It’s a known fact in the email marketing industry - $36 (for every $1 spent) is an average email ROI.
But, how do you calculate the ROI for one of your recent email campaigns?
(Total revenue - Total cost)/Total cost = ROI
We all know the formula. Is the formula enough?
After all, email marketing serves many purposes - from lead generation to launching a product, marketers use emails for many things. The role of email marketing is indispensable in establishing direct communication with target audiences, fostering customer relationships, and driving engagement through personalized and targeted messaging.
Read ahead to learn what is email ROI, how to calculate it, and why you should track metrics to analyse ROI.
This article includes 6 key metrics that are necessary to predict the ROI.
ROI is short for Return on Investment. It’s the return you get from an investment after covering the cost.
Email marketing ROI or email ROI is the profit you get after covering the cost of investment in a particular email marketing campaign.
Marketers need to set a few parameters or metrics to analyse/measure the ROI.
The formula for calculating email ROI is simple:
(Total revenue - Total cost)/Total cost = ROI
Unlike the formula, the calculation of the total revenue and cost is quite challenging.
For starters, email marketing is done for several purposes:
When an email recipient clicks on the CTA, they might be doing it for any of the above purposes, which aren’t conversion but important stages of the sales funnel.
This is why it makes it so complex to calculate email ROI.
Unless you are selling via a website and your ESP has Google Analytics integrated into the dashboard, calculating email marketing ROI is extremely difficult.
But, it’s not just the revenue; calculating expenses behind an email campaign is an even messier process.
You have to count
This process is, again, not an apt one because your marketing team might be doing the email campaigns alongside LinkedIn outreach or inbound campaigns, etc. The same goes for tools/software.
This is why marketers need to trace a few metrics or KPIs to analyse the email marketing ROI.
From open rates to click-through rates, there are many KPIs and metrics to track the performance of an email marketing campaign.
Here’s a list of the 6 most important metrics to analyse email ROI.
This metric gives you the percentage of email recipients who took the desired action by clicking on a link (CTA) within an email message out of the total number of email messages delivered.
The desired action can be anything from purchasing a product to filling out a lead generation form.
The formula is:
(Number of recipients who took the expected action/Total number of emails delivered) * 100
Conversion rate is the most essential metric to calculate email ROI. As I have said before, email revenue isn’t the only parameter to measure the success of an email campaign. An email can push a lead forward in a sales funnel, and the conversion rate says if it did.
This is why the conversion rate of an email campaign is the perfect metric to see if you have achieved the goal of an email campaign.
A good email click-through rate lies between 8 to 12%. Anything above 10% predicts a good ROI.
The best tools/software in the market to track conversion rates are:
This metric gives you the percentage of email recipients/subscribers who clicked on one or more links in an email message out of the total number of email messages delivered.
The link can be for anything from product links to video links.
The formula is:
(Number of recipients/subscribers who clicked on one or two links in the email/Total number of emails delivered) * 100
While the conversion rate gives you the number of people who successfully carried out the desired action, the click-through rate gives you the number of people/subscribers who clicked on one or more links given in an email body.
After clicking the link, they might or might not have completed the desired action.
This metric provides insight into how many prospects/audiences are engaging with your content. It’s a great way to analyse your email marketing efforts.
A good email click-through rate lies between 2 to 5%.
The best tools/software in the market to track click-through rates are:
This metric gives you the percentage of new email subscribers minus the unsubscribe/spam complaints out of the total number of your email recipient/subscribers.
Basically, it’s the metric to check how fast your email list is growing.
The formula is:
{(Total number of new email subscribers) - (Total number of subscribers spam complaints) /Total number of emails recipients in your email list} * 100
Did you know an email list reduces by 22.7% every year?
Yep, that’s true. This stat is clearly the reality check that every email marketer needs in 2023. If you don't have any plans to grow your email list, make sure you have one as soon as possible.
The list-growth rate is a metric that will keep you informed on where you stand with your audience.
The best way to track list-growth rates is Google Analytics.
This metric gives you the percentage of email subscribers who have forwarded or shared your emails with their friends or social media connections.
It’s the number of clicks on the “share/forward” button that matters in this metric, not the social media platform.
The formula is:
(Total number of clicks on the “share or forward” button/Total number of emails delivered} * 100
This metric doesn’t directly help to calculate ROI. But a higher email forwarding/sharing rate indicates a good ROI in the coming future.
As a marketer, you must track this metric. It’s as important as the list-growth rate. Because, a high email forwarding/sharing rate means your list is about to see significant growth.
This metric gives you the percentage of email messages that didn’t land in the leads’ inbox out of the total number of email messages sent in a particular email campaign.
A high bounce rate is a huge red flag for an email campaign.
The formula is:
(The total number of bounced email messages/Total number of emails sent) * 100
Yes, bounce rate doesn’t have anything to do with ROI. But, a high bounce rate in an email campaign indicates a very low ROI.
This metric is as important as conversion or click-through rates. It gives a clear picture of how well a campaign is performing.
A good email bounce rate is anything under 2%. A high bounce rate can make emails look “spammy” in the eyes of the ESPs.
The popular tools to track bounce rate are:
This metric gives you the percentage of email recipients who unsubscribed after receiving emails out of the total number of email messages delivered in a particular email campaign.
A high unsubscribe rate during an email campaign means something is wrong.
The formula is:
(The total number of recipients who unsubscribed/Total number of emails delivered) * 100
Email marketers expect an 0.1% unsubscribe rate. A little more than this is also quite normal.
However, a 3% or 5% unsubscribe rate means there’s a problem that needs immediate fixing.
Please note “unsubscribe rate” isn’t a metric to check customer engagement or predict ROI. It’s a metric to check on your email list.
The popular tools to track bounce rate are:
Use the formula, (Total revenue - Total cost)/Total cost = ROI, to calculate ROI. But, as a marketer, you must know that it’s not the accurate way to measure the success of an email campaign, for it may serve many purposes.
To actually evaluate an email campaign, it’s important to track the important KPIs/metrics alongside the ROI.
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