How can we calculate SEO Return of Investment (RoI)? What information do you request from your clients in order to calculate it? What's your formula?
You can't do a 100% accurate one because YoY (most fair) doesn't account for ranking changes after the dates you compare with.
But I'm transparent about this and we agree to YoY comparison, which PIs and/or KPIs to measure, what value to place (e.g. newsletter signups – what value to assign to referral source that gave it). Ecommerce is easier of course.
Can you give me an example?
Hans Petter Blindheim » Nikolay Stoyanov
I would have to anonymize this (cannot share clients name nor niche), but:
In 2019, one of our biggest clients who we had charged about $1.8m that year attributed $60m revenue (top line) to our efforts that year. Profit margin was 71% on average for the products we focused on.
And as you know, Search Engine Optimization (SEO) doesn't normally stop in its tracks as you finish it, it tends to continue to work in their favour for years to come unless you are in the speculative aspects of how to go about it – but this client had to halt a lot of its business for the pandemic. But its picking up and they pulled us back in now as they are re-gaining traction.
Hans, what was the core work performed to charge $1.8M?
Nikolay Stoyanov ✍️
Leigh DavidsonHans Petter Blindheim, I'd like to know too. Thanks for your last answer!
Hans Petter Blindheim » Leigh Davidson
Conversion Rate Optimization (CRO) and tech SEO
When I was providing SEO services, I was doing that to increase a client's revenue. Not positions, traffic, backlinks and any other irrelevant metric. Clients pay us to bring them more money, so that's what I was focusing on – client's revenue.
It's all in the name ROI – return on investment – this is not traffic on investment, or positions on investment, but the amount of money client made after investing in an SEO campaign.
Client Profit from our SEO Campaign / SEO Camaign Cost, then multiply by 100% to get percentage ROI.
100% agree with this. You could get vanity rankings all day long and get a load of traffic that never converts. Or you could do some deep commercial analysis to find long tail niche keywords that have low volume but high conversion.
Nikolay Stoyanov ✍️ » Morgan Taylor
Sounds fair, but the devil is in the detail. How were you calculating the roo and your fee?
Brent Friar » Nikolay Stoyanov
We do the same. Before we start a campaign we set up goal tracking if they don't already have it, then we base the calculation on goal conversions YOY.
So, if i solve Problems my Job it‘s worth it‘s costs!
E.g. Cost to be Done the Job is 3.000 USD or cost of Not to be Done the Job is 0 USD
Calculate 0 or all! Between is nothing!
While this is true, it has nothing to do with his question. 🤔
Sure you are Right, But if Need to calculate ROI, what have you Done before?
If you habe Done the job… ROI is the success After the Job is done, nothing More….
Perhaps i don‘t unterstand the question… if so sorry for this comments. Regards Blanz.
Christopher Fischbach » Michael Blanz
Whenver you work with bigger clients they'll hunt you for your work and pricing. Even worse if you're working with agencies. You need to tie your work to business goals. They don't have to be monetary in all cases!
However, any return needs a value and you better have that value set prior to working. Then you'll be able to show what they've gained from your work. If you miss that, it will be hard to explain as you haven't written down the status before working most likely too. Rankings work for small clients maybe (even then you should provide better metrics) but it won't for bigger clients as they don't really care most of the time.
Nikolay Stoyanov ✍️ » Christopher Fischbach
Agreed, so how do you do that exactly?
Christopher Fischbach » Nikolay Stoyanov
Define their goals and match that to a value. Leads? What's the average Loan-to-Value Ratio (LTV) of each? Sales? Either match it to specific products or amount of carts. Maybe branding? What's the average amount of impressions/what's their status in terms of visibility. Whatever it is, match it to a monetary value to be able to compare the costs of you to their goal(s).
It's not easy but they need to commit to a value of whatever they want to reach. Maybe all of the above is something to take into consideration too. I usually do discovery talks and pull out the info I need to have some sort of value of each of the above and then I take all of that into the equation when reporting. I usually don't report actual steps of work I did but what they got from what I did. Sometimes all of it increased, sometimes just one thing increased but overall they get a comparison of costs vs gains. Sometimes that's positive sometimes negative, that's why I report the averages of various time scopes along with the actual months reporting.
Yes that's True! I forgott my comfortable Situation in arguing! You are Right
Your client's bottom line is the most important thing. Your SEO efforts should be bringing in quantifiable results – sales, leads, sign ups etc. How much is each conversion worth to the business (Loan-to-Value Ratio (LTV)
I'd divide the value of the conversion by our fee to get an understanding of the results we've produced.
$5000 LTV x 10 conversions = $50,000
Our fee = $5000 p/m
ROI = 900%
It is best is to leave it to the client what to focus on or at least do a follow-up to that question.
Reasons:Maybe they have a limited amount of high profit-margin products they can get their hands on and this solves itself over time and all you did was empty their stocks of that product faster without actually improving ROI for them (only your channels appearance of ROI at the cost of others).
Or if they sell services, might be that the highest profit ones can only be delivered by 2 of their many employees who are already delivering at capacity – and that finding more employees to handle more load isn't something you factor in on your ROI (but that it takes away most of it because the cost of training their existing ones are two-fold (loss of income during training and high cost of training) or a high expense to hire.
Calvin Mckenzie » Hans Petter Blindheim
Good point. I mean no-one knows the business better than the owner. What you mentioned is important because it's easy to take on a client without taking a moment to think 'do they have the right infrastructure/team/capabilities to facilitate more business'.
It's relevant to a company I'm working with who are now struggling to answer their phones. They'll soon be hiring a VA to manage this. More costs, lower ROI..
Never as simple as it seems
SEO ROI = YOY Delta Organic Revenue – SEO Spend / SEO Spend
(Lots of baseline) Information:
Google Search Console (GSC) (Impressions, Sessions, Click Through Rate (CTR), Avg. Position)
GA (CVRs, AOVs, segments)
-Third-party data to bridge first-party data gaps
Depending on the available info and type of website. You can create directional estimates by month with a low, medium and high-scenario.
Ammon Johns 🎓
By asking the client questions and understanding their business right from the start. I know what my clients spend on advertising, where, and what results they get from it. I know what they consider an average cost per lead, and what they pay on average per customer acquisition (at least as well as they know it, even if I have to calculate it for them).
I know what the value of an average order is, and if they have a variety of services or products, I know which are worth more, which less.
I know what their average sales volumes are, how they break down by products and services.
Where they have customer support and after-sales service, I have a good idea of the average costs there too, as well as a good idea of how that plays into customer lifetime value, upsales, etc.
I know these things because I ask, because it is my job to know them, benchmark them, and improve them.
Without these things, knowledge of the bottom-line sales and profit and costs, you CANNOT sell ROI at all. You are just selling something you hope, maybe, correlates to a return on investment, like extra visitors.
Once you know what you can improve, and by how much, you know what they are getting out of it. If it will cost more for you to do it than it will pay back in a reasonable time in lower costs, higher total sales values, or increased profits, then you don't even pitch.
100%. Revenue increases could also be profit decreases so all of these facors must be accounted for. I would also add that certain, performing digital assets created in the process will attribute to a valuation increase where that ROI isn't realized until the sale/merge/acquisition.
Ammon Johns 🎓 » Kenny Holloway
Exactly. But lets not forget that one doesn't always need to increase revenue or gross turnover. If one can instead lower costs to make the same revenue, or otherwise make the same gross revenue be more profitable.
One client I recall was spending 25k (GBP) per month on a particular type of advertising. By helping them switch to a more effective form of advertising, they were able to get the same quality and quantity of leads for just 5k per month, saving them 20k per month with no loss of custom, meaning more profit.
That change took just a few hours to implement, and most of that was simply researching and proving the concept to get them to switch.
Kenny Holloway » Ammon Johns
Indeed. I see a good bit of viewing ROI with blinders on. It can be attributed in many ways like your example, lead acquisition cost, etc… Thanks for posting the insightful comment.