Email marketing is one of the most efficient and effective ways to reach your target audience. But how do you know whether or not your email marketing campaigns are successful? And how can you improve your email marketing efficiency? In this blog post, I will discuss how to calculate email marketing ROI, and how website traffic impacts email marketing ROI. I’ll also provide tips on how to track your metrics and improve your conversion rates. Let’s get started!
What is Email Marketing ROI
Email marketing ROI (return on investment) is a way of measuring how successful your email marketing campaigns are. It calculates how much money you make from your email marketing campaigns, compared to how much money you spent on those campaigns. This number can help you decide whether or not to continue with your current email marketing strategies, and when to work towards improving your efficiency.
Why Calculating Email Marketing ROI is Important
Calculating email marketing ROI is important because it allows you to measure the success of your campaigns and make realistic, data-driven decisions about how to improve your efficiency. By calculating email marketing ROI, you can a better financial handle on how your email campaign success is fairing. This information can help you determine your campaign’s success, and when (also how) you need to develop a game plan to improve your email marketing efficiency.
How Website Traffic Impacts Email Marketing ROI
Website traffic is one of the most important factors in email marketing ROI. The more website traffic you have, the more likely it is that people will click on your links and convert into customers or subscribers. Therefore, if you want to increase your email marketing ROI, you need to focus on generating more website traffic, that compliments the initiatives of your email campaign.
There are a number of ways to generate website traffic, including:
- Creating high-quality content that people want to read
- Promoting your content through social media and other channels
- Investing in paid advertising
- Building and driving an opt-in email list
- and more…
How to Calculate Email Marketing ROI
Now that we’ve discussed the importance of calculating email marketing ROI, let’s talk about how to actually calculate it. Here’s (in my opinion) the most simple formula you can use:
Email Marketing ROI % = (Revenue from Email Campaigns – Cost of Email Campaigns) ÷ Cost of Email Campaigns
To calculate your email marketing ROI, you need to know two things:
- How much revenue your email campaigns generated, and
- how much money you spent on those campaigns.
You can find this information by looking at your campaign reports in your email marketing application / service dashboard. Once you have that information, plug it into the formula above, and you’ll have your email marketing ROI.
How to Calculate the Cost of Your Expenses
Some of the most common expenses people have for email marketing campaigns include:
- The cost of email list acquisition
- The cost of email template design or development
- The cost of email marketing software or services
- The cost of creating or purchasing content for your campaigns
- The cost of paid advertising to promote your campaigns
- The cost of any other resources or services you use to create or send your campaigns
How to calculate email marketing ROI expenses: The above are costs you’d add up and include in your “Cost of Email Campaigns” amount (in the formula above). There might be additional costs, and of course, you should factor those in as well.
If you are looking for an online tool while learning how to calculate email marketing ROI, you can try the following two:
Email Marketing ROI and KPI’s
What are some key performance indicators (KPI) to track for email marketing?
Keep in mind, without tracking and measuring your email marketing KPIs, you won’t be able to improve your campaigns. Further when determining how to calculate email marketing ROI, the results would be substandard (without this information).
The following are five essential email marketing KPIs that you should track to measure the success of your campaigns, as they will ultimately impact your ROI (for better or worse), at some point:
- Total email sent – How many email messages were sent (and is this number increasing)?
- Delivery rate – How many of your email addresses were successfully delivered to people’s email boxes?
- Open rate – How many recipients are opening your email (you want this number to be as high as possible), and is the rate consistent (or better than) your industry’s standard?
- Click rate – Are people interacting with your email message by clicking through to your landing pages? Again, this number need to be brought as high as possible.
- Lead generation – Of the people who click through, how many of them become “real” leads? And… Did they provide further lead contacts?
Email Marketing ROI and Subscriber Engagement
The more engaged your subscribers are with your email campaigns, the higher your ROI will be. There are a number of things you can do to increase subscriber engagement (while determining how to calculate email marketing ROI), including:
- Creating high-quality content that is interesting and relevant to your subscribers – This is an area you should invest more in (because that email is your most critical “interest capturing” pitch.
- Segmenting your list so that you can send targeted, relevant content to specific groups of people. The more strategic the segmentation, the better (and often easier) your email content can address the needs and wants of the segment.
- Making it easy for people to unsubscribe from your list if they want to. This has a direct impact when you calculate email marketing ROI – If people aren’t interested, let them go (otherwise you’re wasting money).
- Running contests or offering discounts and coupons. Provide real and true value. There’s no nice way to say this: Giving away cheap, crappy freebies (for example), advertises that you’re cheap and crappy – This would have a negative implication to ROI. Instead… Provide high quality, and offer a trial, and possibly some discount (to entice purchases). These of course should be included in your email marketing ROI costs calculation.
- Asking people to provide feedback or take a survey. While this adds cost, it valuable as often the insights will uncover areas of opportunity (or of improvement).
Don’t forget… when determining how to calculate email marketing ROI, and expenses for the above; they also need to be factored into “Cost of Email Campaigns” number.
Email Marketing Attribution Considerations
Attribution considerations, in this case, refers to how people engage and act upon your email marketing CTA (call to action). It’s a way of weighing and determining which (and often) how each impact upon your ROI.
Email Sequence Flow
Lets explore the short-version journey of an email marketing campaign, and the potential of how each email message can have a marked effect on how to calculate email marketing ROI.
The recipient receives your email message and clicks a link withing that message. The arrive at your targeted landing page, even though they’ve entered a funnel, they feel motivated to visit another URL – Possibly the “About” page, or a product / service details page.
The visitor is impressed and wants more value, so they begin to surf though your blog. The decide they want to purchase (your service or product), so look for a coupon (perhaps you’ve included that in your email), and in doing so, may also use your live chat.
They also feel the need to research more (even though they’re impressed with your offerings – But maybe can get a better “deal”).
After a day your marketing campaign follows up with another personalized email, which includes the direct link to their potential purchase (the product or service they showed great interest in), in a very compelling way. That link sends them to the direct landing page for the purchase, and they complete the purchase.
So what was the process in this case? You could break it down to something like the below, which helps to better determine ROI impact:
- The person had opted-in as a subscriber, or has already remained a subscriber
- The recipient is within one of your segments (of your email list).
- The recipient receives your email.
- The content is very engaging and they click a link, to enter your initial sales funnel.
- While there, they decide to divert (from your funnel) and do a bit of research on your website. Reading your content for example.
- They look for a better deal (coupon, trial, etc.), checking out your email, as well as your social media channels.
- Your campaign follows up with another personalized email, focused on the product / service.
- They enter the funnel and add the product or service, but still not “cash out”.
- A follow up email, is sent This could also include abandoned cart email reminders (that for example, could also contain a discount offer).
In terms of calculating email marketing ROI, which of the above takes ownership (credit) for the final conversion? Without question, this is not easy to answer. This is where the below attributions come into play!
Keep in mind… No one attribution system is better than the other. In reality you need to work with one that best fits your specific needs!
This spreads the credit of conversion across the complete process of a conversion. Using the above flow of actions “linear” (as the name implies), would spread the credit contribution equally across all touch points.
To put this into a better understanding, if the person spent $100, this would mean each of the email relay’s (of the above 9 steps) above would be credited $11 for the ROI ($100 ÷ 9 = $11.11). So $33 would be credited to the work of your email marketers in that campaign.
Using linear attribution, there are some caveats (in my opinion):
- Is each email truly responsible for an equal value?
- How realistic is the credit, if it exceeds the benchmarks in your industry?
First Click Attribution
As the name implies, this attributes contributes all of the credit to the first click (in the first email) – This follows the premise that the first email is responsible for the chain of events leading to a conversion.
But is this realistic?
Simply put… The recipient didn’t convert until the third email message was sent. It seems very plausible (to me at least… “common sense”) the follow up email messages retained engagement and interest.
Last Click Attribution
On the flip-side, this attributes all the ROI credit to the last click (which would have been initiated by the third email). Again, is this a realistic attribution, given that there would likely have been no conversion without the other two email messages.
However, this does have some merit in that the last email ultimately helped secure the conversion (so it must have done something well).
This also helps to fine tune your marketing campaign (which results in improved ROI): For example what was in the last email, that compelled the conversion (where the other two did not)?
Time Fading Attribution
In this attribution model, the value decreases over time. For example, the first email will not hold as much value as the final one (where conversion was realized).
In many ways, this may seem practical, because your email campaign works to build engagement, and help guide your subscribers on their path to conversion – It’s the “process” of growing leads and bringing them to fruition!
Position Situated Attribution
In this type of attribution, you’ll need to determine the value you apply to each email. For example you could split 40% between “middle” steps and assign an 30% to the first email, and 30% to the final email.
Of course you could mix this up entirely with your own specific values!
One danger to avoid is to discount the value of any particular step, where it in fact may impart incredible value towards your conversion rate – And therefore better ROI.
Tracking Your Metrics
When exploring how to calculate email marketing ROI, you’re going to need accurate analytics and metrics, as they will provide the “success” related information ultimately adding or decreasing your “Revenue from Email Campaigns” (in the above calculation formula).
Simply put – Metrics are critical when understanding how to calculate email marketing ROI – Don’t ignore them!
Without question, it’s critical to track each email campaign you launch. If you don’t, it would be near impossible to accurately determine how to calculate email marketing ROI. Therefore it’s important to also ensure you have access to analytics and sales data (conversions) for your use.
Speaking of conversions… In several cases it’s important to realize that conversion related value for on-going customers can become an exercise in “assigning” value to conversions.
Here’s what this means…
For an ecommerce type scenario, usually this is fairly simple, when a visitor checks out their cart, there’s a financial value to each checkout – Simple.
For a long term customer, the conversion can be more difficult to determine. For example, if you can determine the long-term value (that they spend throughout the life with you), that can then be attributed to conversion in whole or in part; or parts of it can be contributed to different stages (based upon the above 5 attribution models).
Naturally this is often not an accurate, initial, reflection of ROI (in terms of the actual top-line numbers).
But… The income received highlights what you need to know with regards to longer term ROI calculations (and your “customer lifetime value” will continue to change). In turn it also provides the information you need to make key strategic changes to your campaigns (and therefore how better to manage your email campaign resources, processes, and more).
How do you calculate ROI in email marketing?
ROI, or return on investment, is a formula used to calculate how efficient a particular marketing strategy is. To find email marketing’s ROI, divide the benefits of the campaign (in revenue) by the costs of the campaign. This will give you how much money was gained for each dollar spent on email marketing.
What is the average ROI for email marketing?
The average ROI for email marketing (2022) is about $38 for every dollar spent.
Can email marketing ROI be measured?
Yes, email marketing ROI can be measured by looking at how much revenue was gained from the campaign divided by how much money was spent on the campaign. This gives you a return on investment for email marketing.
When it comes to email marketing, how to calculate email marketing ROI can be a complex process. However, by taking the time to understand how to calculate email marketing ROI and tracking your metrics carefully, you can make sure that your campaigns are as efficient as possible. This will help you improve your overall ROI from email marketing and increase the success of your campaigns.