Earlier today I watched a documentary about Finnish welfare society. The message was simple: politics measure everything in money to find the most efficient solution. This way making hard decisions where emotions and other factors could disturb comes simpler. I have to admit that keyword research is an issue where human interference can be misleading. In my earlier blog entries I have discussed some metrics used in keyword research, but now it time to talk about keyword ROI. 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? My solution is to calculate keyword specific ROI. The simplified formula is:
keyword ROI = expected traffic x target product/service gross margin
I usually ask customer to provide me gross margin for each product/service regarding the keyword research. If the figures are like:
1)Product A has a selling price of US$2/unit. Gross margin is US$0.70/unit.
2)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 leave comments.
My question relates to the degree to which the figures from the various keyword search volume tools can be trusted. Do you create a range around it? For example, if it's 1500 searches a month, you might create a range of 1400-1600. I would go for a much larger range - what would you do?
Cheers.
Great tip! I have hundreds of domain names and this will come in handy as another metric for determining which parked domains I want to hang on to (potentially more profitable based on keywords) versus which ones to sell, drop, or develop.