Are Your Email Marketing Campaigns Generating $44 per $1 Spent?: How to Measure ROI

Email is marketing communication's holy grail in terms of customer interaction. Finding new customers for your services or products using email can be flexible, fast, and cost-effective. The same applies to retaining your current customers through repeat site visits.

One might think that this advertising approach is passé. But with $44 returned for every dollar spent and a 4400% ROI, email marketing is set to remain among the most effective digital marketing approaches.

The approach allows you to create personalized, targeted messages that foster meaningful relationships with clients. It can also boost your direct marketing campaign's response rates. All these can aid your goals and facilitate a substantial marketing return on investment (ROI).

Are you achieving the same value from your strategy? And how do you measure actual returns from your email marketing efforts?

In this guide, you'll learn how to assess the value generated from your company's email marketing campaign and view the ROI received. 

What's Your Email Marketing ROI

Return on investment is a business-performance measure that evaluates an investment's effectiveness. Marketing teams determine what they've gained from investing in an email marketing strategy versus what they spent.

The basic formula for computing return on email marketing investment is as follows:

ROI% = (Amount gained – Expenditure) / Expenditure

Only two values are important in this calculation: gained and spent amounts. Therefore, you should understand what both of them entail.

Gained value sums up what the company has earned throughout the accounting period. It's essential to define precisely where the sales originate from. With email marketing, you can leverage Google Analytics integration to track the number of purchases made from a particular email. You can collect the data across a year or for the entire campaign.

Expenditure or spent value refers to what you invested in the campaign. This may include email service provider fees and salaries of copywriters, designers, email marketers, and everyone involved in bringing your campaign to life.  

Notably, the averages aren't guaranteed. Spending $4,000 on your email campaign doesn't mean you'll earn 44 times this amount back. However, it means that you'll likely reap more profit from the email marketing spend than what you'd achieve if you diverted it to alternative marketing approaches like PPC ads

Uncovering The Metrics That Determine Email Marketing ROI

You need two figures to determine your email marketing ROI: amount spent and what you earned. However, figuring out the latter isn't as cut and dry. 

Sales isn't the only value gained from email marketing, and you'll need to consider numerous other metrics to ascertain the value you derived.

So, which are these metrics that determine the success of your marketing strategy? Let's explore

Email-Generated Sales

You'll calculate this by dividing the total revenue earned from your email campaign by the number of emails that comprise the mailing list you reached out to. Calculating email-generated sales can help you compute the amount of sales profit earned from the separate emails. 

Also, track the number of leads that became your customers after the email communication. If you're leveraging an automated email marketing solution, you'll have an easier time trailing revenue earned directly from your email marketing. 

Conversion Rate 

Regardless of the call to action you use in your campaigns, be it setting up a call with your team, downloading a whitepaper, or scheduling a demo, it's essential to keep track of it. This way, you'll know your success rate at ensuring the specific action and how much it costs you.

Fostering more conversions translates to additional revenue. Therefore, this is among the most crucial metrics to track as you evaluate your email marketing ROI. Conversion rate is determined by dividing the total conversions by the number of email messages you sent.

Click-Through Rate

Also known as CTR, this refers to the number of people that clicked a specific link. You'll get this value by dividing the total unique clicks by the number of email messages sent minus the bounces. A higher click-through rate means a greater bang for your buck with your calls to action. 

Engagement 

Marketing emails that encourage engagement have a more significant impact on your profit margins. Your email engagement rate can be classified into two specific key performance indicators: CTRs and open rates. Both KPIs let you know your engagement progress and the email marketing elements costing more than their worth. 

Lead Acceleration

This refers to the speed at which leads move down your email marketing funnel. When measuring this metric, you'll focus more on making comparisons instead of relying on a set formula. 

If you've sped up your lead conversions through email marketing, you're confident your strategy is effective. 

Overall Revenue

Always view your email marketing return on investments based on your inclusive revenue. Using this approach puts it into context with the other sales strategies. If it outperforms the different tactics, it shows that it might be worth investing more resources towards email marketing and less towards those that aren't pulling substantial profits.

Website Traffic

More website traffic means better marketing results. It would help to check out how email marketing impacts your site traffic to ascertain their returns on investment in terms of engagement and brand awareness.

One effective way of tracking your monthly performance on the above metrics is to perform email reporting regularly. This allows you to compare your overall performance and note how your marketing efforts are improving. 

Using an email automation solution can significantly simplify this task. 

How to Calculate Email Marketing ROI

With the groundwork set, it's time to get to the bottom of the matter – determining your email marketing returns on investment. 

How do you calculate that?

Follow these steps for accurate results:

Determine Your Spend

You'll begin with calculating your email marketing ROI by determining how much you send on the strategy. As simple as it seems, the process has its complications.

Your email service provider is your most apparent spend. And fortunately, this is a pretty straightforward calculation. But that alone won't offer a reliable result when looking for your overall ROI, especially since several other expenses come into play, including the time you've invested in the strategy.

So it would help to find out how much time every member of your marketing team spends on your strategy then convert the duration into an hourly rate.

If your entire expenditure goes to your service provider and the team member's time, your total spend will be the service costs plus team bandwidth.

Calculate Your Gain

It's relatively easy to calculate the value your email campaign brings, mainly if you sell products or deliver services online. If your email service integrates Google Analytics into the dashboard, you can easily trace every sale resulting from an email, either for a specific campaign or over a stated duration.

So how do you determine your gain?

You can quickly go about this by calculating the value of the lead. It's easy to trace every conversation you can attribute to your campaign using Google Analytics, including site traffic. You'll then multiply the total conversions by a lead's value to find the total revenue your email campaign has raked in.

Calculating Your Email Marketing ROI

Once you're done compiling all your data, it will be time to plug into the basic formula for computing return on email marketing investment:

(Amount gained – Expenditure) / Expenditure

Assuming you spend $100 per month for your email service provider. In one year, the total ESP spend will be $1,200. You've also partnered with a marketer who directly works on your email campaigns for two hours, five days every week, at an hourly rate of $16. This amounts to an annual spend of $7,680.

Your total email marketing expenditure for the financial period will be $7,680 + $1,200 = $8,880.

If you invest $100 in your lead and your campaign brings in 300 leads annually, the total revenue from the campaign will be $30,000.

You now have all the data to determine your email marketing returns on investment. 

In this case, it will be:

($30,000 – $8,880) / $8,880 = 237.8%

Let an Email Marketing Automation Software Simplify the Task

Email attracts the highest returns on investment than any other marketing approach. But making heads or tails on the true value of your campaign requires you to pay close attention to various metrics. Including an email marketing automation solution in your toolkit can take the guesswork out of it.

Sendlio can track, monitor, and evaluate your email data to provide insights into the ROI metrics. This is way easier than handling all the numbers, and you'll get the information you need faster.

Sendlio is the perfect option for business owners and marketing teams to develop excellent campaigns and deliver unique experiences. The platform comes with a simple drag-and-drop editor that lets you focus on your marketing content instead of spending time worrying about the campaign's nitty-gritty.

You can also automate your messages across email, voice, and SMS to reach various prospects with the right brand message at the most viable time.

Give Sendlio a try to see how it enhances your email marketing campaign.

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