Learn how to estimate an SEO company’s campaign, before they begin services
Learn how to set up tracking on Google Analytics for your ROI measurement.
Learn ROI forecasting in 5 min
So you’ve hired an SEO company, but how do you calculate whether their SEO services will really make an impact on your bottom line before embarking on such a project? In this lesson, we teach you how to calculate ROI for future projects. We also teach you how to add Google analytics to website to be able to have metrics in place with which to measure an SEO company.
Most SEO companies use ROAS as a means of calculating returns. This is very convenient as they are only taking into account the costs of running the advertising campaigns against the revenue generated. These SEO companies do not, however, take into account the actual costs of manufacturing the product or delivering the service. You should.
Before we look at the components for calculating ROI, we need to ensure that we can measure your important metrics for your business in terms of tracking any SEO campaign. The main source of measurement is Google Analytics. Google Analytics is the only measurement your website needs. It tracks conversions, page click-throughs, bounce rate and a plethora of other analytics. Read our SEO guide if you need a quick refresher on SEO metrics.
It is important to realise that if at this stage you have no Google Analytics set up, you would have to measure for one month the very least to create a benchmark to measure the potential increase an SEO company is promising.
Adwords integration with Google Analytics can help track conversions even better. To do this go into Google Analytics and go to the link accounts section. Enter the AdWords account Id and link the two accounts. Then go into Google Ads and check links there too.
Most people fail to set up goals or conversions correctly. This is vital to help calculate ROI for SEO services at a later stage. Follow these steps to set up goals correctly:
Google Analytics for Tracking SEO Companies
1. Log into Google Analytics
2. Go to admin cog icon in the lower left position of the screen
3. Go to goals on the upper right area of the tabs, after clicking on the cog
4. Add a goal
5. Choose the form submission (or the appropriate goal)
6. Choose follow through page – make sure you submission form sends you to a sent page. This is the way you accurately set it up.
The easiest way to set up a goal is to have a separate landing page for after the form submission with Google tag in the header. This, way you can denote this page within Google Analytics as a conversion landing page. Google easily then knows if it pics up traffic on this page then it is a visitor who clicked through.
To get Google Analytics started, you just have to add the Google tag in the header your WordPress section. Before you do anything, backup your WordPress website! Then follow these steps:
1. Log into WordPress backend
2. Log into Google Analytics
3. Go to Admin
4.Go to Tracking js code in the central window pane
5.Copy the code
6. Go to themes, appearance and then editor
7. Locate the header.php and click on it
8. Copy and paste the Google Analytics code or script from the tag, and place this just before or above the lower tag.
You would have to collect data from the beginning of a campaign, you obviously cannot collect data in retrospect.
Now that we have metrics to look at, let’s choose some that are most pertinent to a sales or service business.
Metrics used to measure an SEO Company
Total average Impressions or site visits:
Impressions or site visits are the actual amount of views your website received or ad if it is Google Ads. This is also important to monitor as if this is too low, your SEO company is not getting enough reach for your campaigns.
Average Monthly Conversions:
The conversion is the most important metric to measure the success of an online campaign. A conversion is when a user completes the website’s objective! In a sales or services model, this would precipitate in a sales lead.
Conversion rates are notoriously low. The world average conversion rate across all industries is 2.45%. It is therefore obvious that you understand why it is important to get enough reach or impressions, otherwise, those conversions won’t be worthwhile.
Average Monthly Conversion Rate:
This metric is calculated by looking at the number of impressions versus the number of conversions. The conversions are divided by the number of impressions.
Average value per conversion:
Certain companies will make a once -off sale, this is usually if the item was of a high price such as a car etc. Other services may be used monthly. It is important to take into account the average lifetime value per conversion or at least calculate it as accurately as possible.
Now for any SEO company to deliver value to you through SEO services, you will need to develop KPIs for them at the very least meet.
A KPI, is a Key Performance Indicator. It is basically a change of measurement based on a time frame.
Examples of a KPIs are:
Increase traffic by 20% in 6 months
Increase the conversion rate by 50% in 6 months
KPIs are SMART objectives
SMART is defined at the Chartered Management Institute as an acronym for the following:
“SMART i.e. specific, measurable, achievable, realistic and timely
Specific – outline in a clear statement precisely what is required.
Measurable – include a measure to enable you to monitor progress and to know when the objective
has been achieved.
Achievable – objectives can be designed to be challenging, but it is important that failure is not built
into objectives. Employees and managers should agree to the objectives to ensure commitment to
Realistic – focus on outcomes rather than the means of achieving them
Timely – (or time-bound) – agree the date by which the outcome must be achieved.”
Most SEO companies will or at least should achieve two objectives within a given time period, they should:
-increase your traffic
-increase your conversion rate
Now let’s say we chose the KPIs above for a new online marketing initiative, we would then forecast using historical data from our Google Analytics. We would then apply the proposed increases from a new campaign on the forecasted percentages:
Let’s work out what the average monthly traffic would be if we add the proposed increase percentage.
We do this by quite simply:
Average Traffic per month (T) is multiplied by the proposed percentage increase of traffic (T%), the output is then added to the average month’s traffic, to give you the new increased traffic result (Tnew).
so T+(T x T%) = Tnew
To get value for the increased Traffic Volume (Tnew)
We repeat this for the average conversions with an increase of campaigns:
Average conversion rate (C) multiplied percentage increase of conversion rate forecasted(C%), then add this figure to the original average conversion rate amount, to give you the new conversion rate (Cnew)
C+(C x C%)=Cnew
We then multiply the increased average conversion rate (Cnew) by increased average monthly traffic volume (Tnew) and again by the average value of a conversion (V)(ie. amount of money or average lifetime value of a service.)
Tnew x Cnew x V= Return after investment (Average value per Lead)
Step 4 :
This is where we put it all together to calculate the return on investment (ROI):
We are comparing the returns (Earnings) before investment with the returns after investment
The calculation is simple:
Return before investment using values before increase in conversions and increased traffic:
T x C x V = Return before investment = R1
Return after investment = Tnew x Cnew x V = Rnew
Rnew – R1 = Increase in return
Let total cost (investment) of services to improve performance = Y
(Rnew – R1) / Y = ROI
i.e. (The total Anticipated Revenue from SEO company efforts) / proposed cost of the SEO project = ROI
This process seems complicated but once you have gone through these steps, you will be able to work out if what the SEO company promises is really worth your time.
This forecast model assumes that you target the same target audience or segments or in online terms, the personas. When we begin to change personas or targeting this model will not hold at all. This model relies on all other elements being kept equal, “ceteris paribus”