What Does ROI Mean in Email?
|
In an ideal world, every business decision drives a return on investment; the same is true for email marketing. Return on investment (ROI) is a profitability ratio used to measure the profitability of marketing efforts.
In email marketing, ROI helps determine how effective and profitable email campaigns are. Understanding metrics like ROI, along with return on ad spend (ROAS), allows marketers to measure the performance of campaigns.
Here’s what you need to know about ROI and email marketing.
How do we measure ROI in email?
Email marketing ROI helps you determine the revenue you’ve pulled in from your marketing while accounting for the expenses of conducting it. So, it shows how much money you’re making (or losing) from your email marketing campaigns.
Here’s the formula to help calculate it:
Email ROI = (net profit of email campaign – the cost of the email campaign / the cost of the email campaign) x 100%
Here’s an example to help you run the numbers:
- Your net profit from an email campaign is $300,000.
- The cost of the campaign is $25,000.
Email ROI = ($300,000 – $25,000 / $25,000) x 100%
Email ROI = 1,100%
So, the ROI for this campaign is 1,100%.
It means that for every dollar spent on your email marketing campaign, you gained a return of about $11, in addition to recouping your initial investment.
Where to find the numbers
You may not love digging into numbers as a marketer, but the data is where the magic happens for many successful email campaigns. The good news is figuring out how to calculate email ROI is relatively straightforward.
But you’ll need to know where to find your numbers, especially since some may overlap.
You may have a dashboard for net profit that calculates it for you. If not, you’ll want to identify all the sales directly attributed to the campaign and then multiply the number of conversions by the average value of each to get the total revenue. Then you’ll subtract the campaign costs from that number — you’ll need to find the campaign costs anyway to determine ROI.
When calculating the campaign costs, don’t forget to include the following:
- Advertising spend
- Cost of goods sold
- External tools or software
- Employee wages or agency fees for creative and technical costs
- Other general operational costs
Once you have these numbers, you can get a much more accurate picture of your ROI.
Why is email ROI important?
Understanding ROI helps you determine if your email marketing efforts are profitable or if you’re spinning your wheels and need to make changes.
Not knowing the actual profitability of your marketing can lead you in the wrong direction. So, it is critical to understand what it can tell you.
There are many reasons why email ROI is important, including:
- Competitive advantage: Brands that effectively maximize email ROI have an edge over competitors not leveraging their email marketing as efficiently.
- Performance evaluation: ROI is a key metric for assessing the success of campaigns and overall email marketing strategies to help determine the most effective.
- Optimization: Knowing the results of campaigns allows marketers to look for areas of improvement and where they can optimize revenue for future campaigns.
- Financial justification: Email ROI shows brands the financial return of email marketing efforts, providing a clear picture of profit, which can help justify expenses.
- Improve creativity: By understanding which campaigns have the best ROI and ROAS, marketers can see what resonates with readers, inspiring new innovative ideas and approaches.
According to recent data, email ROI runs from around $32 to $45, depending on the industry, with an average email ROI of $36. So, for every dollar spent, brands see $36 in return. That shows you the power of email marketing and why it’s such a critical channel for brands to connect with consumers.
Let Zembula help improve your email ROI
Every marketer wants to find ways to help boost the bottom line and operate more efficiently. We can help you do that.
With the Zembula platform, it’s easy to create personalized email campaigns that generate clicks, conversions, and revenue without adding extra time, energy, and expense.
We’d love to help you improve and optimize your email campaigns. If you’d like to learn more, get in touch.
|
|
