Search Engine Optimization Cost – The inevitable question … and a fair one at that … but I prefer to turn it around to ‘How much should I spend?’ For that calculation you need to know your average customer value. If you don’t know that – you should! Once you know your customer value you can determine what you can spend on aquisition.
Roger the widget retailer has 500 customers and averages $50,000 in sales per annum – so he’s determined that the average customer value is $100 p.a. Without knowing his other costs, it might be reasonable to assume that Roger can spend 10% – or $10 to acquire a new customer.
If Roger also knows that he has a 10% conversion rate, i.e. 1 in 10 people visiting his site or viewing his ad go on to buy, then we know he can afford to spend $1 per potential customer in acquisition costs.
Now we have some idea of what should be spent attracting new customers. Roger may decide to spend it all on Adsense and knows that $1 per click should be his budget. (Or more if he has a strategy for decreasing click costs over time – but that’s for a different post). If Roger decides to concentrate on building backlinks then he can afford $1,000.00 to bring in 1000 potential customers.
Of course, real world examples are a lot more complicated but it all starts with a very important piece of information – your average customer value. So what’s yours?