Calculating Return on Investment with Search Engine Optimization in Mind

Determining your potential return on investment (ROI) with search engine optimization (SEO) is fairly straightforward. Better yet, by considering the potential search volume that best fits your business, we can provide an accurate ROI picture before any money is spent!

First, we find the words that are most relevant to your business and will likely bring you more business.  We use the Google Keyword tool to see how many people search for those words every month. (Check out my previous post for a video that discusses the differences between “phrase” and “broad” matches when using Google Keyword. For this type of projection, we’d use “phrase”.) Then, we use an independent study to determine click-through rates. Click-through rates on the first page range from 3% all the way to 40% for the top position. We usually use a conservative 5-10% for our estimations.

Next we determine a conversion rate: out of 100 customers, how many would need to buy your product or service in order to generate a profitable return? For most businesses, a conversion rate of just 1-3% would be enough to turn a profit! We can then determine your ROI for any one search term, based on calculations using search volume numbers, click-through rate, conversion rate, and profit-per-conversion. Using Excel, we create a spreadsheet using the words we believe will achieve results, and list out the search volume for each word, targeting anywhere from 5-25 words at a time. Then, we multiply the total search volume by 8%, multiply that number by a conversion rate (let’s use 2% for argument’s sake) and profit-per-customer (let’s use $100 as an example). So if the search volume is 100,000 per month, then the click though would be 8,000 with 160 sales / conversions giving you a gross profit of $16,000 per month.  At this point, using these calculations, you can clearly see the campaigns potential and calculate your return on investment.