What is ROI? How to calculate effective ROI in SEO, Content and Marketing

What is ROI, ROI?

 You have heard this acronym hundreds, even thousands of times. It is an important calculation in business.

It’s not just for Fortune 500 companies (Fortune’s annual list includes the 500 largest US companies) or professionals in the commercial market; it’s needed for all sectors. Area. Simply, ROI – A measure of the success of the business project.

Therefore, if you have not focused on knowing ROI in your business development strategies, it is time to start thinking more carefully about ROI.

Start learning what ROI is for me!

ROI is abbreviated as Return on Investment – ​​Roi is the ratio of net profit to total investment costs. ROI is beneficial for your business goals when it comes to something specific and must be measured.

What is ROI in SEO?

This is a pretty common term in Marketing, especially in SEO and Content Marketing.

ROI (Return on investment) – Rate of return: is a calculation that illustrates what you get from what you invest.

Once we know what the ROI is, let’s calculate the ROI with the formula!

What is the formula for calculating ROI?

The formula for calculating Roi is: ROI = Net Income / Investment Cost or ROI = Return on Investment / Investment Basis. If you make $100,000 from $10,000, your ROI is 90%.

The most commonly used ROI calculation formula

The first ROI formula (net income divided by investment costs) is the most commonly used ratio.

The important thing I want to bring to your attention:

When someone makes a “Good or Bad” ROI, review and ask them to clarify how they measure.

When you’re looking at any Rate of Return formula, the simplest way to think of the ROI formula is to divide the “benefit” by the “cost.”

Now, I will help you to have a more detailed view of ROI.

Small warning: We’re going to be doing quite a bit of math together. But it won’t be too tricky! I will guide you in detail how to estimate the profit earned!

How to calculate effective ROI

How to calculate ROI in Marketing?

While there are different ways to calculate marketing ROI, the core formula used at the High-level is: (Profit – Cost) / Cost = Marketing ROI. If you make $100,000 from $1,000, your return (ROI) is 0.99 or 99%.

How to calculate ROI in marketing

Example: Suppose an investor purchases property A.

Property value with a price of 1,000,000 USD. After 3 years, the investor sold it for 1,120,000 USD. As a result, after three years, property A increased by $120,000.

If we follow the formula ROI = (profit – cost)/cost, the return on investment is 12%.

(1,120,000 USD – 1,000,000 USD) / 1,000,000 USD = 0.12

Also, for a realistic look at marketing and ROI, you should factor in organic sales, according to the following formula:

Marketing ROI = (Sales Growth – Organic Sales Growth – Marketing Costs) / Marketing Costs

Or, you want to measure long-term ROI throughout the customer journey – clarifying the value of the customer relationship with the brand. You need to calculate customer lifetime value (CLV), the formula is as follows:

CLV = (Retention rate) / (1 + Discount rate / Retention rate)

How to achieve a good ROI in marketing?

Good ROI depends on the investment. Example: A company spends money on a device, the ROI is in terms of productivity. On the other hand, investment in marketing calculates ROI according to the sales process. As such, the ROI you expect from your search engine optimization efforts will be different from the ROI from an investment in a new plant or equipment.

Double-digit ROI would be great for if you define percentage ROI. Or if scaled, the best number for marketing ROI you need is 5:1, be careful if your ROI is at 2:1.

Pay attention to where you invest your money; see if it increases the profitability of your business and allows you to achieve better and higher ROI.

How to calculate ROI in Content Marketing?

Measuring & reporting on Content Marketing ROI is not a fun thing to do, but it is an effective way to know the value of a business’ return on investment in content marketing.

There are 2 basic steps:

Step 1: Calculate investment costs

Step 2: Calculate the profit earned

The formula for calculating ROI in content marketing:

What is the whip calculation formula?

3 indicators represent this:

Content Consumption (Awareness)

Interacting with Content (Engagement)

Conversions (Leads, Customers)

Criteria to measure the effectiveness of Content Marketing

Most of these metrics are trackable in Google Analytics. Meanwhile, downloads, open rates, and clickthrough rates can be tracked through marketing automation software and social analytics tools. Particularly, the Conversion Indicators need to be recorded by the customer service/consultation department to be able to evaluate them accurately.

4 Ways to Increase ROI for Content Strategy

At this point, you have a clear understanding of what ROI is and why it plays a role important part of your content marketing strategy. In this section, I will show you 4 simple ways to optimize your content marketing ROI! Let’s find out now!

#1. Identify goals to achieve

Content marketing can be used for a variety of purposes; We can use it to:

Improve your brand’s relationship with consumers.

Attract new traffic to the website.

Create a marketing funnel to get more conversions from your existing website visitors.

However, a good Content strategy will be to optimize content according to the customer journey.

Learn now: 20 ways to write good content, effective immediately.

The formula for estimating the Traffic goal to achieve

Traffic estimate

#2. Create valuable content in stages

Once you have a clear traffic goal, you need to focus all your efforts and allocate the right content for each of these stages.

Remember: Users at different stages will have an other search intent.

I have detailed instructions on Optimizing content for 4 search purposes in the video below; please watch carefully!

>> SEO Content: Complete Beginner’s Guide

#3. Reusing Content to Generate Leads

From a large blog post (about 3000 words), we can extract an average of 3 to 4 small posts (micro content) with different content. These micro-content articles will be posted to social networking sites and act as a traffic driver to the major blog post on the website.

To save money, you should group the most prominent articles you have developed into an ebook to attract leads. If the content is a video, you can choose a short clip to share on social networks and navigate the web, for example.

#4. Choose a distribution channel

Tips: Stop promoting content in every channel you can think of!

Here, I’m talking about channels like Facebook, Youtube, Instagram, etc. The reason is that users on different media will have very other behaviors. Just because a piece of content posted on one channel works well doesn’t mean it will work on another. So focus on up to 3 flatform that brings you the most visitors for your time, effort and money.

>>Ideally, you use Google Analytics to choose effective content distribution channels.

3 ways to calculate effective website SEO ROI

In general, there will be 3 main steps for you to take:

Step 1: To calculate the ROI of SEO, we will start by looking at the Click Through Rate (CTR) for each keyword ranked 20 – the top position on the Google search results table. From there, you can estimate the growth of organic traffic to your website if you are on the first page of Google.

Step 2: Measure the value of organic traffic generated by SEO compared to the cost of Adword, if you want to pull the same amount of traffic.

Step 3: Finally, together, we will calculate the ROI of this organic traffic. I will give you a specific formula for you to calculate your SEO ROI.

So if you get 1,000,000 VND at the cost of 500,000 VND, your ROI calculation will look like this:

(1,000,000 – 500,000) / 500,000 = 100% ROI

But how do you measure SEO ROI?

How to calculate website SEO ROI

Lifetime Value: is the lifetime value of a new customer.

Customer Acquisition Cost: The cost required to create new customers.

How to calculate LTV?

Simply put, LTV is an estimate of the total long-term profit earned from each new customer for the business now and in the future. Below is the formula for calculating LTV illustration. With an average customer, there is:

Total purchase time (years) 5

Average value per purchase (VND) 500,000 VND

Number of purchases per year (times) 4

% profit per order 50%

Lifetime value 5,000,000

Example: You run a pizza shop. You sell amazing pizzas, so you expect the average customer to stay with you for 5 years. On average, 1 customer can buy your pizza 4 times/year. And, your gross profit margin for each customer purchase is 50%. Then your LTV number looks like this

LIFETIME VALUE (LTV) = 5 X 500,000 X 4 X 50% = 5,000,000

Next, we’ll look at the cost of acquiring a new customer – CAC.

So how to calculate the CAC index?

CAC is a metric that helps business owners know how much it costs to acquire new customers.

Therefore, you should track CACs for different types of marketing. Because of that, you find out what works best for your business. What to invest in for the best return – in other words, for the best ROI.

In this case – you will have a CAC thanks to offline advertising (hanging banners, signs, newspapers…) which is different from the CAC for SEO.

Note: The most comprehensive CAC number won’t count solely on AdWords advertising, SEO Web, and Social Media investments. But other costs also contribute to acquiring new customer’s careers.

These can be expenses such as Sales commissions, sales and marketing staff salaries, business expenses related to sales and marketing, etc.

But the goal here is to calculate the ROI of SEO. So I’m just talking about simplified CAC numbers to compare SEO with other marketing channels.

CAC costs of acquiring new customers

Calculation formula

TOTAL SEO COST / NEW CUSTOMERS = CAC

Linking to the example above, you invest an SEO campaign within the first 6 months at the cost of 120,000,000 VND to promote the keyword “cheap pizza”. Going to the top 1 keyword “cheap pizza” brings you a total of 180 new customers in the next 6 months (only need to add 1 new customer every day).

CAC = 120,000,000 / 180 = 667,000 VND

If we include LTV and CAC metrics in our ROI formula. It will look like this:

SEO ROI = (5,000,000–667,000)/667,000 = 650% ROI

Note: customer acquisition costs (CACs) vary by industry.

In fact, the value of a new customer often extends beyond that one customer’s LTV. Sometimes, they refer friends to your store or leave positive reviews/reviews for your products to add value (or more sales) to your business. The CAC formula is very simple, but the most difficult is which SEO strategies help you pull the right targeted traffic from the most potential customers.

What is the ROI Measurement FAQ for SEO?

Do you have more questions about measuring ROI for SEO? Leave a comment below this post!

When to measure SEO ROI?

Generally, you will measure SEO ROI monthly, quarterly, and annually. Because SEO is a long-term strategy and it takes time to produce results. You won’t see an effective ROI for the first three to six months. After this period of time, SEO can start to turn a profit – and continue to grow.

What is a good SEO ROI?

Good SEO ROI depends on your business.

Every company is different, which makes it difficult to pin down average or good SEO ROI. When one business invests 1500$ per month in SEO, another business spends 3000$. Not to mention, lead values ​​vary from company to company.

Before you start SEO, think about the ideal ROI for your business. This number can be used as a benchmark for the team to measure against itself. For best results, you should start with a small percentage. And then work towards larger proportions as you collect data.

Conclude

By the end of the article, you must have understood what ROI is, right..

In fact, there are many ways to optimize ROI for a strategy. But it is important that you understand the importance of ROI. As well as how to use ROI to evaluate the effectiveness of your business strategy.

Want sustainable revenue growth through customer journey research? Or do you want to leverage digital channels to optimize digital marketing strategies? Check out GTV SEO’s digital marketing service package now!

References:

“Return on Investment (ROI)” – Investopedia

https://www.investopedia.com/terms/r/returnoninvestment.asp

“ROI Formula (Return on Investment)” – Corporate Finance Institute

https://corporatefinanceinstitute.com/resources/knowledge/finance/return-on-investment-roi-formula/

“What Is SEO ROI?” – Raven Tools

https://raventools.com/blog/what-is-seo-roi/