Resource allocation between outbound and inbound marketing: Value Tea Company (VTC) ships tea products directly to consumers. VTC spends $50,000 a year on AdWords, which generates 50 million impressions with a click-through rate (CTR) of 0.1%. The conversion rate of visitors through AdWords clicks is 1%, and the average gross profit per purchase is $140. VTCs website shows up on organic search rankings but currently ranks fifth (on average, across a number of relevant keywords), with 2 million visitors out of 2 billion impressions a year. The conversion rate of visitors through organic clicks is 1.5%. The average gross profit per purchase is $140, the same as with AdWords. The CEO of VTC is considering increasing the digital marketing budget, but is unsure of whether to allocate the money to AdWords analytics or search engine optimization (SEO) to improve organic content. On the one hand, she could buy AdWords keywords management software that costs $10,000 annually, with expected results of a 15% increase in impressions, a 5% increase in click-through rate, and a 2.5% increase in conversion, while maintaining the same average gross profit per purchase. Alternatively, she could contract an SEO manager for $60,000 annually, who promises to increase the ranking of the site, improving the ranking by one position, thereby increasing the number of visitors to the organic site by 2%, while the average gross profit per purchase, the click-through rate and the conversion rate will remain unchanged.

a) What is the return on investment (ROI) of the AdWords spend, considering only purchases from visitors through AdWords clicks?

b) Should the CEO invest in AdWords keywords management or SEO?