How to Earn Budget Approval For Your Local SEO Projects – Proving the ROI
Let’s face it, as marketers proving the ROI of any marketing project is never an easy task. In fact, 40% of marketers say proving the ROI of marketing activities is their biggest challenge. Fortunately, here at Chatmeter, we’ve solved the mystery of how to calculate the ROI on Local SEO for you. Here’s our step-by-step formula to find the ROI of Local SEO.
The goal of this calculator is to show you the opportunity that is in front of you. It’s a unique calculator because it’s one of the only calculators that ties local SEO to revenue. In our example, we show specific numbers but keep in mind it is an estimate.
Chatmeter uses local rankings to calculate ROI. The mindset is that the more visible your locations are in search results for keywords relative to your business, the more customers will consider your business and more customers will make purchases there.
There are 3 steps to calculating ROI. The first step is calculating the Total Addressable Market (TAM) for each keyword. Every keyword has a certain amount of revenue tied to it. We’ll calculate the keyword TAM by determining how popular a keyword is (the number of monthly searches) and then determine revenue using the average customer value. The TAM changes based on the industry, how much your average customer spends, and how popular a keyword is.
The second step is determining your business’ current piece of the keyword market. A keyword market size is the amount of revenue being spent at not only your business, but all of your relative competitors as well. In order to determine how much of that revenue is being spent at your business, we look to local search rankings for that keyword. More of your locations on Page-1 of search results equals more of those clicks going to you.
The final step is determining how much more revenue could be driven through increasing your local SEO efforts. It’s easiest to think of this as a pie. Now that you know how big your piece of the pie is, you know what’s still sitting there on the table. The more effort you put into optimizing your business locations for local search, the higher your rankings will get and therefore the more of that pie will be yours.
DISCLAIMER: This ROI Calculator is only an example and should only be used to measure or predict the relative Return on Investment. Some of the numbers used in this formula are based on published studies from various sources. Businesses who track these metrics themselves will have more accurate results.
Before We Begin: Gather Your Local SEO Metrics
There are two Local SEO metrics you will need before we begin. The first metric you’ll want to gather before we begin is keyword search volume. It’s easiest to use the most common unbranded keyword for your business. For example “coffee” for the brand Starbucks. You can use tools like Google’s Keyword Planner or Ubersuggest to find the average monthly search volume. Depending on your business locations, you may want to narrow down to a regional or city search volume.
Now that you know what keyword to focus on and its monthly search volume, we can move on to the second metric – your local search rankings. We like to focus on the number of page-1 appearances for the keyword you selected. Less than 2% of clicks go to listings beyond page-1 which is why brands only need to account for the page-1 listings. Chatmeter users can find this information within their LocationHQ platform. Chatmeter customers can track up to 15 keywords at once.
Once you gather your average page-1 appearances, and your average monthly keyword search volume you’re ready to calculate your Local SEO ROI.
How to Calculate Local SEO ROI
Local SEO ROI Formula: Step 1 – Keyword Opportunity Size
The first step in this formula is to determine your keyword opportunity size. This will help set a benchmark for the potential amount of revenue your brand could bring in each month. To determine the Keyword opportunity size you need to multiply the average customer value (ACV) by the number or purchases. As an example, we’ll use a national clothing retailer with the keyword “Clothing Store” and our sample size will be 50 locations.
Monthly Search Volume for “Clothing Store” is 201,000. But we know that not every search turns into a visit. Studies show that 76% of people who conduct a local search will visit the business in 24 hours.
Clothing Store Visits
201,000 x 76% = 152,760 monthly visits
We also know that not every visit turns into a purchase. Data shows us that around 28% of store visits from local searches result in a purchase.
152,769 x 28% = 42,773/month
In this example, we’re going to use $50 as the ACV.
42,773 x $50 = $2,138,640
The keyword TAM for this national clothing retailer is $2,138,640/month. Keep in mind this money is being spent across all businesses that sell clothes.
Local SEO ROI Formula: Step 2 – True Missed TAM
The second step in calculating ROI is determining the true missed TAM. We look at the number of the National Retailers locations that are not on Page 1. This shows how much revenue is being left on the table.
In this example, let’s say 48% of the national retailer’s listings are not on page-1 for the keyword “clothing stores”. You’d then take 48% of the keyword TAM to determine the true opportunity.
$2,138,640 x 48% = $1,026,547
Now we need to determine the missed opportunity per location. For our page-1 sample size, we used 50 locations but you can also use the total number of locations.
Missed Opportunity Per Location
$1,026,547 / 50 = $20,531/month
Now we need to account for the fact that different positions on page-1 get a different amount of clicks. We’re currently making the assumption that this brand is missing out on 100% of the clicks. But that’s not accurate. Brands in the first position could earn 70% of the page-1 clicks while those in the 5th position could earn 10% of the clicks. You can’t determine where in the rankings the brand is listed so to take a conservative approach, we’re going to say this brand will earn 30% of the clicks.
True Missed TAM
$20,531 x 30% = $6,159/month
The true missed TAM per location is $6,159/month/location. Again, we calculate the missed opportunity to show us how much revenue is being left on the table. If this National Retailer were to get 100% of their locations on page-1 for this keyword, then they will see an additional $6,159/month at each location.
Local SEO ROI Formula: Step 3 – Revenue Increase
Finally, we can determine how much of a revenue increase a brand can expect from implementing a local SEO strategy or using a tool like Chatmeter.
We know that 48% of this retailer’s listings aren’t ranking on page-1. We also know that not every listing is in the first ranking position. Implementing a local SEO strategy can help these locations earn more online visibility. To take a conservative approach we’ll say this brand will see a 10% increase in page-1 appearances.
Revenue Increase From Local SEO
$6,159 x 10% = $1,476/location/month
This is just for our sample size of 50 locations. If we apply this to all locations (1,238 stores) and look at it from an annual perspective this national retail brand can expect to see a $21.9 million annual increase in revenue across 1,238 stores.
Just increasing the online visibility a brand of over 1,200 stores can increase their annual revenue by $21.9 million, conservatively. Imagine if they see a 15 or 25% increase in page-1 appearances? This is more than enough reasons to invest in local SEO tools.
3 Steps: How to Increase Local Online Visibility
The real key to earning a high return on investment with local SEO is to put the work in. Businesses must be actively optimizing their online visibility in order to reach the most possible customers. There are three things a brand can do that will impact their online visibility the most.
#1 – Listing Management
Implementing a local listing management strategy will help brands climb the local search rankings. Accurate, optimized, duplicate-free and active local business listings are all part of the foundation to a successful local SEO strategy.
#2 – Review Management
Review signals are gaining more and more power in Google’s Local Search Ranking Factors, rising 5% since 2015. Brands who implement a review management strategy and start responding to reviews can watch their star ratings and the quantity of reviews increase. According to a 2018 study by the Harvard Business Review, brands that start responding to reviews can expect to see a .12 increase in star rating and a 12% increase in the quantity of reviews. Both of these factors can help increase search rankings.
#3 – Optimized Local Pages
One of the quickest ways to climb the search rankings for web, local, and voice search is through local pages. Optimized local pages are an essential piece of an unbranded keyword strategy. Every multi-location brand needs local pages to create a seamless customer experience no matter how their customers are searching.
Chatmeter is dedicated to helping brands increase their local online visibility. As experts in the space, we’ve built the tools brands and agencies need to get the most ROI on their local SEO efforts. To get your own personalized ROI analysis, request your free brand audit today.