I would love to go with this answer to my clients, but then I end up giving the usual spreadsheets with the magical numbers being the good SEO guy that I am.
Clients expect more than traffic and rankings report from their SEO companies. They demand to know what they are getting against their dollar. Any decent SEO company should be able to give its client an estimated as well as actual ROI report.
There’s a lot of confusion when it comes to measuring the ROI of SEO campaign and many e-commerce companies have expressed disappointment while doing the same. Some marketers lean towards paid search as it can be measured effectively; however, a surprising report from Digital Marketing Philippines showed that only 44% of companies say they can measure paid search ROI effectively.
Now this is very troubling for any SEO company.
So we will discuss an easy way to measure ROI (return on investment) for e-commerce websites. We will touch upon both, organic as well as paid search ROI, considering more than half of the companies are still not able to measure paid search too.
Organic Search ROI for your Campaigns
You surely don’t have to pay for getting organic search results like paid search but in terms of investment, it takes a lot of time, efforts, research, content, some more content, and did I say content?
All these adds to the overall cost of an SEO campaign can be quite considerable. SEO companies are required to decide the quotation based on the scope of work and the time of the campaign. This is the first step where the clients will question about the ROI of your campaign.
Whether you are pitching or you already have the client in the bag, the first thing you need to find is the overall cost of SEO campaign, which involves everything from cost of content creation to keyword tracking and rankings.
Rest all the values, such as conversion rate, average order value and average cost per sale, you can get from Google Analytics and the client.
For the sake of my example, I am going to give imaginary figures.
Here I am assuming that the overall cost of an SEO campaign is $10,000, conversion rate at 5% and increase in traffic at a modest 10%. Using the pictorial example shown below as example, enter all these values in this calculator.
As per the tool my additional revenue, attributed to SEO activities, in the first year is approximately $14,000, this is after deducting the cost of campaign.
Based on this revenue, I will calculate the ROI. I am sharing another tool here to measure the ROI in percentage, you can use this tool or measure it using this formula:
Additional Revenue – Cost of SEO Campaign / Cost of SEO Campaign = ROI
14000 – 10000 / 10000 = 0.4 or 40%
So if the client is investing $1 in SEO, he or she can expect $1.4 in return.
This is a very modest example with average figures. A good SEO company should be able to achieve far better ROI through higher conversions and more traffic volume.
Paid Search ROI or ROAS
The reason everyone likes paid search is that the cost of the campaign and the results can be easily measured. Google provides goal conversion rate, which allows us to track everything from purchase, newsletter sign-ups, media views, social shares, etc.
Despite that, the client will invariably ask for ROI and hence we come to the topic once again. ROI for paid search is known as Return on Ad Spend or ROAS. It is measured differently than ROI. Here’s the formula for calculating ROAS:
Profit resulting after paid search campaign / Ad spend = ROAS
Assuming that your ad spend is not as high and you are not aiming to rank for broad keywords like flowers and student loans, I will use a ballpark figure here and state that you spent $35,000 on the ads or the overall cost of campaign was $35,000. Assuming that the additional revenue generated was same as organic search, your profit should be around $14,000.
So 14,000 / 35000 = 0.4
Thus, your Return on Ad Spend or ROAS is 0.4 or 40%.
This is however not an ideal ROAS. It means that for every $1 spent, you gained $0.4.
You must strive to achieve at least 100% ROAS. So you can gain $1 for an ad spend of $1.
However, this is easier said than done and I have seen many agencies failing to make their clients understand why they can’t deliver a positive ROAS. This is especially true for non-commercial goals such as newsletter sign-ups and brochure downloads.
Under the circumstances, you must tie a value to the goal. For instance, I’ll attach a dollar value for every brochure download at let’s say $20. So if 500 brochures are downloaded, your overall revenue is 500 x $20 = $10000.
Now divide this figure with the cost of the paid search campaign and you have your ROAS.
$10000 / $5400 = 1.85
So the ROAS is 185%.
It is not entirely impossible to achieve a higher return on your dollar through a smart SEO campaign. You will find some terrific tips on getting good ROI on your ad spend in this article, but here’s the gist of it:
Use long-tail keywords and phrases in your content to attract quality traffic for a better ROI
Always keep an eye on negative keywords as they can lead to unnecessary traffic, which don’t convert. Always smartly optimize your campaign to ensure better ROAS
Improve Quality Score by narrowing your keyword groupings and increasing ad CTR through good copy and ad relevance
If your lost impression share is high because of budget constraints, shift the focus of your campaign toward less expensive keywords.
If you are an SEO company, make sure you start measuring ROI even if the client doesn’t ask for it. This will give you a fair idea of the strength of your campaign. If your ROI or ROAS is not as good as expected, use the above-mentioned tips to improve your campaign results.
If you are an e-commerce website and are unhappy with the results of your SEO campaign, I suggest you hire a good agency to set up your SEO campaign. This is a sure-shot way to ensure the best value for your dollar as the agency will help you lay a strong foundation for your website