% yields 8382.35. To spell it out: The SEO campaign must capture 8,383 visits from search engines during the contract period to deliver the minimum of 57 sales needed to reach positive ROI. It’s a nice, solid, simple KPI. There is a but though…

SEO rarely starts from the best-case scenario

Let’s say FBO’s site has a fairly common technical issue: the product pages lack basic optimisation. In addressing this issue, we expect to see a natural increase in traffic volume. This can be estimated through a calculation that takes in current ranking positions, CTR and search volumes. We don’t need to go into that number crunching right now, but one of the core tenets is that a ranking of #1 on Google will achieve a CTR of 30%.

So, if we estimate the SEO plan (worth $10,000) will increase FBO’s organic search traffic by 100% (which is not unrealistic, given our track record of SEO improvements), that’s an extra 10,000 visitors over the campaign period.

So 8,383 is what we need to get to break even and 10,000 is what we project we will get. If the conversion rate remains the same at 0.68%, then 10,000 visits should achieve…

68 sales projected

If the average sale value remains the same (there’s no apparent reason why it would change) these 68 sales represent…

$11,968 revenue projected

Calculated against FBO’s $10,000 investment in SEO that works out to…

+19.7% ROI (rounded)

And that’s a pretty good investment in anyone’s books.

Capturing the results of good SEO

This example also shows the importance of a site optimised for conversions. To adapt an old cliche, SEO leads a horse to water (your site) but can’t make it drink (convert). Optimising conversion rate is a practice of making it as easy and compelling as possible for your site’s visitors to do what you want them to do. That could be clicking the “buy” button, picking up the phone to call you direct or even something else. It’s a discipline all to itself and the topic for another article though…

So, beyond SEO, a site might also need conversion optimisation to best capture the new traffic the SEO investment brings in. And that’s where the actual dollar return in the ROI comes from. Until then all your SEO is really doing is bringing more people to your door and maximising your potential. It is still up to your sales process to do something with all the new leads.

 

Top SEO-ROI tips

  • SEO takes time to have an effect, the ROI isn’t instant.

  • SEO makes improvements that help your results, this is not the same as “buying the result”.

  • You can have great SEO but bad conversions, and thus ROI, because your website isn’t well built.

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