When you are investing money in marketing, you do expect to have some outcomes. One of the most crucial and integral marketing investments is SaaS SEO. Measuring the Return On Investment (ROI) is essential for all SaaS businesses.
Did you know that the data required to measure ROI is generated within your operations and processes? You can evaluate the data of your SaaS business with the help of ROI. By measuring the ROI monthly or quarterly, you can augment the growth of your SEO channel.
Before we look into how to calculate SaaS SEO ROI, let us first examine what it is.
What is SaaS SEO ROI?
The ROI is the profit from an investment and is generally measured using a percentage. For SaaS marketing, the ROI is the ratio of profits concerned with your marketing efforts and costs. For instance, let us assume you invest $200 in a business and obtain a profit of $100 after a year. In this example, you will receive an ROI of 50% after a year.
The ROI is a performance metric used globally to measure and evaluate profitability. Moreover, it is used to assess the efficiency and probability of getting a return from the initial investment. The ROI is definitely something which is on the checklist of SaaS Companies.
By measuring ROI, you can get detailed insights into your SaaS marketing strategies. It can help you evaluate which ones produce tangible and positive results. Your ROI will become positive when your business has more profit than what was spent on initial investments.
The results of yearly investments can be quite different from those of monthly investments. It is crucial to review the time when determining the SaaS SEO ROI. If the acquisition of ROI is positive, it is a good practice to account for the time it took for your marketing efforts.
Now that we know what SaaS SEO ROI is let us see how to calculate SaaS SEO ROI.
What is the Formula for Calculating ROI?
The SaaS SEO ROI is the ratio that examines the profit or loss from the initial marketing efforts relative to its cost. The formula for calculating SaaS SEO ROI is quite straightforward:
Return Of Investment = (Net or Total Profit / Investment Costs) x 100
To further simplify the formula, here are the steps for how to calculate SaaS SEO ROI:
- Subtract the initial amount of investment from the final amount of investment. The resultant value will be the net return.
- Divide the net or total return by the total acquisition cost.
- Multiply the resultant value by 100.
How is the SaaS SEO ROI Calculated?
Now, comes the main question: How to Calculate SaaS SEO ROI? Calculating SaaS SEO ROI concerns different variables, which include Total Monthly Searches, Click Through Rate, Average Order Value and Conversion Rate. The formula for calculating SaaS SEO ROI is as follows:
Click Through Rate x Average Order Value x Total Monthly Searches = SaaS SEO ROI.
Now that we know the formula for how to calculate SaaS SEO ROI, let us look at the variables used in the formula.
1. Click Through Rate (CTR)
CTR is the percentage or ratio of searches that result in a user clicking on your respective website. The CTR is affected by the keyword search. The CTR tells where your website ranks concerning the targeted keywords.
You will engage more traffic when you are near to #1 rank. For instance, if the keyword is ranked #1, research has shown that you will receive 30% of the clicks. The research further suggests that keywords in positions 5 and 10 received 9.5% and 3% clicks.
2. Average Order Value
Average Order Value (AOV) is used to track the average amount of dollars spent every time the user places an order. To determine the AOV, you can divide total revenue by the order numbers.
The AOV is a critical performance indicator that you can use to understand the purchasing behavior of your users. Generally, organizations use it to calculate the moving monthly average. Similar to other metrics, AOV can be used for any period.
3. Total Monthly Searches
The Total Monthly Searches (TMS) is the sum of all the monthly searches driven from all the used keywords. You can use any SEO tool and conduct a keyword search to find your Total Monthly Searches. After you have discovered monthly searches for each keyword, add them to see the TMS.
The Importance Of Calculating SaaS SEO ROI
The SaaS market is gaining increasing popularity and admiration. By 2023, the market for SaaS is predicted to grow by 208 billion U.S dollars. With such an extensive market, it is more important than ever to calculate the ROI and evaluate the marketing efforts.
The ROI for SEO is crucial since it helps you to compare your marketing spend to your business results. Calculating the ROI ensures you are investing in SEO that is bringing the desired results.
Many SaaS startups are functioning on low budgets. Therefore, for them, every dollar that is invested, counts. Moreover, when you invest in marketing, the results are usually long-term. Thus, SaaS ROI helps to know how you can expect your investment to be aligned with your business results.
The best part is that the SaaS ROI helps you evaluate whether your marketing strategies are bringing the desired results. You can determine which SaaS SEO strategies are worth your investment and time and which could be more fruitful.
Metrics Used To Measure SaaS SEO ROI
Several SaaS marketing metrics can help to measure your ROI. These metrics for SaaS companies assist to evaluate the outcomes of your marketing strategies. Thereby, with these metrics, you can determine which marketing strategies are well-suited for your SaaS business.
Now that we have previously discussed how to calculate SaaS SEO ROI, let us look at the top metrics that will help you to determine the ROIf
1. Customer Lifetime Value (CLV)
CLV is the money your SaaS organization or business makes annually. The value is calculated for the duration the customer uses a business product. Here is the formula to calculate CLV:
CLV = Average Revenue Per Individual Account / Net MRR Churn Rate
2. Website Traffic
By examining your website traffic, you can evaluate which channels and marketing strategies bring the best results. You should invest more money if a channel is getting the expected results. On the contrary, if any channel is not bringing the desired outcomes, it is advisable to discontinue the marketing strategy.
3. Churn Rate
This is the rate at which your users halt using the services of an entity or an organization. The churn rate can be determined by the help of this formula:
Churn = (Number of initial customers – Number of final customers) / Number of initial customers
4. Customer Acquisition Cost
Customer Acquisition Cost (CAC) concerns how much you spend on gaining new customers for your SaaS business. For calculating your CAC, you can use this formula:
CAC = (Sum of Marketing Costs + Sum of Sales) / (New Customers Gained)
5. Marketing Qualified Lead
The Marketing Qualified Lead (MQL) refers to a lead interested in your business’s marketing efforts. In other words, the lead has a high probability of becoming your business customer.
How Much Time Does It Take For SEO To Generate ROI?
Although this is an essential question, there is no simple answer. SEO agencies often need help answering this question when they discuss investments with their clients.
If an SEO agency claims it can deliver results in months or weeks, it probably means you have encountered an illegitimate agency. Generally, it is a long term process and it takes considerable time before you can see the results of SEO.
It is crucial to note that various factors determine the time it takes for an SEO agency to deliver results. One of the primary factors is the investment you make for your marketing strategies. Other factors include the targeted audience and size of your SaaS business. These factors play a fundamental role in examining whether you will get the needed SaaS ROI or not.
Typically, SEO results can take from months to even years. This is because marketing efforts take significant time to gain new leads and customers. Therefore, it is essential to remember that you should patiently wait for the SEO results and your SaaS business to grow.
The Bottom Line
The SaaS market is constantly growing, and there are more than 17,000 SaaS companies in the U.S alone. With such massive growth, it is quite crucial to calculate the ROI to ensure whether the marketing efforts of your SaaS business are meeting your objectives or not. The SaaS SEO ROI calculation helps to showcase the results of your SaaS SEO marketing strategies. It also helps to evaluate whether your investments bring financial returns for your SaaS business.
Stratigia is a well-established SaaS Marketing Agency that solves the most complex challenges of your SaaS businesses. With Stratigia, you can constantly evaluate SaaS SEO ROI and make more insightful decisions. This will assist you in getting the best result and account for each dollar you invest in your marketing efforts.