When evaluating the success of an email marketing strategy, there is a lot to consider.
We’ve looked at click rates, open rates, conversions, and average revenue per email sent (ARPES) at length already. These metrics are each, in their own way, extremely important to helping us understand how well our email marketing campaigns are performing.
These metrics can answer many of the questions we will likely be asked when called to account for how we have been spending our email marketing time and effort. They can also help us identify specific areas of strength and areas for improvement.
But, for our bosses, benefactors, and managers, who have invested their brand’s marketing money in our email marketing campaigns, there’s really only one question that needs to be answered:
After all, if we weren’t making our employers more money than we were costing them, why would they employ us?
Fortunately for us, ROI numbers for email marketing are some of the highest in the entire digital marketing sphere. According to the Data and Marketing Association, email marketing returned an average of £38 for every £1 spent across all industries, in 2015. Data from 2016 and the first quarter of 2017 indicate that this figure might actually be getting better.
Which is good news, both for us and for those who avail themselves of our email marketing services.
So, as it pertains to email marketing, what exactly is ROI?
ROI: The most important email marketing metric ever
What it is
ROI is, quite simply, a measurement of the total amount of revenue generated by an email campaign measured against the cost of designing, developing, and sending out that campaign.
It is possible to attach a specific value to each of email marketing’s lesser metrics to generate an ROI figure (this email marketing ROI calculator is pretty good for that), but in reality the only figure that matters is the total revenue from online/offline sales generated over the course of a campaign.
Once we’ve figured out the total revenue generated by a campaign, we must look at the total cost of creating and sending that campaign e.g. labour costs and development costs. Then, simply divide the revenue generated by the cost of the campaign, and you have your ROI, which can be expressed as either a percentage or as a ratio.
Bingo! We’ve got our ROI.
What it tells us
Measuring a campaign’s ROI should give us a pretty good indication of how well we (and the brand we are working with) are functioning from an email sales perspective overall. If the ROI of a campaign is lower than normal, this should indicate that there was a problem with the campaign. However, there are several factors beyond the email marketer’s direct control that first need to be taken into account:
- Does the next stage in the sales funnel line up properly with the subject line, body content, and call to action included in our email?
- Where are recipients redirected to when they click through? Is the website up to snuff?
- If a user clicks through on our email, what does the journey to purchase look like? Does it function well?
If the answers to these three questions are all positive, and every stage of the customer journey beyond our email is of sufficient quality, we must then use email marketing’s lesser metrics to identify exactly where our efforts are falling short.
How much ROI is a good amount of ROI?
In theory, any positive ROI should make it a worthwhile investment. The 2015 DMA report stated that 1 in 5 companies using email marketing reported an email marketing ROI of 70:1 or higher. So, this benchmark is probably a pretty good goal for any campaign to shoot for.
As always, there is a lot to take into account in determining a healthy ROI goal for your campaign. A good approach is to simply measure your campaign’s performance against those of previous campaigns from the same company. This should give you a pretty good indication of how you and your emails stack up.