How to budget for search engine marketing

The return on investment when utilising SEM (Search Engine Marketing) is great as it presents analytical stats and direct measurement of the various campaigns used, however

1. if companies are investing too much money into a product that has minimal markup then they will inevitably lose on their investment.
2. if companies have a large budget but don’t implement conversion marketing then they stand to lose on their investment.
3. if a company under invests in a lucrative market, then they are also losing out on potentially a large market share.
4. if they adopt a bad strategy for search engine marketing then they will neither see great returns.

The first step is to understand what the various services are:

• Search engine optimisation (SEO – includes Public Relations)
• Social media marketing
• Pay per click (PPC)
• Conversion marketing

The second step is to understand what are keywords and how to choose effective keywords:

• Know the estimated search volume for the keywords you are going after.
• Do not make keywords that have a low amount of search traffic your primary keywords as your time & money will be wasted on low conversions.
• The same can be said if you are on a small budget and want to go after a keyword that is heavily competed for (one worded keywords like ‘safari’ or ‘iphone’). These types of keywords are heavily competed for and large budgets are thrown at them to remain #1. If you spend time on these types of keywords you are actually still going backwards because of the higher budgeted campaigns moving further away from you.
• The two best tools to measure keyword search volume are Google Adwords Keyword Tool and Google Insights. When you are using Google Adwords Keyword Tool, be sure to be location specific and use [Exact] when doing your search query. By default it ticks the [Broad] search, however this does not give an accurate answer. [Broad] search is the estimated search volume across all the Google content networks. You only want to check what is happening on a particular search engine, for example google.co.za (world-wide) or google.co.uk (world-wide) searches.

Once you have identified the expected search volume if you were to be in #1 spot, the third step is to calculate the value of a product/service to your company.
Let’s use two examples:

1. Company A sells fashion clothing and is making 30% markup on each item of clothing they sell. On average Company A’s product is valued at R500 so they are making R150 profit on each item (on average). If the search volume for ‘t-shirts’ is 3000 per month then they are expected to receive roughly 1500 visits per month (see ‘search behaviour’ heat map below). With a conversion rate of 2%, this will equal 30 sales per month. 30 sales equals R4500 profit (excluding indirect and direct costs).
2. Company B is a safari tour company and wants to be #1 for ‘african safari’. On average each sale is worth R2500 per person in commission (I’m no travel guru but I’m using these figures for argument sakes). There are 30 000 searches for ‘african safari’, therefore they can expect to receive roughly 15 000 visits for being #1. With a 2% conversion rate, this equals 300 enquiries per month. 300 enquiries, should hopefully be a further 30% conversion rate into sales (90 sales). R225 000 commission per month (excluding indirect and direct costs).

With the above-mentioned said, how do we calculate the cost of investment into SEM (search engine marketing) and how do we split the budget into the various services SEO, social media, PPC and conversion marketing)?

Companies have an allocated marketing budget which is limited. The company and your SEM agency need to set realistic goals according to that budget.

Budgets can be divided into small, medium and large.

Small – R5000/month and less:

Objectives:
Immediate: sales
Long-term: high rankings for niche keywords

Investing money in PPC is a good way to ensure immediate sales. These sales can be then used for re-investing into a SEO campaign. The problem though with PPC is that traffic appears immediately and with that your money disappears. So having a correct testing strategy is imperative. When you go the PPC route ensure that you are testing various designs per campaign because more often than not you sit with a design that doesn’t convert and you wonder why. If you have various designs you will immediately see which one works and which doesn’t and your return on investment will be so much greater.

Whilst the PPC campaign is running, ensure that you have your own social media and blogging campaign. Because of budget this will need to be done in house. Your outsourced search engine marketer should be giving you basic guidelines of what to do and what not to do within the likes of Facebook, Twitter and your blog.

Re-invest the sales from PPC into SEO because ultimately you don’t want to rely on PPC to get your brand noticed on the web. You want to be #1 in organic (unpaid) search results! Your SEO expert will give you competitive analysis of how many links you have (also quality) against your competition and identify possible links to go after to improve your link graph.

Medium – R6 000 to R20 000/month:

Objectives:
Immediate: sales and brand awareness
Long-term: high organic traffic

As mentioned above, ensure that the PPC campaign is being run effectively. Ultimately the difference between small and medium budget is that the Ad spend is larger and the detail in conversion testing is better. With a bigger budget better designs can be made so even further improvement in conversion rates can be done. One thing to remember is that conversion rates for PPC are slightly lower than organic traffic.  From experience and researching industry standards the conversion rate for organic traffic is 2% and 0.5% for PPC traffic. However, if you are intentional about conversion marketing you can increase this. Read this article by Rob Stokes of Quirk Marketing for more info.

Towards the top end of the medium budget, companies will be able to employ small PR companies to write more professional blog articles and then submit them to top press release and news driven websites. This is when you start seeing how important online PR is for your SEO campaign. Content generation and article link building is crucial to get noticed by Google.

Large – R21 000/month plus:

Objectives:
Immediate: sales and brand awareness
Long-term: go after high search volume keywords

So you have a full PPC campaign running with a designer and programmer making subtle changes and now instead of re-investing the money into SEO you are actually making a profit from the sales off the PPC campaign. This may sound silly but I’ve seen large corporates throw money into advertising and not measure the conversion rates thereof. Then after the campaign they sit in the boardroom and wonder what returns they got for their advertising. What a waste of money…

When competing for the high search volume keywords usually one or two keywords, the need for fine tuning the on-site optimisation and incoming link graph is crucial. A large portion of the budget will need to go to content creation and site architecture updates, if the company wants to be seen as the authority it needs to be leading the way with informative articles and product/service information.

So going back to my example of Company A and Company B, once you have worked out the profit you make on one sale and search volume of the keywords you want to target. You dedicate a portion of your budget to PPC to recoup the investment costs of advertising, remembering that the normal conversion rate for PPC is 0.5% so the traffic has to be substantial for you to make the sales.

Another example of working with PPC on a small budget; if you are spending R3000 per month on PPC then you will need to ensure that you are making a minimum of R6000 in sales otherwise it’s not worth it. To make R6000 worth of sales you need to ensure that the traffic is large enough to support leads of 0.5% of traffic and further increase this conversion rate.

SEO becomes very straight forward and easy to understand; simply put it’s about links and content, which will give you the success you desire. If you are moulding all the search engine marketing channels (SEO PR, Social Media, PPC and conversion marketing) together into one well defined campaign, the chances of success increases even higher. Whether you are investing in any one or all of these marketing channels ensure that the company you are using always provides detailed monthly reporting coupled with good communication. It’s this reporting that helps you measure and track the campaign’s effectiveness. If you are a person/company who requires instant results then stick to PPC but be prepared to continually be spending money to sustain sales.

Read this article by Rob Stokes of Quirk Marketing for more info on conversion ratios.