Also known as Return on Investment
If you offer me a tenner and I tell you that when I see you next week, I’ll give you £20 would you consider that a good return on investment?
How about if I sold you a packet of tomato seeds for £1, and in three months, you had a healthy tomato plant with more tomatoes than you could eat? What we’re talking about here is ROI, or ‘return on investment’. And to a lesser extent, tomatoes.
ROI is used by business owners, marketing managers and digital marketing agencies to determine what types of activities are helping the business grow. The logic behind ROI is that it’s a good idea to do more of what works. But if you do not measure ROI, then you’ll struggle to figure out what works and what you need to do more of.
Let’s break this down in the style of the maths books found in primary schools in the 1970s and 80s. If you are of a certain age, you’ll know the sort of books we’re talking about.
Jane has £300 to bring new customers to the baked figs stall she runs every Saturday afternoon at her local stock car racing stadium.
Jane splits up her £100 between three marketing channels and spends it like this:
- £100 on Google Ads (PPC)
- £100 on SEO
- £100 on hiring local thug ‘Big Timothy the loudmouth’ the shout at people about baked figs when they enter the turnstiles at the stock car racing stadium.
Which marketing channel gives Jane the best return on investment?
Unfortunately, Jane refuses to share the results of her £300 marketing campaign, so we’ll have to make up some results. Jane used to be cool, but the baked figs game has changed her.
Before we analyse the fake Jane data, let’s look at an important part of calculating ROI – attribution. Attribution is the method by which we can assign the success of campaigns to specific marketing channels.
Jane used Google ads to direct potential customers to a page on her website that contained a secret password for visitors to her baked figs stand to whisper to Jane to get a 20% discount on figs. This helped Jane figure out which sales of baked figs could be attributed to the £100 spent on Google Ads. If they whisper the code, then they must have seen the Google Ads campaign and been directed to the page that contains the secret code.
Jane wrote the best article about baked figs the world has ever seen. Because Jane’s backlink profile is strong, her Google My Business account is on-point, and her writing is excellent her article about baked figs ranks number 1 on Google nationwide. Jane hasn’t thought through exactly how she will attribute the success of her SEO campaign to sales during stock car racing events. But she can look at the steep rise in organic traffic to her website (since she wrote the article), and reconcile the rise in organic traffic to improved sales of baked figs at events. She knows that customers who whisper a secret code to her probably found out about her through Google Ads, so she discounts the value of their sales from sales recorded due to her SEO efforts.
Big Timothy the loudmouth
It’s easy to spot which customers have bought baked figs due to being yelled at by Big Timothy. These customers are trembling while purchasing, and nervously looking over their shoulders to see if Timothy is still watching them.
Jane’s fake results
A baked fig costs £9.73, which sounds like a lot of money, but you would be surprised how tolerant the baked fig market is to high prices.
Here are Jane’s results:
- Google Ads – 50 sales
- SEO – 20 sales
- Big Timothy – 75 sales
On this occasion, the marketing channel with the best ROI is Big Timothy, which is hardly surprising if you’ve never seen him in action at the stock car racing stadium.
In reality, if Jane was looking at the ROI of her SEO efforts as a failure, she might be danger of not seeing the bigger picture. The ROI of SEO can be fantastic, but it takes far longer to measure than the ROI of Google Ads campaigns.
Why is ROI important to SEO?
In the world of SEO, we all work very hard to ensure we target the keywords to help our clients meet their goals. But SEO is not an exercise in ‘fit and forget’. The journey doesn’t end once you have gone to a website and ‘done an SEO’.
We use ROI to measure which optimisations and adjustments in an SEO strategy are yielding results. For example, if we are working with a client with many products and the ROI calculation reveals that the increase in traffic to a specific product has increased profits more than the increase in traffic to a different product, we might be inclined to spend more our SEO budget on pushing the higher-value product.
Alternatively, if we have spent 10 hours trying to rank product A, 10 hours to rank product B, and product A shoots into the top ten, while product B only rises a few places, then the ROI on our efforts to rank product A is better.
This is not set in stone, but it might help you understand the nuances of ROI in SEO.
The biggest decision measuring ROI can have on SEO, is whether SEO is the right tool for the job. SEO is not always the answer, and if the amount of extra profits you make due to SEO does not justify the cost, then your ROI calculations will make dropping SEO an easy decision!
ROI – explain it to me like I’m five years old, please!
ROI means how much you get back from what you put in. If you spend more money on SEO and it results in higher profits, then the ROI on SEO is good.