Measure and Improve Email Marketing ROI: Metrics That Matter

Email marketing return on investment (ROI) is a performance measurement used by businesses and marketers to determine the efficiency and profitability of their email marketing campaigns. This number is calculated by taking the net profit generated from the campaign and dividing it by the total cost of the campaign. What’s left is a decimal, which is then multiplied by 100 to give you a percentage.

In simpler terms, email ROI tells you how much you earn back for every dollar spent on your email marketing.

Every penny counts in business. A positive email ROI indicates that your campaigns are effective, delivering more in email marketing revenue than they cost to run. On the other hand, a negative ROI signals a need to refine your email marketing strategy.

Understanding this figure can help with resource allocation, email marketing strategy refinement, and future campaign planning, guiding companies on where to invest time and money to maximize results.

While ROI gives a holistic view of campaign effectiveness, it’s important to note that the underlying metrics that determine ROI are just as important. Open rates, click-through rates, conversion rates, and bounce rates play a role in determining the final ROI. These email marketing stats offer insights into various facets of the campaign, from audience interest and engagement to the effectiveness of a call-to-action.

By analyzing these metrics, businesses can gauge the success of their current campaign while driving actionable insights for future campaigns to ensure continuous improvement and optimization, allowing them to derive maximum value from the benefits of email marketing.

The formula for calculating email marketing ROI is relatively straightforward:

Email ROI (%) = [(gross profit - cost of email campaign) / cost of email campaign] x 100

In this formula, gross profit is the total revenue generated from the email campaign minus any direct costs associated with the product or service being sold. The cost of an email campaign encapsulates all expenses tied to the email campaign, including platform costs, design, copywriting, and any other associated costs.

Let’s take a look at an example to help you get the full picture:

Imagine a company spends $1,000 on an email marketing campaign. From this campaign, they made 50 sales, resulting in a total revenue of $5,000. The cost of products sold amounts to $2,000.

Now, let’s plug these numbers into the formula to calculate the ROI of email marketing for this company:

Gross profit = $5,000 (total revenue) - $2,000 (product costs) = $3,000.

Email ROI = [($3,000 - $1,000)/$1,000] x 100 = 200%

In this example, the ROI is 200%, meaning for every dollar spent on the campaign, the company earned back $2 in profit.

An ROI of 200% is a strong indicator of a highly successful campaign and can be used to plan future marketing efforts. A higher ROI suggests certain elements of the campaign resonated well with the audience, allowing you to reinvest in what works for next time.

Additionally, with proven success, there’s an opportunity to scale the campaign. This could mean targeting a larger audience, replicating the campaign in different markets, or increasing the frequency.

Of course, even with a high ROI, there’s always room for improvement. A/B test different elements — like subject lines to CTAs — to see if you can push the ROI even higher.

At the same time, keep in mind that marketing is dynamic. External factors, such as market shifts, new competition, and global events, can influence results. Consistently monitor your ROI, and if there’s a dip, quickly assess and adapt your email marketing strategy.

As email marketing continues to be a pivotal tool for small businesses, it’s increasingly important to optimize email campaigns to ensure maximum returns. Beyond sending emails, the strategy hinges on ensuring that every email is effectively tailored, targeted, and timed.

Here are a few strategies you can use to improve email ROI:

Segmenting your email list

Segmentation is the practice of dividing your email list into specific groups based on certain criteria, be it demographics, purchasing behavior, or engagement levels. The primary benefit of this approach is relevancy.

By tailoring content to specific segments, emails become more relevant, resulting in higher open rates, better engagement, and a more significant ROI. Additionally, segmentation reduces the risk of sending irrelevant content, which can lead to unsubscribes or being marked as spam.

There are many different types of segmentation, including:

• Demographic: Group subscribers based on age, gender, location, or occupation.
• Behavioral: Classify subscribers by their actions, like past purchases, website traffic, or email interactions.
• Engagement level: Divide your list into groups like active readers, occasional openers, and inactive subscribers.
• Sign-up source: If subscribers joined your list from different marketing channels or sources, like a webinar, social media posts, or website popup, segmenting them based on this can help tailor your content to their initial point of interest.

Incorporating segmentation into your email strategy ensures each message is finely tuned, making your messages more relevant.

Personalization

A generic email is easily overlooked. However, a personalized email stands out, making the recipient feel recognized and valued. Personalized emails tend to enjoy higher open and click-through rates and lead to increased customer retention and higher transaction rates.

Essentially, personalization turns a broad message into a tailored conversation, resonating on a personal level and building a deeper connection between the brand and the individual.

Some of the most common personalization techniques include:

• Using first names
• Sending tailored content and product recommendations
• Using dynamic content to change parts of the email content based on a recipient’s demographics or behavior
• Behavior-triggered emails that use automation to send based on specific actions like cart abandonments

A/B testing

A/B testing compares two versions of an email to determine which performs better in terms of engagement, conversions, and any other defined metric. This testing allows email marketers to make data-driven decisions and optimize emails for better performance.

For instance, by testing two different versions of their subject line, marketers can determine which prompts more opens or by comparing CTAs, which drives more clicks.

A/B testing removes guesswork from email marketing, providing clear insights into what resonates with the audience. Through continuous testing and refinement, it ensures that every element of an email is optimized for maximum impact.

Email automation

Automation streamlines email marketing efforts by optimizing resources and ensuring consistent, timely, and personalized communication with subscribers. Through automation, you can send a welcome email to a new subscriber, a birthday discount, or a follow-up to an abandoned cart without manual intervention.

Best practices for email automation include:

• Segmentation: Before automating, segment your email list to ensure that automated emails are tailored to different groups, enhancing their relevance and impact.
• Personalization: Even automated emails should feel personal. Incorporate elements like the recipient’s name and tailor content based on their behaviors or preferences.
• Timing is key: Schedule automated emails for optimal times, considering factors like time zones and typical user engagement patterns.
• Monitor and adjust: Track success to determine the effectiveness of your marketing emails. If certain email marketing campaigns aren’t yielding the desired results, tweak the strategy accordingly.

Tools and resources to improve your email marketing ROI

Knowledge is power, and the right tools can guide every step. As you strive for a high ROI, remember the importance of choosing the right tools. You can use market research to find email marketing stats for benchmarking and comparing your email marketing ROI to others in the industry. These email statistics can also help you determine how you compare in terms of other metrics, such as open and engagement rates.

To determine whether your email marketing campaigns are working, use analytics tools designed to provide actionable insights you can use to inform and improve future marketing strategies while consistently measuring ROI to identify new strategies. Mailchimp offers an array of advanced analytics products that streamline and optimize email marketing for increased ROI.

Our audience analytics dashboard, email dashboard, and customer reports provide an in-depth view of campaign performance metrics, from open rates and click-through rates to more advanced analytics like subscriber growth rate and engagement levels.

In addition, you can connect with your e-commerce store, aligning email metrics and store metrics to determine your true ROI. Sign up for Mailchimp today, then use this email marketing field guide for creating your first campaign.