How to Calculate Your Email Marketing ROI
Written By Jason Rowse - Digital Marketing Expert
Email marketing is a very popular way for businesses to reach out to their customers, with research by The Manifest in 2018 estimating that 69 per cent of organizations in the US participate in the activity. However, how many of them are effectively measuring the impact of their work?
Companies need to have a grasp on whether campaigns are proving to be value for money and email marketing ROI is the key way to do this.
What is Email Marketing ROI?
ROI stands for return on investment and is a term used to describe how beneficial a specific investment has been. With this in mind, email marketing ROI relates specifically to how effective a campaign has been, both in terms of driving sales or interest in a company’s services.
It can be calculated in a basic form using a simple formula:
|(gained – spent)/spent = ROI.|
Learn How to Calculate the ROI for Email Marketing
When it comes to the formula above, ‘gained’ would be earnings from a specific campaign, while ‘spent’ would be the amount paid out to create it. The ROI is then generated as a percentage using those figures.
So, to use a basic example, if you made $20,000 in sales from an email campaign but spent $5,000 on designing and putting it together, the ultimate ROI would be 300%. To explain further, the aforementioned formula would look like this:
|($20,000 – $5,000)/$5,000 = 300%|
There are also other important measurements that you should consider when analyzing the effectiveness of your email marketing campaigns however, with two particularly vital issues being sales and conversions and website traffic.
Sales and Conversion ROI
An effective email marketing campaign can, of course, provide a major boost in terms of sales and there are a handful of elements that can provide important insights on the issue.
For instance, you may want to assess how customers have engaged with your content by looking at a host of factors, from click-to-open rates to conversions.
Quality email marketing software will allow you to examine such matters easily, which means you should be able to assess what elements proved particularly effective in attracting the attention of your customers.
This ensures you have the opportunity to learn lessons and refine your processes ahead of the next major campaign.
Website Traffic ROI
Interestingly, while sales may be a key objective in some campaigns, the Manifest study mentioned earlier found the top email marketing goals for businesses were to grow and retain their customer base and increase engagement.
Website traffic could be a key indicator of whether you are being successful on that front and you can measure whether a campaign is providing a return on investment in terms of visitors by using two approaches. The click-through rate provides guidance on the number of people who have headed to the site by clicking on a link in an email, while the click-to-open rate focuses on the number of people who actually clicked on links after opening up your message.
Again, this is information that can be accessed by using email marketing software and it can offer a host of benefits. Perhaps most importantly, it gives you a clear indication as to what people are responding to within your messages.
Ultimately, it is fair to say that email marketing ROI revolves on a basic level around three key actions – considering how much you have spent on a campaign, working out what you have earned from the activity and then making the calculation using the clever little formula above.
While email marketing is known to be effective in a range of industries, it is vital to have a grasp of ROI so you can measure and highlight the contribution it is making to your business.
In addition, you can also then use such information to build on previous campaigns and ensure your future communications are as effective as possible.