One of the most common and frequent question made by marketers, in particular during annual planning discussions, regards the allocation of annual budget on the marketing levers, and in particular on SEO activities.
In every marketing or strategy class, you had listened to several approaches on preparing the budget plan, from the incremental method that takes into account last year figures and adds or subtracts a percentage, to the benchmark one using the same split of competitors.
In the last years it’s become even more important to link these investments to the revenues or profit results, to better calibrate the costs and optimize the yield of these activities, despite some of them cannot be matched with these outputs and this makes it difficult to calculate the ROI. In the end there is no clear answer to this topic but the context, the industry and the goals of each company can drive the choice about how much your company can spend on SEO.
Let’s start from scratch: you should define the share of revenues dedicated to the marketing area, often 5-10% or more of revenue, depending on the industry; if we take a B2C retail company it could be 20%.
Then you should break that down between offline and online marketing, keeping in mind that online marketing has been increasing a lot in the last years due to better ability to catch the right audience and collect more data on traffic. For this reason, I decide to invest 50% of the marketing budget on the online area (i.e. 10% of revenues), half of which would be allocated to SEO since I know that half of my company traffic comes from organic. In the end we get a rough allocation of our SEO budget, that would be 5% of the revenues.
Then we can check the correctness of initial plan considering other relevant facts, as well as the goals for the next year, and refine the plan accordingly.
Firstly, it makes sense to divide up the dollars by which channels drive the most traffic and revenue to your site, either what the present breakdown is, or what the ideal should be, based on your industry standards. If you know that your company is weak on the organic traffic if compared to the rest of the market segment, you can decide to increase the SEO investment to achieve the same contribution and reduce the lost opportunities.
You can also review the SEO budget keeping in mind how much money your company is investing in Paid Search (Paid Per Click). At a minimum, you should be spending at least 50% of what you’re spending on your PPC budget, while the “best practice” benchmark would be matching 100% of your PPC budget. Indeed, the paid channel (PPC) is a great lever for marketers since it’s effective and measurable, but it’s bringing value only for the short period of the campaign, while SEO is a more permanent long-term strategy, and for this reason it should at least be matching what the PPC spend is.
Anyway, there are some outliers where this rule can’t be applied, let’s take for example funded start-ups that need to bring results in the short terms and are still looking for the right customers so it’s clear that investments will be paying off. On the other hand, there are industries like insurance and financial categories where majority of keywords are really expensive (above €60 per click) and where SEO represents the best option to obtain a long-term success.
To conclude, the right allocation of marketing budget to SEO activities is crucial for any company, to avoid losing opportunities driven by organic traffic. It’s common to prioritize paid search since it guarantees certain results, but it’s a pure-cost activity with no positive contribution on your digital assets as after the conclusion of the campaign you will have no benefits. Investing the budget in SEO, instead, will generate long terms results thanks to better quality of your proprieties, that are the sources of most of your traffic. So, are you sure you can afford to ignore the SEO importance?