Knowing how much to spend on SEO can be tricky—especially if you’ve been thinking of organic traffic as "free." While marketing experts recognize the importance of search optimization, knowing how much you should effectively spend on SEO is another matter. Let’s talk about the options:

Most marketing experts are aware of the vital role SEO plays in reaching potential customers. For this reason, spending on search engine optimization is steadily increasing, with estimates in the United States alone reaching $79.3 billion in 2021.

Even if you know how important SEO is for your marketing, the question of how much you should spend on it is a different story. While there is no single, simple formula for setting an SEO budget, we will introduce you to some strategies you can use effectively to find the right number for your business.

Allocating your marketing budget: Digital vs. Traditional

Marketing budgets typically include spending on both digital and traditional marketing activities. Companies that sell directly to consumers (B2C) spend an average of 5% to 12% of their revenue on marketing, while companies that sell to other businesses (B2B) typically spend 8% to 9% of their revenue on marketing.

Once you have set a total marketing budget, you should consider how much weight you want to place on digital strategies. According to Forrester Research, companies spend an average of half their marketing budget on online strategies such as SEO, direct email, social media, data analytics, and machine learning. If you have a purely web-based business, you will likely need to spend a higher percentage of your total budget on digital strategies.

How much should I spend on SEO?

According to The CMO Survey , nearly 74% of companies invest in SEO. However, every company has different needs, and the amount that should be budgeted depends on your business model and your niche.

How does my target audience find my business?

Companies that rely on digital channels like e-commerce typically invest more in SEO than companies with traditional revenue streams.

How aggressive is the competition?

If your competitors are ranking at the top for your industry's keywords, you may need to increase your SEO investment to remain competitive.

How well is my website optimized?

Consider what still needs to be improved about your digital presence. Is your website outdated? How is your company currently ranking in search engine results? Are there any Google penalties on your website that need to be addressed? A well-optimized website means you are satisfied with your site's online visibility.

What stage of growth is my company currently in?

Younger companies, for example, tend to spend a higher percentage of their revenue on marketing.

How important is SEO for my industry?

Companies operating in consumer or B2B services invest more in SEO on average than those in manufacturing or healthcare.

Calculating your SEO budget

Taking into account the variables that affect an individual business, let's take a look at an example of marketing and SEO spending.

We have applied industry benchmarks to create some average budget allocations for different types of companies (B2B or B2C) with varying revenue levels. We have also added granularity based on whether the companies sell products or services.

Data sourced from The 2021 CMO Survey

This table shows what your SEO budget could look like. However, the exact breakdown of your SEO budget should be tailored to your specific needs.

Defining how much to spend on effective SEO

There are various methods for budgeting for SEO, ranging from rough percentages of total revenue to more precise calculations based on marketing metrics. Let's look at some of the options.

1. Allocating a portion of the total marketing budget

How it works:
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Set aside a percentage of your digital marketing (or total marketing) budget for SEO, depending on how much you rely on website traffic to generate sales. An e-commerce company, for example, will very likely need to spend more on SEO on average.

Things to consider:

Allocating a percentage of your marketing budget is a simple calculation, but it does not necessarily account for your specific SEO needs.

2. Setting a flat amount

How it works:
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Review the line items in your marketing budget and decide what amount you can allocate to SEO.

Things to keep in mind:

If you base your SEO budget solely on what you can afford relative to your other marketing activities, you may not be spending enough to achieve meaningful results from an SEO campaign.

In a large-scale SEO analysis , Backlinko found a direct correlation between SEO spending and results.

The data shows that those who opted for "low-budget SEO" were less satisfied than those who invested more in SEO as a marketing channel. Remember: what you spend on SEO can also improve the performance of other marketing channels.

3. Match your competition

How it works:
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Companies whose competitors are aggressively targeting industry keywords must invest more in search engine optimization to maintain their share of organic traffic. Compare your current search engine rankings with those of your competitors and measure the opportunity costs incurred by losing customers to them.

Things to keep in mind:

This approach helps you decide whether or not you need to prioritize search engine optimization. The next step is to determine the SEO budget required to overtake your competitors.

4. Consider your marketing goals

How it works:
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Think about your SEO goals in the context of your overall marketing objectives before setting a specific amount for this line item in your budget.

Are you relying on organic traffic growth to hit key KPIs like leads or sales? Or are you meeting your revenue targets and looking to expand to gain visibility and authority in your industry? Make sure you set the right internal expectations for your marketing investments and ensure you are investing enough in SEO to achieve the desired results.

Things to keep in mind:

Aligning your budget with your goals requires forward-looking planning to ensure your funds are allocated in a way that helps you reach your targets.

5. Compare the value of a competitor's organic traffic

How it works:
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Use these metrics to refine your budget planning. Professional SEO tools can help you estimate the organic traffic your competitors are receiving via the SERPs. You can then use this figure to decide how much you should budget for SEO to capture a share of that traffic.

Estimating the value of organic search

With an SEO tool like Ahrefs, SEMrush or SearchMetrics , you can analyze how much organic traffic your competitors are getting.

Ahrefs, for example, estimates the traffica website generates by pulling keyword ranking data and estimated click-through rates.

You can take this metric further by assigning a monetary value to that organic traffic.

Estimate the conversion rate of visitors on the landing page. The average conversion rate for e-commerce websites in Europe is 2-3%, though this varies by industry.

Based on your industry knowledge, estimate the average value of these purchases.

Calculate the value of the organic traffic by multiplying:

Organic traffic x average conversion rate x average order value

For example, if a competitor's site has 40,000 monthly visitors, a 1% conversion rate, and an estimated average purchase value of 50 CHF, the site is worth 20,000 CHF per month.

Things to keep in mind:
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This strategy is based on estimates and is therefore not highly precise. However, when applied consistently, it can help you accurately assess the potential benefits of improving your search engine ranking. For example, if your website's organic traffic is currently valued at 30,000 CHF per month, but a higher-ranking site is estimated to be worth 50,000 CHF per month, there is an opportunity to capture a larger market share and significantly increase your site's revenue through well-executed SEO.

Using these figures, you can set goals for increasing your traffic and determine how much you need to budget for SEO to achieve those targets.

6. Consider Customer Lifetime Value (CLTV)

How it works:

The benefits of organic traffic extend beyond a one-time purchase, especially when you focus on customer satisfaction, retention, and brand loyalty. With this approach, the value of a website is determined based on the Customer Lifetime Value (CLTV)—the amount you can expect to earn from a customer over the course of your business relationship.

Budgeting for SEO based on CLTV

Let's assume your company has a website with 10,000 visitors per month. If you convert 1% of those visitors, you are selling to 100 customers per month. If your Customer Lifetime Value (CLTV) is 3,000 CHF, your website is worth an additional 300,000 CHF each month.

You can use this figure to calculate how much you should spend on SEO. Perhaps you want to use your SEO strategies to increase visitor numbers by 10%, generating an additional 1,000 visitors per month. With a 1% conversion rate, this traffic leads directly to 10 new customers, and your SEO investment has added 30,000 CHF in value to the site, thereby amplifying your ongoing CRO or UX improvements.

What you should keep in mind:
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When conversion rates are factored into the profitability of your SEO efforts, you improve the impact on your bottom line by increasing your website's conversion rates.

7. Determine the effectiveness of SEO compared to paid advertising (PPC)

How it works:
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‍You can also budget for SEO in relation to your pay-per-click (PPC) advertising spend by considering the effectiveness of each marketing strategy. According to Marketing Sherpa most companies spend more on PPC than on SEO. However, SEO typically generates twice as much traffic. Research shows that, on average, 53% of website traffic is generated by organic search results, while paid search accounts for about 15% of traffic.

Since search engine optimization is the most effective way to attract visitors to your website, you should consider reallocating your digital marketing budget to ensure a significant portion is dedicated to SEO.

Things to consider:
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‍While paid advertising (PPC) can deliver quick results, your visibility drops as soon as you stop running ads. On the other hand, an SEO-optimized website that ranks well can build momentum and drive more traffic in the long run. Depending on your company's needs, however, you should consider a mix of both SEO and PPC.

Why you should increase your SEO budget

If you start crunching the numbers to figure out how much you should spend on SEO, you might end up with higher figures than expected. Here are a few reasons why you should do it anyway.

"Bargain SEO" doesn't deliver significant results

There is a correlation between SEO spending and results. Backlinko found that clients who invested more than a minimum amount were 53.3% more likely to be "extremely satisfied" than those who spent less.

SEO is highly effective compared to other channels

Instead of spreading your digital marketing budget too thin, you should prioritize where you spend your money to achieve the highest return.

Keep in mind that:
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- Organic search has an average conversion rate of 5%, which is higher than email marketing (3.9%), paid search (3.6%), and social media (1.9%).
- According to Google, businesses receive an average of five clicks on organic search results for every one click on ads.
- SEO generates 1000% more traffic than organic social media.

Let the numbers do the talking and plan your budget with an eye on the final ROI that is visible to your stakeholders.

Changes in data privacy are impacting online advertising

It is common to put money into PPC instead of SEO to achieve seemingly quick results. This approach has many weaknesses, but the most current information you should keep in mind when planning your 2021 budget is the impact of data protection regulations around the world.

Third-party cookies track user visits across different websites and help marketing experts find the right target audiences for pop-ups and online advertising. For data protection reasons, Google and Apple are introducing restrictions on third-party cookies which is expected to reduce the effectiveness of digital advertising strategies like PPC.

While marketing experts who rely on third-party cookies will need to monitor their advertising tactics, these changes do not affect first-party cookies, which are used to track customers on your own website.

Sensible SEO Budgeting

The budgeting process can be handled in many different ways depending on the company, but one of the simplest methods is still to contact an SEO agency like ZUMO SEO. The free SEO consultation is designed to identify the most effective SEO strategy for your company to focus on and to determine the level of investment required to achieve the best results.

Don't hesitate—sign up for a free consultation today.