Email marketing is a powerful tool for engaging customers and driving sales. But, are you getting good value for your dollar invested in email marketing?
With so many metrics—opens, clicks, conversions—it’s easy to lose track of the big picture: “Is it worth it?” Although business owners typically earn $42 for every $1 spent on email marketing, your situation may differ.
Calculating your email marketing ROI can help you understand how well your campaigns are performing and help you make informed decisions for the future.
In this guide, we'll explain the steps and best practices for accurately measuring and analyzing your email marketing ROI.
What is Email Marketing ROI?
ROI, or Return on Investment, measures the effectiveness of an email marketing campaign. For this, it considers the email marketing returns you generate from the campaign relative to the campaign’s cost. We’ll look at this in detail later.
Importance of Measuring ROI in Email Marketing
Measuring email marketing ROI is essential for a few key reasons:
Enhances Brand Awareness
When you dive into your ROI data, you get a clear picture of which content and strategies click with your target audience and are profitable. You can then double down on these things that work and further amplify your brand’s presence.
Increases Website Traffic
ROI insights also show you which email strategies are driving the most traffic to your site. Once you know what’s working, you can fine-tune and replicate those tactics to consistently draw in more visitors.
Boosts Revenue
When you know what your email marketing ROI is every step of the way, you can continuously work to improve it and boost revenue.
4 Steps to Calculate ROI for Your Email Marketing Campaign
Calculating ROI for email marketing campaigns involves a few straightforward steps. Here’s a simple guide to help you get accurate results:
Determine Revenue Generated
To get a clear picture of your email marketing ROI, you first need to figure out how much revenue your emails are bringing in.
If you’ve added UTM parameters to the links in your emails, you can use Google Analytics 4 to track these. You can check the Session Medium section to look at each email newsletter’s performance. Go to Session Campaign to zero in on more detailed metrics. You can see the revenues associated with a specific email campaign there:
Now all you need to do is sum up the revenues from all your email campaigns over the period you’re analyzing.
Calculate Total Costs
Now, let's figure out all of your email marketing expenses. These can include:
- Expenses associated with email marketing software and services.
- Costs related to employees such as hiring copywriters and designers for your email campaigns.
- Costs for promotional offers, list segmentation, acquisition, etc.
Once you've got those numbers, just add them up to get your total campaign cost. Make sure you use the same currency for all these values. Let’s assume your email marketing provider only accepts the UK pound and you paid in that currency to gain access to the software. You’ll have to either convert the money you spent into US dollars (or any other currency of preference) or convert the other values into UK pounds.
So, let’s say, converted, you spent $200 for your email platform. You also spent $100 on email design and $50 on list management. Then your total campaign cost would total $350.
Remember that you only have to consider the costs incurred for your email campaigns, not other marketing strategies. So if you incurred costs to hire a copywriter but the new employee helped out in your social media campaigns instead, then you shouldn’t include those expenses in calculating your total email marketing costs.
The costs you consider should also be specific to the email marketing campaign/s you wish to calculate your email marketing ROI for. If your goal is to calculate email marketing ROI only for May, for instance, then stick to the costs you incurred for that campaign, and do away with the ones in April in your computation.
Here’s another important thing to remember: The period that covers the email marketing costs you decide to include in your computation should be the same as the period that covers your calculation of generated email marketing revenues. That’s a no-brainer since you can only properly compare and contrast apples and apples, not apples and oranges.
Compute ROI
After gathering all your data, calculating your ROI is pretty straightforward. Here’s the basic formula:
(Gain – Spent) / Spent = ROI
For example, if your campaign brought in $5,000 in revenue (that’s your Gain) and it cost you $1,000 (that’s your Spent), the calculation would look like this:
ROI = (5000 - 1000) / 1000 = 4
To turn that into a percentage, just multiply by 100:
ROI = 4 × 100 = 400%
So, in this case, your return on investment is 400%.
Analyze Results
A high ROI suggests that your email content and targeting were effective and yielded good returns. A low ROI, meanwhile, signals just the opposite and tells you changes in strategy or execution are required.
Maybe you need to change your email content to get subscribers to buy. Or maybe you need to get around those spam filters better to boost email deliverability.
But how does a “high” and “low” ROI even look in the first place?
That depends.
If you set a target email marketing ROI prior to launching your email campaign, then any value beyond that target should be considered “high.” Anything below that, of course, is “low.”
You can also compare your ROI and metrics with industry benchmarks. For instance, here's the average ROI for email marketing across different industries.
If you exceeded your industry’s average email marketing ROI, then you can say your campaign went pretty well.
Other Email Marketing Metrics to Track
The email marketing ROI measures how much revenue you earn from your email campaigns. But not all email campaigns have monetary goals (campaigns that aim to drive sales, for example). Some marketing email campaigns aim to primarily nurture relationships, generate event sign-ups, and boost web traffic, among others. With these campaigns with non-monetary goals, you can look at metrics such as:
Engagement Rates
This includes open rates, click-through rates, and other interactions. It gives you a complete picture of email engagement, or how email users are interacting with your emails.
Conversion Rates
This tells you what percentage of recipients complete a desired action, like signing up for a webinar or registering for an on-site event, through your email.
Website Visits
This measures how many recipients visit your website because of your email.
This way, you can get a complete view of your overall email marketing performance.
You can then use your findings to spot areas where you can improve, whether it’s fine-tuning your email targeting, upgrading your marketing content, or tweaking your timing.
Finally, pull it all together in a report with actionable insights. You can use a conclusion generator to summarize your findings effectively. This tool can help you create a clear and concise analysis summary you can always refer to for future campaigns.
Conclusion
You must understand and accurately measure the ROI of email marketing campaigns. Knowing your email marketing ROI can help in building brand awareness, driving website traffic, and increasing revenue.
You can use a straightforward four-step process to calculate average ROI:
- Determine the revenue generated.
- Calculate total costs.
- Compute ROI
- Analyze results
To get a more holistic view of your email marketing performance, track key metrics like engagement levels, conversion rates, and website visits as well.
Alongside email ROI, analyzing these will help you spot trends, identify areas for improvement, and, ultimately, achieve email marketing success.
