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Measuring SEO Value- Cost Per Leads Generated

  • 7 Dec, 2011
  • Jon Tucker
  • 0 Comments

When running a business division or an entire company, it’s important to know how effective each of your marketing dollars are. After all, each dollar needs to be held accountable for producing revenue or it may need to be diverted to another marketing channel that is measurable.

Some web marketing channels, such as online advertising with Google Adwords, are pretty straight forward to measure:

  • $### in ad costs produces ### visits
  • which turns into  ### leads or sales
  • which means each lead or sale costs $###).

However, when pursuing search engine optimization to increase the rankings of your business on Google (and therefore your website traffic / sales) it may seem more difficult to connect the cost of your current SEO company to a specific financial outcome.

Measuring SEO’s Value is Possible…

While understanding how SEO affects your entire organization and marketing initiatives is important, it’s also important to be able to tie your SEO budget to financial metrics.

This blog post series explains a few of the ways that we work with clients to report on SEO’s impact on their business. While each situation is unique and usually requires a conversation to cater it to a specific business, this should be a good start to help you quantify the value of SEO in your organization.

Measuring the Value of SEO Using Cost Per Lead or Sale Generated

If you’re doing any other online marketing, such as Google Adwords, you’re more than likely already measuring the cost per lead or sale generated from online ads. SEO can be measured in a similar way and oftentimes ends up producing leads and sales for a much lower cost compared to other online advertising campaigns.

Here’s the breakdown of how it’s calculated:

  • How much are you paying your SEO team monthly?
  • How many leads or sales are generated each month specifically from non-brand SEO traffic?
  • The cost per lead or sale from SEO is the SEO budget divided by volume of leads generated.
  • In short, the formula is: SEO Cost Per Lead or Sale = Monthly SEO Budget / Number of Leads or Sales Generated

Things to Consider When Valuating SEO With This Metric

Here’s a few things to consider when using this method:

  • If you just started doing SEO in the past quarter (or possibly 2 quarters depending on your industry), the amount of SEO traffic you receive now is going to be relatively low compared to the amount of traffic you’ll be receiving after approximately 6 months of pursuing SEO. This is due to the time it takes for a website to get ranked on Google for competitive keywords that are going to send a lot of traffic and sales. However, once you have achieved competitive rankings your traffic will continue to grow while you can focus SEO resources on acquiring additional competitive rankings. In short, the volume of traffic and sales from SEO efforts begins to grow exponentially while the cost per SEO lead or sale drops exponentially the longer you pursue SEO.
  • You must be measuring your traffic (Google Analytics is probably the easiest solution) and you segmenting the reports so that you can see data related to the traffic you receive from SEO (called “non-brand organic traffic“). This enables you to see data specifically related to SEO instead of looking at all website traffic sources at once.
  • Many SEO consultants only report on rankings (i.e. “we got you ranked for “keyword ABC” this month- great!”) but don’t present data regarding traffic or sales generated from SEO. This is a red flag, as it either means that they aren’t confident in the traffic and sales SEO generates or they’re not familiar with how to actually measure the work they’re doing- either way, it’s not good for your company. Rankings are important, but are a small piece of the puzzle.

Real World Examples

Here’s some interesting things we found using this with clients:

  • We have a few clients working on a lead-generation model in competitive industries. It’s not uncommon for a client to be paying $500-$1,000 per lead within their online advertising campaigns while getting leads from our SEO efforts at an effective cost of $100-$150/ea. We ensure that the quality of the SEO leads is comparable to other channels in regards to conversion / revenue, so this sheer difference in cost is a big win for lead-generation clients in boosting their overall profitability.
  • We work with clients that have an e-commerce model where they’re selling some sort of product online via their web store. Oftentimes, the client hasn’t configured Google Analytics to include e-commerce metrics within the reports. In short, this enables you to see specific sales data for all of the traffic coming into your site directly within Google Analytics. If you’re running a web store, make sure this is setup as it makes reporting on granular revenue data much easier (i.e. “how much revenue was produced by keyword ABC last month?”).

How to Get Started Measuring SEO Value in Your Business

The first step to using these metrics (and others) to valuate your SEO efforts is to ensure that you connect how you measure your SEO efforts to how you measure other marketing channels so comparisons can be  made.

Feel free to leave a comment below or contact us, as we enjoy seeing clients light up when we help them establish simple metrics to measure the profitability of their business so that they can make better decisions with their marketing dollars.

image credit: via Flickr user Brooks Elliot

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