ROI
What is Return on Investments (ROI)?
In finance, rate of return (ROR) or return on investment (ROI), or sometimes just return, is the ratio of money gained or lost on an investment relative to the amount of money invested. The amount of money gained or lost may be referred to as interest, profit/loss, gain/loss, or net income/loss. The money invested may be referred to as the asset, capital, principal, or the cost basis of the investment.
ROI is also known as rate of profit, rate of return or return. Return can also refer to the monetary amount of gain or loss. ROI is the return on a past or current investment, or the estimated return on a future investment. ROI is usually given as a percent rather than decimal value.
Now lets talk about SEO. In the present Internet era, a number of websites are there to promote the businesses. There are a lot of Internet website promotion tools and services including search engine optimization. Search engine optimization has become a very low cost advertising method with a probable high rate
of return. Currently, the immense benefits of SEO services have made the competition in optimizing websites increase drastically. These effective methods can make your site to list among the top sites in the search engines. The high competition has also led to the rise of many different styles and methods of website optimization. Nowadays, many individuals as well as firms are offering various SEO services.
SEO101 thinks that one of the key benefits of SEO services is the excellent return on investment (ROI). Increased brand visibility, targeted traffic, and higher sales are some of the main benefits of SEO services. The files size can be made smaller by the proper validation and optimization of files during servicing of pages. Another benefit is the cost effectiveness. One of the most cost-effective ways of marketing is SEO. If a website is properly designed and optimized, it stays for a long term in the rankings compared to pay per click (PPC) option.
Most usually term keyword ROI is used in PPC marketing. However, it can be a valuable tool in organic SEO when estimating what products / keywords to focus.
Imagine a situation where you have done keyword research for a customer. Yes, you know approximately how much traffic each keyword provides. Yes, you know how competitive those keyword are. And yes, based on this information you usually prefer some keywords over others. Take for example two products related keywords:
1)Product A keyword is expected to provide 2500 visitors a day. KEI is 100.
2)Product B keyword is expected to provide 100 visitors a day. KEI is 90.
Based on this information most SEOs would prefer Product A keyword. It provides more traffic and has less competition. But how can you tell if it provides a better ROI for customer? SEO101’s solution is to calculate keyword specific ROI. The simplified formula is:
keyword ROI = expected traffic x target product/service gross margin
We usually ask customer to provide us gross margin for each product/service regarding the keyword research. If the figures are like:
- Product A has a selling price of US$2/unit. Gross margin is US$0.70/unit.
- Product B has a selling price of US$75/unit. Gross margin is US$25/unit.
Suddenly product B begins to look a whole lot more tempting. The calculations prove this:
Product A keyword ROI = 2500 visitors x 0.70US$ = 1750US$
Product B keyword ROI = 100 visitors x 25US$ = 2500US$
Of course, this does not give a real value to play with only a portion of visits end to sales, price range affects to sales rate etc. However, this is a good indicator of potential monetary value of single keyword with certain amount of traffic. Like in PPC and affiliate marketing, the higher product specific profit is, the more affordable target it is. This is a valuable lesson to remember with keyword study.
As always, if you have any questions or tips on this subject, just contact SEO101.
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