The steady upward trend in SEO spend shows that marketers recognize the role SEO plays in helping potential customers find their offerings. In 2020 alone, US businesses have invested a estimated $79.3 billion to increase the amount of freedom footprint.
But even if you know how important SEO is to your marketing, deciding how much to spend on it is another question. Although there is no single formula for set SEO budget but here are some strategies you can leverage to find a number that works for your business.
Break your marketing budget
Recent data shows that B2C organizations spend on average 5% to 12% of their revenue from marketing, and B2B spends about 8% to 9% of sales for marketing spend. Of that total spending, as reported by Forester Research , companies spend an average of half of their marketing budgets on online strategies, such as SEO, direct email, social networking, and data analytics. If you have an entirely web-based business, you will likely spend a larger percentage of your total budget on digital strategies.
Sample SEO budget breakdown table
According to 2021 Survey of CMO , nearly 74% of companies invest in SEO. Every business has unique needs and the amount you should budget for depends on your business model and niche, but it can still be helpful to see some examples.
The following chart shows the average budget breakdown for different types of companies (B2B or B2C) with different levels of revenue, based on the same survey data.
This table suggests what your overall SEO and marketing budget might look like at a premium.
Now let's go one level deeper. How are you strategizing that precious budget to ensure it helps you hit your marketing sales year after year?
5 methods to determine the amount to spend on SEO
You have options when budgeting for SEO, with methods ranging from raw percentages of total revenue to more precise calculations based on marketing metrics:
1. Commit a percentage of your overall marketing budget
How it works
Set aside a percentage of your digital marketing budget based on how much you rely on website traffic to generate sales. (For example, an e-commerce business would choose to spend more on SEO than their traditional counterpart.)
You can do the same with a fixed amount: check the line items of your marketing budget and decide what you think you can afford to spend on SEO.
Memorize
Allocating a large portion of your marketing budget doesn't take your specific SEO needs into account.
Basing your SEO budget on what you think you can afford may mean you're not spending enough to see meaningful results. In one Large scale analysis of SEO services , Backlinko found a correlation between spending and satisfaction. Data shows that people who choose low-budget SEO are less satisfied than those who invest more fully in SEO as a marketing channel.
2. Match your competitors
How it works
Businesses with competitors actively targeting industry keywords must commit more to SEO to maintain a fraction of their organic traffic. Compare your current search engine rankings to your competitors and measure the opportunity cost of losing customers to them.
Memorize
This approach helps you decide how to prioritize SEO, but it may only get you half way there. The next step is to determine the SEO budget you will need to rank higher than your competitors and you can get Free SEO consulting to answer that question.
3. Consider your marketing goals
How it works
Think about your SEO goals in the context of broader marketing goals before allocating a specific amount to that line of your budget.
Where does SEO fit? Think about your organic search potential with a realistic mindset. Are you relying on organic traffic growth to meet key KPIs like leads or sales? Or are you hitting your revenue goals and want to expand brand awareness? Make sure you set the right internal expectations for your marketing investment and enough in the funnel to achieve the desired results.
Memorize
It takes tight planning to align your budget with your goals, but this ensures that your money is distributed in a way that supports your goals.
4. Budgeting using Customer Lifetime Value (CLTV)
How it works
The benefits of organic traffic extend beyond a one-time purchase, especially if you focus on satisfaction, customer retention, and brand loyalty. This approach determines the value of a website based on Customer Lifetime Value (CLTV) – how much money you can expect to earn from customers over the long term.
Let's say your business has a transaction page on your website that gets 10,000 monthly customers. If you convert 1% of visitors, you are selling to 100 customers a month. Now, if your CLTV is $3,000, your site is worth $300,000 overtime.
You can use this number to work out how much to spend on SEO. Perhaps you want your SEO strategies to increase traffic by 10%, generate another 1, 000 monthly customers. With a 1% conversion rate, that traffic will directly bring in 10 new customers, giving you $30,000 worth to redefine that SEO investment.
Memorize
Which comes first, SEO or CRO? If you're budgeting for SEO, the answer is SEO. But if you're using CLTV to determine page value, make sure to keep in mind the various factors that affect conversions. If the conversion rate turns to profit from your SEO efforts, you can increase your SEO spend by investing in CRO and UX improvements to increase your website's conversion rate. These two marketing strategies work together to improve the bottom line.
5. Determine the effectiveness of SEO versus paid search spend
How it works
You can also make an SEO budget relative to your PPC ad spend, looking at the effectiveness of each marketing strategy.
According to Marketing Sherpa . However, SEO often generates twice as much traffic. Research shows that organic search generates an average of 53% of website traffic while paid search generates about 15% of traffic.
What about ecommerce conversions? Or closed won trades? Review your own data to compare ROI on paid and organic traffic, and make sure the comparison budget is right for your bottom line.
If SEO is driving more high-quality visitors to your site, consider reallocating your digital marketing budget to reflect SEO's larger return on your investment. Review Comprehensive comparison between SEO and PPC .
remember
While PPC can produce results quickly, when you stop running your ads, your visibility will drop. On the other hand, an optimized website that ranks well can gain momentum and continue driving traffic in the long run. Consider a mix of SEO and PPC that suits your growing business needs.
Where to increase your SEO budget
Once you start breaking down the numbers to figure out how much money to spend on SEO, you may end up with higher-than-expected numbers.
Your budget stakeholders may not understand the benefits of investing in SEO, so here are a few helpful points to discuss.
Basic SEO bargaining won't yield significant results
There is a link between SEO spend and satisfaction. Backlinks found that customers who invested above the minimum threshold of 53. were 3% more likely to be “extremely satisfied” than those who spent less.
SEO brings high efficiency compared to other channels
SEO is a relatively new digital marketing channel. Just because you (or your stakeholders) aren't used to prioritizing it in a budget doesn't mean you shouldn't start doing it.
SEO boasts a wide range of statistics that you can inform your stakeholders in support of SEO prioritization to generate the highest ROI. For example, consider the following benchmarks.
Let the numbers make sense and plan your budget with your ultimate ROI.
In the evolving online landscape, SEO remains a powerful digital strategy.
Google and Apple are introducing restrictions for third-party cookies for security reasons, a move that is expected to reduce the effectiveness of digital advertising strategies. But these changes do not affect the first-party cookies that you use to track customers on your own website.
Everyone's budgeting process looks different, and you can tweak each of these methods to align your SEO budget with your annual goals. But perhaps the easiest way to plan your SEO budget is to simply talk to an SEO consultant. SEO marketing agencies usually start with Free SEO consulting material ionic for this exact reason.
It is designed to hone in on the most impactful SEO opportunities to focus your budget and determine the investment required to see impactful results. Most importantly, it's an effective way to make sure you're investing at the right level before committing to your budget amount.
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