How to Calculate SEO ROI Using Google Analytics Here's a list of actionable strategies to spot-on measure search engine optimization's return on investment.
By Pulkit Agrawal Edited by Matt Scanlon
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You likely heard the saying, "You have to spend money to make money." Well, the same is true when it comes to search engine optimization (SEO). To see a true return on that investment, you need to track results, but doing so can be tricky, especially if you are not sure which metrics to track. The good news is that Google Analytics can help make sense of website traffic and conversions, so you can see exactly how much value your SEO efforts are adding.
Put simply, SEO ROI is the return you get from money invested in SEO — the actual monetary benefits that it reaps, and the best tool for determining that is Google Analytics. Using it, you can get complete information about a website's traffic: how visitors are responding to it, where they are from and what the best keyword strategy might be to increase their numbers.
What SEO ROI reveals
• Effectiveness of strategy: This is established using several parameters, such as website traffic, visitor retention rate and visitor bounce rate.
• Revenues: If your SEO strategies are not generating revenue, no amount of website traffic will make a difference. Therefore, you need SEO ROI to know how investing in SEO is adding to profits.
• Need for marketing fine-tuning: When you are aware of returns from different marketing channels, you can modify your strategy to focus on the more profitable ones.
• Conversion ratio: Suppose that your SEO strategies are bringing amazing traffic, but only a small proportion of visitors are turning into customers who add to your revenue? Would you be willing to continue an extensive marketing budget investment in SEO in such a scenario without alterations? Of course not.
• Time-to-conversion: You may come to realize that the people reading your blogs are turning into customers in around a month. They might not have converted immediately, but eventually did. In such a situation, any savvy business owner would want to increase their focus on SEO.
Related: How to Improve Your Conversion Rates With the Help of SEO
The process of calculating SEO ROI involves three steps.
1. Conversion tracking
Put simply, this means keeping track of all conversion actions — any performed by website visitors deemed profitable for your business. This can be the simple act of purchasing a product from your ecommerce store or something more indirect such as signing up for a survey. With conversion tracking, you can stay on top of how website visitors' activities are earning you revenue. This is usually easy for ecommerce sites since all purchases and transactions are recorded. However, even if you are a service-based business, you can still track actions by assigning monetary value to specific activities.
How to track conversions based on website type:
• Ecommerce: Every time a customer purchases an item and adds to your revenue, the transaction will be recorded. In case yours are not being recorded, you can check out Google's instructions to start doing so. Once transactions are being recorded regularly, simply click on Conversions > eCommerce > Overview to view all sales and conversion actions-related data in one place.
• Service-based websites: Tracking conversion actions for service-based websites is slightly tricky, but doable. Since actual monetary transactions and purchases do not take place on these sites, you cannot simply keep track of them. Instead, you need to assign monetary values to actions that can profit your business. For example, you can assign a value of $70 to the act of signing up for a newsletter. To set such values, click on Admin > View > Goals in Analytics and create "goals" that record these assigned monetary values.
Once those goals are set, you can easily calculate conversion rates using a variety of methods:
(a) If you are tracking the act of filling out a form, determine what proportion of sign-ups go on to become customers. For example, if you are having 1,000 people filling out a form on your website, and 50 of them turn into leads, the conversion rate would be 5%.
(b) If you want to track the average value of a sale, find out the average amount of money being spent by each lead that converts into a customer. For example, if you had five sales worth $200, $500, $160, $400 and $170, then your average sales value would be $286.
(c) If you want to determine the value of each lead, divide total revenue from converted leads by the number of leads you got from that goal. For example, if you had 500 people signing up for a newsletter, out of which 20 made a purchase of $500 each, the value of each lead would be [(20 x 500)]/500 = $20.
By using these set goals to determine conversion rate, average sales value, average lead value and other important metrics, you can convert actions of website visitors into quantifiable terms.
Related: 6 Lead Generation Tactics That Can Give Startups a Big Boost
2. Sort and analyze conversion tracking
Once you have tracked conversions for at least a month, the next step is analyzing them, and the best way to do that is to compare them to expected results. Every business that tracks its conversions has certain expectations that align with business goals. When you analyze your conversions, you are digging into why your actual conversion rates meet, exceed or fall short of expectations. What triggers a certain conversion action, how to prompt it for the maximum number of visitors and more related questions can be answered by analyzing conversions.
The easiest way to analyze conversions is to sort them based on their channel of origin. This allows you to only focus on analyzing conversions that were obtained organically from SEO efforts. To sort your conversions by channel, click on Conversions > Multi-Channel Funnels > Assisted Conversions > Conversions. All conversions marked by the Organic Search tag will be the result of SEO strategies.
3. Calculate your SEO ROI
Once you have collected, sorted and analyzed conversion-related data, calculating SEO ROI should be a breeze. To calculate yours, the formula usually followed is:
(Gain from Investment - Cost of Investment)/Cost of Investment.
If you are confused about how to apply it, here's a quick example: Assuming you invested $1,500 in preparing and implementing your SEO strategy and wound up making $5,000 from investments in SEO, your SEO ROI would be calculated in the decimal form as follows:
$(5,000-1,500)/$ 1,500 = $3,500/$1,500 = 2.34
If you want to calculate in terms of percentage, multiply the decimal value by 100:
2.34 x 100 = 234%
Related: Become an SEO Expert and Make Your Business Stand Out Online
Start calculating to optimize SEO campaigns today
Calculating your SEO ROI using Google Analytics is one of the most effective and efficient techniques available to business owners today. With this data, you will be able to determine what type of content resonates most with a target audience, what keywords should be used in future campaigns and whether certain landing pages need improvements, among other vital tasks.
