How to Measure the ROI of SEO
Are you wondering how to make sure you get a positive return of investment on your SEO budget?
A common way to measure ROI is with search impressions, clicks and website traffic. Although those are good lead indicators and should be looked at, it is nowhere near as accurate as the method we’re going to discuss here.
In this article, we’re going to walk through how to measure ROI for SEO to ensure you’re getting your money’s worth.
Know Your Numbers
Before you can measure results, you need to know the right numbers.
You can do this in three easy steps.
1. Calculate Your Lifetime Customer Value (LTCV)
How much is a customer worth to your business?
That number drives how much you can spend on SEO and any other marketing.
What is lifetime customer value?
Lifetime customer value is the average amount of revenue you get from your customers for as long as they buy your products or services.
Since every industry, business and customer is different, there is no set number.
If you’ve never done this before, coming up with a ballpark number is a good starting point.
Over time, you can tighten up that number as you collect more data.
How to calculate lifetime customer value (LTCV)
If your products or services are one-time transactions:
- Average transaction amount per customer over the last 12-24 months.
If your products or services are mostly one-time transactions with some irregular return customers from time to time:
- Total amount in sales revenue over the last 12 or 24 months / total number of customers.
If it’s a recurring fee (ie. monthly subscription) :
- Average monthly subscription amount x average number of months a customer stays
Tip #1: If you use an accounting service, like Quickbooks, you can easily find these numbers by running a report.
Tip #2: If you use a CRM, like Hubspot, Pipedrive or Salesforce, you can easily find these numbers by running a report.
For the purposes of this exercise let’s say your lifetime customer value is $3,000.
2. Calculate Your Sales Close Rate
Lead generation can be a major investment, converting as many leads into sales as possible is important to make sure your business is growing efficiently.
How many leads do you need to close a deal?
The sales close rate measures how well you convert leads into sales.
Include all leads, no matter the quality.
- Number of all leads / sales = sales close rate
Tip #1: If you are using a CRM (Hubspot, Pipedrive, Salesforce, etc.) you can run a report for your sales close rate.
Tip #2: If you have no idea what your sales close rate is, then use 25%. Again, you can adjust this number as you collect more data.
Let’s say you have a sales close rate of 25% or it takes four leads to get one sale.
3. Calculate Your Lead Value
How much is a lead worth to your business?
Simply divide the lifetime customer value by the number of leads.
- lifetime customer value / number leads
If your LTCV is $3,000.00 and it takes four leads (25% sales close rate) to get a sale, your lead value is $750.00.
4. Calculate Your Sales Cycle Timeframe
What’s a sales cycle timeframe?
It’s the average number of days it takes to close a sale.
From the moment of first contact (phone call, contact form, etc.), to the day the sale closes, how many days does that take?
The easiest way to find this out is to pull a report in your CRM.
Let’s says your sales cycle timeframe is 90 days.
The Numbers To Watch
- LTCV: $3,000.00
- Sales Close Rate: 25%
- Lead Value: $750
- Sales Cycle Timeframe: 90 days
Set Up Conversion Tracking
With numbers in-hand, it’s time to set up conversion tracking.
What is conversion tracking?
Conversion tracking is monitoring and counting where your leads and sales came from.
It tells you what’s working and what’s not working and where to invest.
While, it’s difficult to get to 100% accurate tracking of every lead or sale, setting up a good tracking system will produce data for most leads and sales most of the time.
This alone will give you an advantage over your competition, because most local businesses are not tracking conversion from the website to the lead to the sale.
Sidebar:
Why can’t you get to 100% tracking of all leads and sales?
Some reasons:
- Buyers can be unpredictable and tend not to move in a straight line.
- Buyers have poor memories and may not even remember how they found you.
- The sales timeline can vary from days to weeks or months.
- Employees tend not to fill out CRM records accurately and consistently.
- The longer it takes for a prospect to buy, the less accurate online tracking gets.
For example:
A prospective customer may find your website on Google Search in January. They visit it three or four times in a week, save it to their browser, but then forget about you.
March rolls around and they see your business again, let’s say on a social media ad.
They click on the ad intending to make a decision, but they get distracted.
Later that evening they get home, they find you in their browser favorites on their laptop (from January).
They go to your website and fill out your contact form to schedule a consultation, etc.
In that real-world example, your SEO channel doesn’t get the credit and your social media ad doesn’t get the credit even though they both worked.
However, conversion tracking today is hundred times better than pre-internet days.
In the last section we’ll talk about how to manage less than 100% tracking.
1. Set Up Tracking in Google Analytics*
Program your lead value (ie. $750) into Google Analytics as a Conversion Goal Value.
What is a conversion?
A conversion is the action you want a visitor to take after learning about your business.
You are converting them from visitor to prospect and then eventually customer.
Examples of conversions:
- Filling out a contact form
- Calling a phone number
- Scheduling an appointment online
- Purchasing a product or service online
- Joining a mailing list by entering their email
All of these things can and should be tracked in Google Analytics.
*The technical steps to setting up tracking falls outside of the scope of this article. Your SEO agency should know what to do. The important thing is to forward them your numbers.
2. Set Up Call Tracking on Your Website
When someone is visiting your website on their mobile device and they call by tapping on your phone number, Google Analytics will track that (set up in the steps above).
What happens if they visit your website on their laptop or desktop than they manually dial your number on their desk or mobile phone?
Google Analytics won’t track that.
If you use a service like CallRail, it will track the source of the call based on the phone number the visitor is seeing at that moment.
If a significant number of your leads start with a phone call, this can be a real game changer.
3. Integrate Your Website and CRM
Getting more impressions, visitors and leads are important lead indicators, but sales are where the rubber meets the road.
Tracking what happens to a lead once it enters your sales cycle is key to determining how best to spend your marketing dollars.
It will also tell you where the breakdown is in revenue.
For example, if you need more sales and your sales close rate is over 25%, then you probably need more leads.
If your sales close rate is under 25%, then you probably need to improve the sales process or quality of leads first.
Sales revenue is such an important metric.
What is a CRM?
A CRM is a customer relationship management program like Hubspot, Pipedrive or Salesforce.
Integrate your CRM with the website contact forms and live chat on your website.
When a contact form is filled out, or a visitor starts a chat conversation, it creates a lead record in the CRM and tracks which marketing channel it came from.
From there your sales efforts will be tracked as they go through the sales process.
4. Track Every Lead in Your CRM
Even with online conversion tracking set up, not every lead will come to your CRM automatically.
No matter where the lead comes from, make sure to enter it in and track its source and outcome.
Measure The Results
Now the fun begins.
How to Measure ROI for SEO
Every month, run these CRM reports:
- Sales and Leads from ‘organic search’ last 30, 90 and 180 days.
- Sales and Leads from ALL marketing channels last 30, 90 and 180 days.
- Compare your sales revenue numbers with your current SEO investment.
- Compare your lead value with your future sales revenue based on your sales close rate.
You’ll want to do these things for three reasons:
- First, SEO results are not instant (no marketing channel is). Things done this month may not yield results until a few months down the road.
- Second, you will get leads and sales from SEO marketing, but it won’t get the credit.
- Third, your sales cycle may take months to go from a lead to a sale.
Tip: If your sales cycle is longer than 90 days, run longer timeframe reports like 365 days.
How Long Does It Take To Turn A Profit On SEO?
The exact number of months to seeing profitability will depend on your particular situation.
Generally, if you are just getting started with monthly SEO services, then the range can be 3 to 6 months before turning a profit.
Again, due to various reasons, like the strength of your existing competition, lifetime customer value and sales cycle timeframes, the time to profitability will vary.
Conclusion
As the months and years go on, you should see your ROI increase due to greater amounts of traffic from the older pieces of content getting established on search engines.
Doing monthly SEO consistently, has a compounding effect on your website traffic, leads and sales and will generate revenue for years.
Want to get into the finer details? What is local SEO and how does it work?
Want to see SEO in action? How we ranked a local business on Search in nine days.
Want to see if we can help? Local SEO services.