How to Maximize ROI for Small Business SEO Marketing?
August 7, 2014 Sarvesh Bagla
For a business in the modern world, the internet is the most effective medium to reach and engage customers. Mega advertising campaigns that plaster your business all over TV, traditional media and internet are not plausible for small businesses who generally have a small budget and tighter purse strings. The most cost-effective method for a small business is to get the consumer’s attention through the internet. This is where SEO marketing comes in handy for businesses to attract customers.
Your small business online marketing will often consist of organic search engine optimization, as well as paid traffic like CPC/PPC advertising. Now that you have set up your search engine marketing (SEM) campaign, you obviously need to see how effective your efforts have been. Effectiveness of the campaign largely depends on return on investment (ROI) that is offered. Thinking about the ROI is of course the easy part; it is dictated by common sense, the difficult part is quantifying your SEO marketing results in terms of business gain.
An Eye on the Customer Buying Cycle
We know SEO is an ongoing, long-term process. More specifically, it’s the process of continually discovering highly converting, non-branded keywords that are driving organic search traffic and conversions. It’s about understanding search intent and how keywords used to describe your products and services evolve as a prospect progresses through the buying cycle. It is then about having insight into great data and taking action by including those optimized keywords in your content marketing plan.
– Krista LaRiviere at SearchEngineWatch
For all the skill, effort, and money your put into your SEO, any effective leads generation marketing campaign will place the prospective customer in a buying cycle. We call it a “cycle” because you want customer loyalty for maximizing the ROI. Once the customer purchases a product or service, you would want the customer to return for their next purchase or requirement. An effective campaign will help push customers in the right direction, nudging them through each step of the cycle. It is important however, that you keep an eye on the customer through the stages to know the effectiveness of strategies employed at every stage.
A lead starts with discovery, which is to say your SEO marketing campaign brings your product and business to the prospective customer’s attention on the internet. This is what kicks off the Customer Buying Cycle. Your SEO campaign has brought a prospective buyer to your business, while that is a great achievement in itself, the job is not yet over; you have a good lead that needs to be converting.
The next step for the prospective consumer would be to research your website and pick a product preference. A good SEO campaign will be backed by great content that nudges your potential customer to stay on your website and narrow down the preference to a product.
Now comes the purchase, which would form the completion of the cycle with excellent results. However, if things ended at the purchase, we wouldn’t be calling this a cycle. The next step is customer loyalty, the one that brings you the best return on investment, by encouraging the customer to shop again at your website, or return to your brick and mortar store.
Quantifying Organic SEO
As we already know, a lead generation campaign will be a multi-pronged effort. For a search engine marketing campaign, your organic SEO efforts will be accompanied by advertising by means of PPC or CPC campaigns. Seeing results from the latter is somewhat easier using tools provided by the advertising company, but the former, your organic SEO is comparably difficult to quantify. Google Webmaster Tools and Bing Webmaster Tools will help you see the keywords and gauge their effectiveness in search engines and search rankings. They can also be effective in finding non-branded keywords that can be put to use in driving traffic and a high conversion rate.
Tools like Google Analytics, Ahrefs, and AdLuge allow webmasters to track the flow of traffic, right from their origin to their arrival on your website, their movement through your website pages, and eventually, when they leave the website.
These tools will allow you to see traffic and visitors coming in from search engines like Google, Yahoo, Bing, and the popularity of various pages on your website. For example, SEO could have resulted in increased linking to a particular page through carefully managed keywords and well placed backlinks. You will be able to see the growth of this page through the analytic tools.
Another very important metric is the bounce rate. The bounce rate signifies the number of people who visit your website and see more than one page. A high bounce rate would mean that people arriving at your website leave at the landing page itself, which is not a good thing. In this scenario, you will need to engage visitors in a better way so they spend more time exploring the products and offerings on your website.
This is the reason most SEO marketing tips point towards an effective website and great content. Pulling a visitor to your website is not enough, your search engine optimization strategy should also make sure the content on your website is engaging, and presented well enough to hold the visitor through the customer buying cycle.
Learn More: How to Increase Organic Traffic in SEO
Generating a Good Lead
The importance of loyal and returning customers cannot be stressed enough. Cost of acquisition of a lead can be fairly high, and a one-time customer will barely cover the expense, if at all. The best return on investment comes from a returning customer, where the subsequent purchases by the customer provide a good profit. Moreover, your loyal customer might also become an advocate of your business, recommending your business to friends and family. A lead generating more leads! That is one solid ROI you simply cannot afford to miss.
Lifetime Value of a Customer
Not all leads are created equal, and neither is every customer the same. They will however, follow the above mentioned customer buying cycle. This brings us to the concept of the lifetime value of a customer. Broadly speaking, this is the duration for which your customer is active with your business and making regular purchases. Considering a period of five years, a customer who makes one purchase a year is good, the one who makes multiple purchases over the duration is better, and a customer making multiple purchases along with recommending your website to their friends and family is the best.
There is an ROI on each of these broad categories. And as is obvious, the lifetime value of the third customer is the greatest for your business. As common and pedestrian this concept might seem, the lifetime value is a great way to know the ROI of your campaign.
Doing the Math
Now that we have ways to gather data and the required information, it is time to do the math to see our ROI. First, let us setup a hypothetical store that will help in illustrating our calculations. Let us imagine we have an online fashion website that sells the best T-shirts possible. We just had an SEO marketing campaign and now it is time to see the results.
The simple approach
There is no reason why SEO can’t have its success or failure measured, as long as you can 1) add up the cost of your SEO resources and 2) quantify the value of a visit to your website. With these two items, SEO can be calculated as a percentage of your revenue, and you can develop deeper and more useful metrics.
– Jim Magary at Boomient
First, let us go the simple way with a nearly straightforward expenditure and income analysis. Let us say our online store was selling 100 T-shirts a month, each sold for $30. Then we embarked on a rather successful SEO campaign, and at the end of six months, our store was selling 200 T-shirts a month.
For the six-month campaign, the SEO company charged us for their consulting fees, our website optimization to search engine standards, production of new and engaging content, and link building exercises. Let us say the cost of this process, including our own effort was $10,000. Now clearly, with the 100 extra T-shirts we sold every month on average, our gain in revenue is 600 x $30, or $18,000. Well, that looks neat.
As clean as the (increased revenue)/cost formula is, it is easy to see that there are problems with it. Even in our hypothetical scenario, not all success can be attributed to the campaign. Perhaps our own efforts with the website increased the sales quantity a bit. Then there is also the concept of returning customers that is missing in our calculation. To make a better calculation, let us cut down the efficiency of the campaign a bit, assuming it was 80% accurate.
We already have tools to quantify our SEO traffic, measuring the new links built and the change in referrals, so this estimate is fairly accurate. We can however, pull it down a point or two for a more conservative estimate.
Assuming a gross profit of $10 from every sale, we have earned a profit of $6000, adjusted for the efficiency of the campaign, we get $4,800 in profit.
Now our ROI is 48%. That’s quite a downer from our initial values, but keep in mind some hypothetical costs are manipulated for easier calculation.
This might not be entirely accurate, but it is good enough for practical purposes.
A more detailed look
Whether you are spending money on pay-per-click campaigns, SEO efforts, or banner ads, you should be calculating the return on your investment. If you are making more than you are spending, you are doing a great job.
– Neil Patel at Quicksprout.com
On the other hand, let’s take a more detailed look at the problem. A deeper look comes by considering all costs, and the net profit generated by the customers. First point to note, would be the expenditure of the business. This includes the cost of the SEO services, added to fixed costs like rents and salaries. Your SEO cost per acquisition (SCPA) would be the total cost of the campaign divided by the new leads generated.
A complete Cost per acquisition (CPA) would be SCPA + recurring expenditure.
Lifetime Value (LTV) of your customer is the profit generated by the customer during this duration. An ideal customer would have a high LTV, with multiple purchases to give a good profit number.
Finally, your ROI will be the LTV – CPA.
A complex calculation, but one with more pointed results. However, this is most effective over longer durations of time.
The Time Factor
Calculations for SEO marketing are often done over a fixed time scale. However, unlike banner advertising, the benefits of SEO marketing are continuous. Good SEO for organic traffic will continue to benefit a website, and bring in more leads long after the campaign has officially ended.
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