Is that what our goals really are? Clicks? Hits? Pageviews? To me it sounds like either somebody bought some snake oil, or they’re just trying to sound like they know what they’re talking about. Come on, we’re all business people. We all should be trying to bring in one thing. More REVENUE.
Clicks, Hits, Subscribers, #1 Rankings, Pageviews, etc. are all just paths to your goal. It is appropriate to chase all of the above, but the amount of effort and energy you pour into each has to be measured against their actual value. And the problem I most often encounter is that people have a tough time grasping the actual value of different measurable key performance indicators. As an SEO guy, sometimes it goes against your gut to tell somebody that SEO is not always the answer. But if you’re a real business person who happens to be an SEO, you already know this is the case and you’ve probably told somebody that at least once before. Ranking number one for a phrase that generates no business is worthless unless it’s free.
So let’s make it easy and spell it out, line by line. This is a little guide on how to determine the value of your KPIs and to identify where your low hanging fruit is.
Define Your Multipliers
It’s fine and dandy to have reporting, but it doesn’t actually mean much without assigning monetary values to each metric. I like PPC a lot, so let’s start with that.
Google Adwords provides some neat campaign performance reports. You probably need to pull them daily if you’re handling a budget larger than a shoe string. To the average business person, it looks like a bunch of techie jargon. So you need to be able to quickly assign values to each metric.
Here are some common key performance indicators that I like to call MULTIPLIERS:
- Fulfillment, Shipment, Funding, Disbursement, Mailout, Contract, etc etc (final stage)
Calling any of these “conversions” can make things confusing. The web guy might think a conversion is a click to a lead. But the sales guy says a conversion is a lead to a sale. The operations guy thinks conversion is a sale to a fulfillment. And the deacon thinks a conversion is a heathen to a choir boy. So we need to be clear and try to avoid the word conversion unless everybody already agrees on its meaning.
Assign Values to Your Multipliers
First, you need to know how much revenue you brought in for the time period you are reporting on. Let’s say you have 10 sales in a given reporting period for a PPC campaign. Your revenue is $1,000. You spent $400 on marketing costs so far. This scenario looks good, because your marketing costs are in the black and you have $600 to pay operating expenses and / or pocket. Divide the number of sales by your cost and you have a cost per sale of $40. Now divide your number of sales by your revenue, and you see your revenue per sale is $100. You’re making $60 a sale, which is a pretty good return in most cases.
It’s pretty easy to assign a value per sale. The neat thing is, you can use this same simple logic to assign values to any of your multipliers. To get your cost per action for any action in any campaign, divide the over all cost by the number of each action. So if it took 100 clicks to get those 10 sales, you know your landing page is converting at 10% and you know your value per click is $10. You use that number to guide your bidding. And to kick your web designer in the butt for creating a landing page that only converts at 10%.
For those not in the trenches of web marketing, I am over simplifying much of this. There are usually so many other factors to consider. Numerous buckets of keywords, multiple PPC channels, different conversion rates for each. And to make the matrix even more messy, different times of day, different cities, different days of the week, and different seasons will usually yield different conversion rates on each. Not to mention market AND marketplace conditions will affect all of these KPIs. Leads generated from the 3rd ad slot will probably have a different conversions than those from the #1 spot.
But that kind of stuff is why I get paid to manage stuff like this. To be really really good, you need to have a strong handle on all of those nuances.
Assign Actual Values to Your SEO Campaigns Too
It can be frustrating trying to explain the importance, or even play down the importance of SEO when talking in generalizations. Some people have it in their head that SEO is a magic bullet. This goes for SEOs and business people alike. But sometimes, let’s be honest, SEO is not the answer. If nobody is searching for your new invention, you’ll have to use other channels to generate market awareness before your natural search rankings will have real value. Or if you’re getting into a super saturated market which will take a ton of effort, time, money, or a combination of all three, then sometimes the return is not worth the investment. When making an argument either for or against SEO for certain verticals or keywords, knowing the approximate true value of those rankings will make all the difference.
Fortunately SEO is actually similar to PPC in the way you measure success. If you isolate your search engine traffic, especially keyphrase by keyphrase, you can get an accurate measure of conversion rates on your site. This might not be quite as simple as measuring conversion rates on PPC, but it’s pretty close. Close enough so that you can now take your revenue generated from that traffic, and divide it by the cost of gaining those rankings. Sometimes it’s easy; if you bought 10 links, and that’s all you did for SEO, then you have your true cost. But usually it’s more complex. You may have to take into consideration your time, your co-workers’ time, retained SEO services, publishing costs, content generation costs, and all kinds of other indirect costs that are associated with SEO. But once you have your actual cost, the rest is the same. If your revenue is more than your cost, clearly you’re on the right path.
Now that you know what your site’s conversion rate is for similar keyphrases, you can use search volume tools like Google’s keyword suggestion tool, and their trend tool to get click projections. The keyword suggestion tool shows actual search volume per keyword, which is pretty sweet. If you know where you rank for a particular keyword, you can use the data you have now on conversions, then divide the number of searches for that keyword by your actual clicks to get your click through rate. Once you have that, you can use the AOL search data to make some pretty strong guestimates on click volume for each of the top 10 positions.
After applying these methods, you should have a pretty good idea of how valuable that keyphrase actually is for your company. When you have a really strong handle on how much SEO will probably cost for new keywords (in both time and money) and you know what it will return, you can make intelligent and calculated decisions on whether or not to attack certain keyphrases. And you can speak in pure numbers, which makes things so much easier. And if your numbers are a wash, just remember if you’re breaking even on SEO costs now, in the future when you peel back, your rankings will still be bringing in business. Sometimes it’s worth the up front investment, especially if your company isn’t cash poor.
Again, this is an over simplification of a pretty complex matrix. There are still a lot of unknowns or in-exacts that you’ll have to have a pretty good handle on. For example, the higher you rank for a keyphrase, the higher your conversion rate on your site usually is. Traffic value from each of the search engines will be different. Your competition’s SEO efforts might not be as easy to detect initially, giving you a false sense of how easy cracking open a market might be. But these nuances, again, are the reason people like us get paid to manage this stuff.
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