Regardless of many predictions that email would disappear someday, it is alive and well. With the average consumer checking either work or personal email several times a day, it is one of the more reliable forms of communication. Unlike the ringing telephone, emails can be answered at the convenience of recipients. It’s probably no wonder, therefore, that email marketing is a huge driver of profit. However, this becomes even more apparent when you consider the following email marketing statistics: (please see my post on email marketing statistics for the sources for this data)
First of all, email marketers make $40 in sales for each $1 spent sending emails. This is a lot of potential profit, even if you don’t have a large email list. And it isn’t likely that your marketing email lists will stay short for long, because 77% of customers prefer email for permission-based marketing messages. Considering how convenient it is for consumers to read email as time permits, this probably isn’t surprising.
Of course, your email marketing program is highly scalable, even if your company or clientele jump international borders. One reason for this is that there are 3.9 billion daily email users. This is a huge percentage of the planet’s adult population. Combined with the fact that there are 400 million more email users than social media users, there’s a lot of money to be made with email marketing. With that in mind, how can you measure your company’s email marketing ROI?
What is Email Marketing ROI?
Knowing what email marketing ROI is requires understanding this term and what it measures. First, ROI refers to “return on investment.” Simply put, ROI is calculated as the return divided by investment dollars. Here, the trickiest part is to quantify the dollar value of your return. If your definition of return is an increase in sales over baseline, then this is easy. However, other benefits of email marketing, such as brand awareness, are harder to value.
Similarly to ROI, calculating email marketing ROI can be simple or complicated, depending on your definition of “return.” In this case, the ROI is expressed as the value realized from email marketing, divided by what you spent on the email marketing campaign. Investment can include staff time, email software services purchased, and anything else spent. Let’s look at the benefits of email marketing that can count as part of your “return.”
Email Marketing Increases Sales
The most obvious email marketing ROI measurement is an increase in sales. One of the reasons why email gets such a large ROI is that it is highly effective. In fact, 59% of people say that email influences their purchase decisions directly. Furthermore, studies have shown that buying through email results in a purchase that costs 138% more than orders placed by customers who don’t get marketing email.
These statistics together show us that not only does email marketing increase sales, but it does so by a significant margin. In other words, both access to a customer’s inbox and the awareness you’re having a promotion (or releasing a new product) gives you an edge over your competition. Sometimes something as simple as regular customer communication is highly effective.
Email Marketing Improves the Effectiveness of Your Marketing Efforts
Even beyond immediate sales increases, there are many other ways to generate email marketing ROI. Once again, statistics tell us that sending emails increases the effectiveness of marketing efforts. Getting customers to your website is half the battle, unless you are doing email marketing. However, to get a customer’s buy-in you’ll still need to bring them in another way.
One of the ways to draw people to your website is through social media marketing. This approach can include paid social, organic postings, or influencer marketing. However, once you get that email address, the email marketing conversion rates are 3X that of social media marketing .
Getting engagements is easier with email, too. For instance, the average email clickthrough rate is 6X that of average organic social media engagement. People tend to scroll through Facebook for news of their friends and family. On the other hand, emails are checked for commercial content. It’s probably no wonder, then, that your message is 5x more likely to be seen through email than Facebook. Other social media networks have similar results. In fact, you are 6x more likely to get a click-through from email than you are from Twitter.
Similarly, marketing emails are highly effective when your customers abandon their cart before completing their purchase. In one study, 50% of email users who clicked on cart abandonment emails purchased. And, that isn’t the end of the story, because more than one email increases the effectiveness of your emails. Researchers found that sending three emails to those who abandon their carts results in 69% more orders than if only one was sent.
Finally, email marketing helps your marketing efforts on social media. In fact, your email subscribers are 3.9 times more likely to share your content in social media. While we don’t necessarily know why this is, it’s easy to imagine that email subscribers are excited about your products and services. In addition, everyone likes a good deal, and deals are frequently shared with other people.
How Do You Calculate ROI in Email Marketing?
With email being such an effective marketing tool, it’s easy to see why email marketing ROI is so high. However, this is no substitute for knowing how to calculate these numbers. Luckily, it’s always easier if you know your marketing goals. In most companies, sales targets are hard dollar numbers or a percentage increase over the last reporting period. Understanding your email marketing goals in the context of overall sales targets is critical to calculating your ROI.
Ultimately, however, your ROI is dependent on what you hope to gain from email marketing. Sales numbers are easy to calculate, but other metrics like brand awareness or customer loyalty are harder to quantify. Some measurements do exist, however, such as the “customer lifetime value.” Remember, customers kept represent higher sales over time.
Calculate your spend
Naturally, your first step in determining email marketing ROI is to know how much you spent on email marketing. These numbers can be calculated per year, month, or campaign. However, in each case your email marketing cost should include all of your expenses. This includes:
Every email marketing campaign requires staff. Even if this is just one person who manages freelancers or other outsourcing options, you must pay that salary. Some people working on the emails can have significant specialized skills.
Creating the emails and related content also costs money. Examples include graphics design software and freelancer fees.
Email program fees
Most email marketing software costs money, typically on a subscription basis. Sometimes they’ll charge you by the month. In other cases, email marketing clients will charge based on the size of your email list.
If you’re an ecommerce site, then lead magnets are often discounts off of a future order. For other businesses, it can be something like a whitepaper or book chapter. Your choice depends on the type of goods and services you provide.
Depending on your jurisdiction, you may have compliance costs. In the US, you need to have a way for people to opt out of your emails. California has added privacy rights, as does the European Union. There are programs which can help you stay compliant.
Calculate your gain
On the other side of the email marketing ROI equation is the value you’ve gained from your efforts. Ideally, you’ll have more precise numbers for your management team than “sales went up by X amount.” However, being this accurate requires a few extra steps.
Using Google Analytics allows you to measure a wide range of website traffic changes. For instance, you’ll know how many unique visitors you have to your website, and how many repeat visitors. Analytics can tell you where the customers are from, too. This tool is especially effective for measuring factors like changes in brand awareness and (to a lesser extent) consumer loyalty.
Compare Customers with Subscribers
Another technique you can use is to see how many people on your email subscriber list actually buy stuff. If you integrate your CRM or order taking databases with your email provider, this is relatively easy to see. In addition, you’ll be able to determine how many of your first-time customers are signing up for marketing emails.
Taken together, these and other factors will help you calculate email marketing ROI for your company. Armed with this number, you can compare your actual results to corporate goals. Just as importantly, you can give an accurate picture of how well your efforts have paid off.
Once you’ve determined your email marketing ROI, you can take action to improve sales even further. For one thing, you can optimize your email marketing to get even better ROI. One way of doing this is by purging your email list once in a while. People do change email addresses and abandon old ones, leaving you with unproductive subscribers. There’s no reason to keep sending them emails. Other methods of reducing email marketing costs can also boost ROI.
Another way to capitalize on the high ROI of email marketing is to shift some of your budget to email from other channels. Which marketing line items get reduced should depend heavily on where else you are getting good ROI. The lower your ROI, the less you should spend on something.
Try Using an Email Marketing ROI Calculator
Finally, there are some calculators on the Internet that can help you determine email marketing ROI more easily. First, check out this calculator by Sleeknote. Rather than being a fill-in form, it tells you which items to plug in to determine the value. You’ll then do the math yourself. For another option, there’s this automated form. It’s on a website by itself, but the authors have left detailed instructions on how to use the calculator. Just keep in mind that the results from these calculators should be validated by internal figures.
Knowing your email marketing ROI is one of the most important ways of measuring marketing effectiveness. Whether you’re trying to directly increase sales, get more customers or just raise brand awareness, everything has a cash value. Fortunately, calculating those numbers is easy with these tips and a few analytics numbers.
Hero photo by Ömer Haktan Bulut on Unsplash
Email Marketing ROI FAQs
According to recent studies, the average return on investment for email marketing is around $42 for every $1 spent. That kind of ROI is enough to make even the most cautious marketer go all-in on email campaigns. And with so many tools and strategies available to make your email campaigns more effective than ever, it’s easy to see why email marketing is still one of the most popular ways to reach and retain customers.
Yes! Email marketing has proven to be one of the most cost-effective methods of marketing and has a much higher conversion rate than other types of marketing. The beauty of email marketing is that you can target specific groups of people with relevant messages, giving them the push they need to make a purchase. With the right strategy, email marketing has the potential to bring in significant returns on investment.
To properly calculate your email marketing ROI, you’ll need to track your expenses, measure your conversions, and compare your results to industry benchmarks. By doing so, you can get a complete understanding of your campaigns’ effectiveness and make data-driven decisions to optimize their performance.
While some may have doubts about its effectiveness, recent studies have shown that email marketing has an impressive ROI of 3800%. This means that for every dollar spent on email marketing, businesses can expect a return of $38. That’s not all – email marketing also boasts a conversion rate of 66%, which is much higher than other digital marketing channels such as social media.
While there is no one-size-fits-all answer, many experts agree that a strong ROI for digital campaigns should be at least 5:1, meaning that for every $1 spent on advertising, a company should expect to earn $5 in revenue. However, it’s important to remember that ROI can vary greatly based on factors like industry, target audience, and campaign objectives.