Launching and running a search engine optimization (SEO) campaign can be expensive. Knowing whether your SEO activity is generating actual revenue is crucial to ensure that you are getting quantifiable results and not leaving money on the table. In this guide, our marketing pros at Relentless Digital discuss how you can measure the return on investment (ROI) on your SEO campaigns.
The Importance of Measuring Search Engine Optimization ROI
Are you researching marketing strategies to achieve exponential growth in your contractor business? SEO is likely the marketing practice you encounter most frequently. Implementing a comprehensive SEO strategy is critical to boosting your ranking in the search engine results pages, growing organic traffic to your website, and improving lead generation.
However, contractor business owners are often unaware that SEO is a long-term strategy. During the campaign’s initial stages, you might be paying for the campaign without seeing a significant increase in job bookings. Down the line, when your business performs well, you need to know how much revenue is due to SEO and which portion of the income is advertising revenue.
Climbing the search engines’ results can increase organic traffic, but it might not lead to more revenue. Calculating your SEO ROI and conversions gives you the insights to decide whether an SEO strategy shift is necessary.
How To Calculate SEO ROI
SEO key performance indicators (KPIs) are metrics that let you track various aspects of your SEO campaigns. Examples of these metrics include keyword rankings, non-branded traffic volumes, page loading speeds, and click-through rates. SEO ROI is one of these metrics, and it is the most significant in determining the effectiveness of your campaigns.
The ROI of SEO measures the returns that your investment generates. You can calculate SEO ROI using the following formula:
SEO ROI = 100 x (Dollar Value of Conversions – Total SEO Investment) / Total SEO Investment
For example, suppose your organic conversions have a value of $100,000. In this case, a $25,000 SEO investment will drive a positive ROI of 300%.
When considering sample data on how much revenue SEO generates for HVAC companies, you can expect every $1 you spend on SEO campaign management to drive a $30 return. Data Driven Trades, a leading data tracker, based this benchmark data on at least 1,200 organic leads across five HVAC contractors from June to August 2022.
As a contractor, this data is relevant to your business. The information demonstrates the value of SEO services, especially when you hire a reputable SEO agency. However, the ROI of your SEO tasks might vary as your business operates in a unique environment with a specific target audience.
Now that you know how the SEO ROI formula works, the next step is calculating each variable for your business. The sections below provide step-by-step instructions to calculate your business’s SEO performance and the resulting returns.
Calculate the Dollar Value of Conversions
When using the SEO ROI formula, the first step is determining the conversion value of your strategies. This step boils down to two questions:
- How many conversions did your business generate from SEO strategies?
- On average, how much revenue does each conversion generate for your business?
Follow the steps below to calculate your business’s SEO conversion value:
1. Set up Proper Conversion Tracking
You need to set up conversion tracking in your Google Analytics account to track the conversions on your website that earn revenue. This step is relatively straightforward with eCommerce tracking because an eCommerce store makes sales directly.
However, as a contractor, you have a lead-based business, and eCommerce data points, such as sales, are irrelevant to you. Instead, you need to consider other conversion goals. Even though this step is more challenging for contractors, you can still use it to get accurate conversion data.
In Google Analytics, open Admin > View > Goals in Analytics. Here, you can choose from several conversion goals under the Revenue, Acquisition, Inquiry, and Engagement categories. The most relevant conversion goals for contractors include:
- Contact us: When a site visitor views your business location or contact details, it counts as a conversion.
- Get callback: In this case, a conversion is when a visitor requests a phone call, free quote, or service via your website.
- Live chat: Each site user that contacts you via the live chat function counts as a conversion.
- Sign up: With this engagement goal, every person who signs up for your newsletter equals one conversion.
Google Analytics also lets you create a custom lead conversion goal. For example, if your website has call tracking, each phone call via your site is a conversion.
2. Calculate the Monetary Value of Conversions on Google Analytics
After selecting your business’s conversion goals, you need to assign an estimated dollar amount to each goal in the Goal Details section. Calculate this average value using the information in your business records or Google Analytics.
Let’s take a look at a practical example using quote requests as the conversion goal:
Suppose an average of 50 people send you quote requests per month, and 20 of these people end up hiring you for contracting services. In this case, your average conversion rate is 40%.
Now, suppose each of these 20 customers pays you an average of $1,000 for your services. In this case, you earn a total of $20,000 per month from lead generation.
Lastly, you need to calculate the value of each lead by dividing $20,000 by the original number of lead conversions, which is the average of 50 people who send you quote requests each month. In other words, each lead conversion is worth $400.
Follow this process for each conversion goal, ensuring that you have a numeric value for each type of action available to your website traffic.
3. Sort Conversions by Marketing Channel
Once you have calculated the value of each conversion goal, you need to determine the conversion value of your SEO strategies. Remember, various marketing channels, like Google ads, marketing emails, and social media platforms, contribute to direct conversions, for example. Organic traffic is one of these channels and includes clicks from the search engine results page.
In Google Analytics, select Conversions > Multi-Channel Funnels > Assisted Conversions. Click on Conversions at the top of your screen to view your conversion report. Here, you will see all the marketing channels, including Direct, Organic Search, Paid Search, Email, Social Network, Other Advertising, and more.
The Organic Search channel provides the information you need to calculate the return on investment of SEO.
Locate the Organic Search channel from the Multi-Channel Funnels (MCF) in Google Analytics. The Conversion column shows the number of conversions that resulted from organic traffic. The Conversion Value is a dollar amount that is the product of the number of conversions and the lead value you calculated during the previous step.
4. The Assisted Conversions Value of Organic Search: Conversion Paths
The Assisted Conversions report you used during the previous step shows the following:
- Last Click or Direct Conversions
- Last Click or Direct Conversion Values
These are conversions that a marketing channel completes directly. While these values are crucial when calculating the Dollar Value of Conversions for your ROI formula, they don’t show the entire picture. You need to consider every assisted conversion value contributing to lead generation and conversion.
Consider the following example:
Mr. H, a homeowner, has an HVAC system that needs a filter change. After an online search, Mr. H clicks on a search result that directs him to an informative blog post of HVAC Fixit, a local contractor. Mr. H finds the information on the page helpful and signs up for HVAC Fixit’s newsletter.
During the next few weeks, Mr. H receives several marketing emails, providing valuable HVAC maintenance information and energy-saving tips.
One day, Mr. H’s HVAC system breaks down. He immediately takes out his phone and types HVAC Fixit’s website address into the search bar. He clicks on the contact page and requests a repair quote.
The quote request is a conversion that results from a combination of SEO tactics and email marketing. However, on the Assisted Conversions report of HVAC Fixit, the conversion shows up as coming from a direct visit. If HVAC Fixit doesn’t consider SEO’s contribution, it cannot accurately measure SEO ROI.
Using Google Analytics’ top conversion paths, you can see prospective leads’ most common steps before converting. Select Conversions > Multi-Channel Funnels > Top Conversion Paths to view this information and include it in your marketing ROI calculations.
Calculate the Sum of Your SEO Investments
Once you have calculated the value of your conversions, you need to calculate the costs. Even though you don’t pay for organic search traffic, your business will incur SEO costs. However, because these costs are necessary to generate revenues, you can consider them investments.
The SEO investment categories include:
- Employees: The salaries and wages of in-house employees who contribute to your business’s SEO performance form part of the investment.
- Freelancers and agencies: Include the costs of every external SEO service when calculating the ROI from SEO. For example, a reputable SEO company for plumbers should provide a comprehensive range of solutions, including technical SEO, link building, and onsite SEO. Even though content marketing has value beyond SEO, you should include the cost of these services as they are integral to your optimization strategy.
- SEO tools: Subscription fees and once-off payments for software should form part of your investment variable.
Calculate Your Organic SEO Return on Investment
After calculating the SEO conversion value and cost variables for a specific period, you can calculate your business’s actual SEO ROI. Add the values to the ROI of SEO formula discussed above.
When you calculate the ROI, use conversion goals that are the closest to job bookings. For example, if your business gets more customers from site evaluation bookings than quote requests, use the former as your conversion goal.
If your business is relatively young, track as many conversion goals as possible, including phone calls and email newsletter signups. These steps are more challenging than eCommerce tracking because you don’t rely on online transactions. However, the longer your company has been in business, the more accurately you can calculate averages and assign values to lead conversions.
Google Business Profile Optimization ROI
Google Business Profile (GBP) optimization is integral to local SEO for contractors. When you calculate the ROI of SEO, ensure that you consider the conversion value of GBP and all costs relating to this platform.
Google Business Profile provides in-depth insights that let you accurately track conversions. These customer actions include website visits, phone calls, and direction requests. Google Business Profile optimization costs might be part of SEO agencies’ fees. These optimization services include:
- Completing your business information
- Linking your website and Google Maps location
- Creating engaging service descriptions
- Writing Google My Business posts
- Monitoring reviews
- Writing questions and answers on your webpages
Calculating SEO ROI – Common Issues
How much organic traffic you generate from optimization practices is only one aspect of the ROI calculation. The revenue you generate from webpage optimization is the other. Unfortunately, traffic volume is not directly proportional to revenue. You also need to consider the conversions and costs related to optimization.
However, when you calculate the ROI of your SEO, you might also encounter other challenges:
Quantifying Conversion Attributions Is Challenging
Before becoming a paying customer, all your leads complete a buying process that typically consists of the following three steps:
Members of your target audience might have several interactions with your brand during this customer journey. With every touchpoint, the prospective lead is one step closer to converting into a paying customer.
However, these buyer journeys are complex, and determining how your optimization efforts affect their decision-making can be challenging. While the conversion paths feature in Google Analytics provides valuable insights, it doesn’t give you all the details you need to calculate an accurate ROI from SEO.
Measuring the Customer Lifetime Value of SEO Requires Extensive Data
The ROI formula doesn’t take a customer’s lifetime value into account. For example, if a homeowner finds your business in the search engine results and hires your services, this event counts as one conversion from organic traffic.
Suppose the homeowner saves you as a contact in their phone and hires your contracting business several times in the years that follow. You don’t include this revenue in your ROI calculation because you can’t predict the future.
If you have been in business for several years, you might be able to calculate an average customer retention rate. For example, if you know that 20% of your new customers will contact you again, you can adjust the variables in your formula accordingly.
How Long Does It Take To Generate ROI From SEO?
Search engine optimization is a long-term strategy that can take several months to generate significant revenues. Most contractors will have a negative ROI during the first few months after launching their optimization campaign. After around six months, you can expect to see steadily increasing growth from your optimization efforts.
Reputable SEO agencies typically recommend ongoing optimization. For example, building a portfolio or high-quality inbound links and regularly publishing helpful blog articles are critical to maintaining a high ranking in the search results.
How Often Should I Measure SEO ROI?
Once your page optimization efforts gain traction, measure your ROI regularly. Ideally, you should calculate the ROI once every quarter. However, measuring SEO ROI every six months should also be sufficient during the first two years.
If you are paying for a full-stack optimization solution, measuring your ROI more frequently is critical to ensure that you meet your revenue targets.
How Do I Know if My ROI Is Sufficient?
The optimal ROI for optimization is unique to your business. Your business has unique SEO investments, and your lead values differ from those of your competitors.
Use your conversion values, service fees, and optimization costs to come up with an initial ROI objective, then adjust it as you gather data. Ideally, the ROI should be higher than the previous measurement.
What Other Optimization KPIs Should I Track?
The revenue from SEO is one key performance indicator to track. However, as a contractor, you should also monitor the following metrics to ensure that your campaign is a success:
- Lead conversion rates
- Organic visibility
- Non-branded organic traffic
- Branded searches
- Keyword rankings
- Organic click-through rates
- Average time on page
- Bounce rates
- Page loading speeds
Start Measuring the Returns From Your SEO Efforts
As a contractor, you might not have the background and skills to implement an effective SEO strategy and measure its ROI. At Relentless Digital, our team can provide a complete, personalized SEO solution that fits all your marketing requirements.
Whether you want to learn more about using keywords for SEO or onboard us for a complete digital marketing service, we can help. Contact us at 262-720-5739 to schedule a consultation with our Relentless Digital team.