SaaS SEO

SEO ROI: How to measure for SaaS [+ free tracker]

SEO ROI: How to measure for SaaS [+ free tracker]
Jake Stainer
by Jake Stainer

To effectively scale your SEO channel, you need to be able to measure its ROI every single month. 

In this ROI guide we are going to dive into:

  • The difference in ROI measurement between brand and performance SEO
  • How to measure ROI when you don’t know what your LTV is
  • What to do if you have only just started investing in SEO
  • How to keep an acceptable payback period and 3:1 LTV:CAC ratio 

We have also made a free ROI tracker & calculation spreadsheet designed specifically for SaaS companies who are growing their SEO channel.

Click here to get access to our free ROI tracking sheet. 

We will be looking at cost per product signup. If your business model uses leads, then substitute signups with leads. If your business has a hybrid model, then use a combination of the two: measure cost per conversion (lead+signup). 

Ready? Let’s begin! 

If you’ve been investing in SEO for < 6 months

If you are yet to invest in SEO or have been investing in it for less than 6 months, then you cannot measure the ROI of your SEO channel.

You have decided to make a bet to scale a new customer acquisition channel and need to validate this bet after a 6-month period. 

Why 6 months? 

Because SEO takes time in the beginning to grow for multiple reasons. To be successful, you need to: 

  • Research and create a high-impact strategic SEO plan
  • Create high-quality content 
  • Design and implement scalable systems for growth 
  • Build high-quality links
  • Build up domain-level and page-level topical authority. 

The danger when validating this bet, is that you don’t put enough resources into it, and after the 6 months you cannot make a decision to scale or kill this channel. This is the worst thing that can possibly happen when growing your SaaS company. 

Here are some tips to make sure you are able to validate your SEO channel effectively within 6 months:

  1. Understand the channel potential (the output): 
    1. How many new product signups and how much new MRR can you drive from SEO every month?
  2. Understand the effort required to get this output (the inputs): 
    1. Number of high-quality pages to build
    2. Number of links to build 
    3. Resources required (design, writing, engineering, marketing) 
  3. Use experienced SaaS growth experts who have already scaled SEO channels 
  4. Put enough budget behind the initiative to increase your inputs in these first 6-months. E.g. working with an agency for $10,000 / month. 

If you invest an average amount of resources, you’re just going to simply get average results. 

If you’ve been investing in SEO for > 6 months

If you’ve been working on your SEO channel for at least 6 months, you’re now able to start measuring your channel’s ROI to understand how you can calibrate your monthly SEO budget. 

From our experience working with a range of SaaS brands, it takes three months on average to see SEO impact after publishing new content,  acquiring links, etc. Neil Patel also found the same thing in a study that he conducted analysing 20,000 URLs (see image below). So we should consider a 3-month lag when measuring ROI. 

chart1.png

Now we have aligned on the average lag to see SEO results, we now need to use two different calculations of ROI depending on if the SEO we are measuring is brand SEO or performance SEO. 

Important: in your marketing budget you should already be differentiating between these two types of marketing (brand vs. performance). Sometimes performance is also called demand gen or growth. As a rule of thumb, on average companies invest 25% of their budget in brand and therefore 75% in performance marketing tactics. 

Performance SEO

Performance SEO in the context of SaaS is all about driving leads and product signups, so you’re creating content with the purpose to convert. Here you’re tackling product, solution and problem aware audiences. 

Here are the four steps you need to take in order to effectively calculate ROI:

Step 1: Understand your max CAC (Customer Acquisition Cost)

First you need to understand how much you can pay maximum in order to acquire a customer. 

In SaaS we are looking at maintaining a 3:1 LTV:CAC ratio, within a max 12-month payback period (including the usual SEO lag). 

Why? Because we want to scale a healthy SaaS company: 

  • Given CAC only involves acquisition costs (e.g. marketing & sales), then we maintain a 3:1 ratio between LTV:CAC so that the other 2:1 can pay for the other parts of our business: product innovation, human resources, etc. 
  • We recuperate our investments within 12-months (payback period) 
  • We can grow faster as a business by maintaining this ratio because there’s less capital investment required to grow

This means that you pay 1/3 of your lifetime value to acquire a single customer where your CAC / ARPA is less than or equal to 9. 

If you don’t know the LTV of your SEO channel, then use your company-level LTV.

If your company doesn’t know its LTV, then you’ll need to align on a max cost per signup that I cover in the next section.  

If you do have your LTV then you need to simply divide this by 3, and ensure that when dividing this final number by your ARPA, it doesn’t exceed 9. 

Worked example:

  • LTV = $1,500
  • ARPA = $50
  • Max CAC = $1500 / 3 = $500
  • $500 / $50 = 10, so max CAC = $450 (9 months payback * $50)

Having a 9-month payback period ensures that you are able to recuperate your SEO investment within 12 months including the 3-month SEO lag.

Step 2. Understand an acceptable cost per signup

Second, you now need to work back from your max CAC to understand how much you can pay to acquire an SEO signup. You’ll need to understand how a cohort of signups from +12 months ago converted into MRR to be able to establish the average 12-month conversion rate.

A) If you don’t know your max CAC or don’t have conversion rate data for the past 12 months

You have two options:

  1. Take a max cost per signup benchmark from your PPC channel and use this. E.g. $30 per signup.
  2. Align as a company how much you are prepared to spend maximum to acquire a single product signup. 

B) If you do know your max CAC and have conversion rate data from the past 12 months

Take a cohort of product signup from > 12 months ago and measure how it converted into MRR over a 12 month period. Calculate your 12-month signup conversion rate and divide your max CAC by this %. 

Worked example:

  • Max CAC: $450
  • Signups in cohort: 300
  • Customers from cohort who converted within 12-months of signup date: 15
  • 12-month conversion rate: 5% (15 / 300 )
  • Max cost per sign up = $22.5 (CAC * CVR)

Step 3. Build in all costs

Now we know how much we can spend to acquire an SEO signup, then we need to start tracking all of our SEO related costs every month so that our ROI is fully loaded. 

Costs to include:

  • Salaries (SEO manager, designers, engineers, sales)
  • Tools (e.g. Ahrefs, Screaming Frog, ClearScope etc)
  • Agencies & freelancers (link building, writers, etc.)

If you have a full-time employee working part-time on this channel, then include the % of their salary. E.g. you have a developer who works on average 10 hours / week, then take 25% of their total salary into consideration.

Step 4. Build your tracking & calculation sheet 

Now we have all the data, this last step is to build our ROI tracking spreadsheet.  

Screenshot 2020-04-30 at 17.09.55.png

Click here to download our ready-made SaaS SEO ROI tracker.

Here’s an overview of how this monthly tracker works:

  • You input all related SEO costs. If you’re missing cost categories then simply add new rows. Be sure to reconcile costs with your finance team every month to make sure they are correct and agreed upon.
  • You input the number of signups you track from your SEO channel every month. E.g. from Google Analytics or your data warehouse if you have a custom attribution model. 
  • The model calculates the cost per signup by using the costs from 3 months ago (to take into account the average SEO lag from action -> impact).
  • The model calculates your channel ROI by taking into account your max cost per signup (in the “ROI Settings” tab) versus your monthly cost per signup. 

Monitor your ROI every month to evaluate if you should increase or decrease your SEO investments. SEO is getting forever more competitive, so you should be investing as much so to maintain a 1x ROI month-on-month. 

Thus, there shouldn’t be any cause for celebration if you have an ROI higher than1, because it means you are missing out on additional SEO opportunities, for example by not building out more content or links. You are already hitting your payback and LTV:CAC ratio goals to scale a healthy SaaS business so don’t stop your SEO investments increasing.

It’s a “CAC game”, at the end of the day. 

Brand SEO

Brand SEO refers to content which you are creating in order to continually be in front of your ideal customer, as opposed to trying to convert them. This is usually problem aware or problem unaware content and this tactic is therefore classified as brand marketing. 

Not a lot of brands are currently doing this, but moving forward this will become a more recognised SaaS marketing tactic to engage with your prospects before they have a need for your product. 

You are also able to pixel this audience and effectively run retargeting campaigns to guide them through the next stages of your funnel and introduce them to your product and feel their pain. 

So the goal here, like most other brand marketing plays, is reach which we evaluate using a cost per click metric. 

First, we need to establish an acceptable cost per click that we are prepared to pay in order to get in front of our ICP. 

If you are currently running brand campaigns through display or paid social you can get a CPC benchmark from here. If not, then here are some Facebook CPCs by industry benchmarks that you can use

Second, the easiest way to get the number of clicks to your Brand SEO content, is to build a custom report in Google Analytics looking at landing pages from Organic which had 0 conversions. Use the New Users metric as a proxy for clicks. 

Now build a monthly tracking spreadsheet where you:

  • Enter in all costs involved in building out Brand SEO content (salaries, freelancers, agencies, tools. etc. )
  • Enter the number of New Users from your Google Analytics custom report
  • Calculate your CPC with a 3-month lag vs. costs (e.g. you divide April New Users by January costs)
  • Compare your CPC with your benchmark CPC to understand the efficacy of your Brand SEO investment. 
  • Decide if you should increase or decrease your brand marketing investment each quarter. 

Every brand should start to invest in Brand SEO in 2020 and beyond as part of their brand marketing mix. Are you?

ROI measurement mistakes to avoid

Here are a few mistakes we suggest you avoid when measuring the ROI of your SEO channel: 

  1. Measuring ROI of individual pages or website sections
  2. Measuring the ROI of a siloed part of your SEO mix. E.g. measuring ROI of a link building campaign. 

Given all the different moving parts and assumptions which are involved in growing an SEO channel, the best approach is to measure the ROI of the channel as whole and not break it down.

Wrapping up

So there you have it, our 2020 guide to measuring SEO ROI for SaaS. We hope you learned a lot and can start effectively measuring the ROI of your SEO channel.

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