Calculate Your Email Marketing ROI (Formula Included)
Are you trying to measure email marketing ROI?
Want to increase the ROI of email?
Tracking the ROI of your email marketing automation strategy can be difficult if you don’t know where to start.
So, where do you start?
Let’s start with the mathematical formula for ROI:
Earned – Spent / Spent = ROI as a percentage
This equation can help you track and determine your email ROI, and help answer similar ROI questions:
What will you track and how do you determine the results?
What is the value of an email subscriber?
How much do I spend in time and money to use my email service provider?
These are all things you need to know to understand the ROI.
Let’s look at an example of a B2C indoor rock climbing center for the purpose of illustrating email marketing ROI.
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Calculating Email Spend
This one seems simple enough, but there are other factors you need to consider calculating the cost of email.
First, let’s look at the cost of your email service provider:
For our example, let’s say the rock climbing center is paying $200/month and they are measuring email ROI for the quarter.
$200 x 3 = $600 to the ESP
Now here’s where things get tricky:
Remember those other factors we mentioned above?
You also need to factor in the amount of time spent on email as money.
And that means accounting for any employees, outside agencies or service packages from your ESP.
To keep things simple for our example, let’s say they have one marketing specialist named Hank.
Here’s Hank on holiday having a lot of fun while still thinking about email marketing.
Hank spends about two hours per week or 26 hours for the entire quarter on email marketing campaigns.
To calculate Hank’s effective hourly rate we use this equation:
(annual salary / 2,080 working hours per year) x time spent on email
Hank earns $49,000/year; that puts his effective hourly rate at $23.56/hour.
If Hank spends 26 hours a quarter on email, the rock climbing center is spending $612.50 in time on email.
Remember what they are spending on per quarter for their ESP? $600.
$612.50 + $600 = $1,212.50 spent on email for the quarter
Calculating Email Revenue
First of all, the easiest way to track ROI is if you are selling something online.
Delivra integrates with Google Analytics, offering the ability to track the total purchased amount from a single email.
This data then can be aggregated across a campaign or a year of time to leverage how much your email program is pulling in.
While that is the simplest form, not every email program is directly selling products in an email.
So let’s continue with our example:
For the rock climbing center, their monthly online membership is worth $125/month.
They know if they can get someone to walk into the center they have an 80 percent close rate.
Four out of five people that complete a free trial will become a member, and they know their average member uses the center for 15 months.
We now can calculate the value of getting someone into the center:
15 months x $125/month x .8 conversion rate = $1,500
The rock climbing center also has a “Sign Up for a Free Trial Pass” form on their website.
They know that anyone that submits the form for a free trial pass has a 40 percent probability of coming to the center to claim their free pass.
We can also calculate the value of getting someone to submit the website form:
$1,500 value x .4 = $600
The rock climbing center sets goal values to the website form in Google Analytics and tracks the impact of email on overall conversion for the quarter.
At the end of the quarter, Hank can attribute email to 18 direct or last interaction conversions worth $10,800 and another three assisted conversions worth $1,800 for a total of $12,600 for the quarter.
Now on to the final piece of the email marketing ROI pie:
Calculating Email ROI
Now we have all of our numbers needed to calculate the email ROI for the rock climbing center.
Earned – Spent / Spent = ROI as a percentage
$12,600 – $1,212.50 / $1,212.50 = 9.391
That’s an email marketing ROI of 939.1 percent!
To put that back into dollars, for every dollar the indoor climbing center spends on email marketing they earn it back plus an additional $9.39.
There you go!
Now you have something to start talking about when you are asked, well, what is your email program worth?
Knowing and understanding your email marketing ROI will help justify your sends.
You will also learn quickly that by segmenting your list and targeting email subscribers that have a higher probability of becoming members will cut your investment and increase your ROI.
According to a new survey by the Direct Marketing Association and Demand Metric, the median email marketing ROI is 122 percent.
That’s 4x higher than social media, paid search, direct mail, and other marketing channels.
There are plenty of other stats that prove just how valuable email marketing is to ROI.
But how can you optimize your email marketing efforts to maximize ROI?
We dive into that next:
Get More ROI from Email Marketing
Knowing your email marketing ROI isn’t enough for the results-driven marketer.
You want to increase it.
You’re looking at your reporting tools and squinting at spreadsheets trying to measure what works.
Email marketing may be one of the oldest marketing strategies still widely used on the Internet, but it remains a viable means of increasing leads, traffic, and revenues.
But despite its long-standing application, there are right and wrong ways to implement email marketing into your overall strategy.
It’s easy to fall short of the potential ROI this type of campaign can provide your business.
In many cases, businesses who use email marketing are likely to overlook simple ways they can improve the efficacy of their marketing strategy.
It’s important to make sure your marketing efforts are mindful of email marketing best practices.
Here are five email marketing best practices to improve the performance of your email marketing ROI:
1) Increase email open rates with incentives
The easiest way to encourage email readership is to offer enticements to peak the interest of recipients.
For example, offering discounts, free items or other special, limited-time offers can motivate email recipients to click and read.
Here’s a great example from Helix:
Email open rates are vital to the success of an email marketing strategy, so always look for ways to improve their performance area and you’ll see the impact with your ROI.
2) Simplify your email design
Busy emails can often disorient recipients and prompt them to abandon the message entirely.
No one is going to buy from an email that they can’t even look at.
Simplicity in email design will keep your message clear and will appeal to the eye of your reader.
The fewer typefaces you employ, the better — two tends to be a good number.
And don’t ever send out an email more than 650 pixels wide.
When you do, readers have to scroll to the sides — but few actually will, truncating the right side of your message and losing potential leads.
This example from Groupon doesn’t get much simpler:
3) Construct your email according to reader appeal
There’s plenty of data out regarding which types of formatting, structure, and layout are most effective in connecting with readers of an email campaign.
Make sure the main message of your email is placed high in the body, along with a call to action.
Additionally, your company’s logo will be best remembered by placing it at the upper-left-hand corner of the email.
Research shows this is where an email recipient’s eyes gravitate to the most.
Since email marketing is about creating brand awareness and remaining top-of-mind with those organizations, your logo’s visibility is just as important as the content of the email itself.
4) Implement autoresponders
The use of autoresponders can decrease your time spent managing email campaigns and ensure emails are fired off efficiently over time, improving lead qualification and other efforts.
Just make sure these emails don’t overwhelm the consumer, and they provide them with a reward for remaining opted-in to your campaign.
5) Keep subjects short and sweet
Under 50 characters is best.
Get to the point, and convey a sense of urgency to motivate readers to click on the email and take action.
If you need some help coming up with great subject lines we have 100 you can steal here.
By remaining mindful of these email marketing best practices, you can be sure your campaigns will be effective for your business.
Time to Get to Work
Email marketing remains a low-cost choice for brands to build relationships, drive engagement and increase revenue.
Certainly, deliverability remains a challenge for many, but as result-driven marketers make the shift from batch-and-blast to highly personalized mailings, the future looks to be bright for email as a marketing channel.
Are you struggling to find new ways to leverage email to drive engagement and increase revenue?