Is SEO Wasteful or Worth It? [For Local Service Providers]

While SEO is used by numerous types of businesses ranging from global ecommerce stores to local restaurants and venues, there is a lot of chatter among local service providers as to whether or not SEO is a good solution for marketing their business.

Instead of trying to convince you one way or another, I am going to equip you with the knowledge to make the best decision for your business about whether SEO is wasteful or worth it.

Forget about SEO - At Least for Now

The very best thing a business owner can do is forget about SEO. That is not to say it is not important because it is. If you stop and think about it though, you don't want to rank higher or for more keywords. You don't really want to have a bunch of listings created, you want more leads, calls and closed sales. That being said, SEO is only one tool in the kit of a good digital marketer. So, as a contractor (or any local service) stop focusing on "getting SEO" and start asking yourself how you can meet your actual goals.

Evaluate Your Current Marketing and Advertising

As a business owner you goal should be to find the marketing channels that deliver customers at the lowest cost, this is referred to as customer acquisition cost (CAC). Many business owners miscalculate their actual customer acquisition costs by failing to include the cost of addition resources per channel.

Let's take a newspaper ad as an example. Let's say that you spend $1,000 to run a newspaper ad and as a result, you get five phone calls, one of which turns into a customer. Many business owners would look at this equation and say that their CAC was $1,000, which is incorrect.

In addition to the cost of the newspaper ad, you had to pay someone to answer the calls. If the add resulted in five calls, an employee was paid to take and handle those calls. If each caller took two hours to research, pitch and follow up with, you are looking at 10 hours of staff time to add to the total. Assuming your salesperson makes $15 per hour, you need to add $150 to the CAC. In many cases, it will take well over two hours to speak with, research and close a job, especially when you take the consultation, estimate creation and travel time into consideration. Aside from staff you may also have dependent expenses such as call tracking for each ad. These should be included into your calculations as well.

Once you step back and start to look at the bigger picture, you will be able to better understand just how valuable digital marketing can be. In place of having someone answer the phone, you have a website. In place of spending hours repeating the same information to potential clients, you have your website and digital collateral that can be easily shared. Instead of having a sales person call on cold- leads repeatedly, you can engage the client via email marketing, and measure how engaged they are with your message. Do you have a client on the fence? Re-targeting will allow you to engage with them, often times for pennies per interaction.

Before you go any further, take the time to get an accurate picture of how much your current methods cost to deliver a customer, then we will look at how to determine customer value.

Determining Client Value

Put simply, customer lifetime value (CLV) is the total profit you stand to make from a customer. CLV is determine by calculating the total income gained from a client less the customer acquisition cost. There is a basic and advanced formula used for calculation CLV. Check out this SlideShare to understand how to do both.

As you know, the type of service(s) you offer will dramatically influence customer value. If you are an HVAC contractor or plumber your customers may buy from you a few times per year. If you are a roofer on the other hand, you may only have customers buy from you a few times over their life. When determining CLV be sure to honestly evaluate how often most homeowners need your service. In doing so you will also see which services and customers are best to target. If you are a carpet installer, real estate agents and home builders could both be great contacts to make. This is the type of information that will help your digital marketing firm create campaigns that produce the greatest ROI so spending the time to pin point your best customers is crucial.

Evaluating Your Sales Funnel

The next step in deciding whether SEO or digital marketing is a worthwhile investment is to look at your conversion rates. This will allow the marketer to determine if you may be a good fit. Here is a simple formula used by many marketers to determine potential ROI:

Traffic X Click through Rate X Conversion Rate X Average Profit per Sale.

Here is an example: Let's say that you site converts 10 percent of visitors into customers and you want to gain 10 new customers per month. Using the formula above we can determine that how many searches must occur and what CTR is needed to generate enough site traffic.

Traffic X Click Through Rate - 1000 X 10% = 100

Site Visits X Conversion Rate - 100 X 10% = 10

Conversions X Average Profit = 10 X 100 = $1000

So, using this information we can see that if we cannot generate 100 site visits that convert at 10 percent, for under $1,000 per month, we do not have a profitable campaign - unless - we know what the customer LTV is in which case we can increase the customer acquisition cost allowance and still be profitable.

Did you know: While this may all seem pretty simple, improperly calculated customer acquisition costs to customer lifetime value is one of the leading causes of business failure.

Are There Good Keyword Available?

A lot of SEOs sell cheap packages and services guaranteeing to rank a business owner for several keywords. As demonstrated above, you aren't going to get far if your keywords do not generate enough searches and traffic to help you meet your goals. When considering whether or not SEO is a good fit for your business and when talking with a potential SEO partner, they should show you keyword ideas and search traffic, this will allow you to see the actual value of each keyword. Once you look at the available traffic, review your conversion rates (if known) then you need to revisit your average profit per sale. If your profit margin is only a couple of dollars per sale you will need high volume keywords. If you profit margin is several thousand dollars per sale, terms with 1-10 searches per month can be very profitable.

Can the Company Deliver?

Sadly, one of the biggest variables in SEO and digital marketing comes down to the competence of the person or company performing your services. If you hire the wrong company, you could lose your time and money, not to mention ending up with a penalized site. Since the SEO industry is not regulated, there are several low-quality companies polluting the space. When you are talking to a potential company to partner with, you should ask for references, examples of rankings, and look for a company that understands concepts like CAC and LTV.

If you put the information above into practice you will be able to see whether or not SEO is right for your business and if your potential marketing partner is up to the task. SEO is incredible for some businesses but not a good fit for all so take some time to better understand your marketing before you decide to "get SEO."