Measure the ROI of email marketing
1. Refer to your marketing brief, business plan and customer journey and list specific, measurable email marketing KPIs for your organization and audience.
Keeping your audience and organizational needs in mind ensures that your ROI calculations are built on metrics relevant to your business metrics. KPIs can focus around email-generated sales, conversions, and website clicks, including: Open rate. Click-through rate. Email lead conversion rate. Email sales conversion rate.
2. Set up UTM tags to help you track traffic coming from email campaign links.
Standard UTM categories include: utm_medium: where the link was displayed, for example email or social-media. utm_source: the type of email, for example newsletter or automation. utm_campaign: the individual email campaign, for example onboarding or lead-nurturing. utm_content: an individual link within an email. utm_term: used narrowly for paid search campaigns to tag keywords. For example, you can create a unique UTM code for every link in each email using this utm sequence: http://www.yourdomain.com?utm_medium=email+utm_source=automation+utm_campaign=customer-onboarding+utm_content=hero-image
3. Create a simple email marketing report spreadsheet in which you record the KPI performance for each email you send.
For most date-based emails, track results one week after the send to include most relevant recipient actions. Record the time the email was sent, and the time the KPIs were recorded, to account for any discrepancies with the email platform’s internal dashboards. For ongoing automated emails, update the metrics periodically, at least once per month.
4. Calculate how much you spend on email marketing, including email platform costs, design costs and the cost of your email marketing team.
Choose a specific time period for tracking costs that spans across all of these variables, like monthly or yearly. Including the cost of your email marketing team is an often overlooked aspect of ROI calculations. If you don’t have a dedicated email team member, ask everyone involved in this channel for the percentage of their time spent on email. You can use the average of these percentages with the cost of their salary and benefits for a rough estimate.
5. Calculate your estimated gain from email marketing by multiplying the number of conversions attributed to your email marketing by the value of each lead.
Using UTM parameters and Google Analytics, track how many conversions can be directly attributed to email marketing and how much value they generate for your business. For example, if your email campaign generates 300 leads annually and the value of each lead is $300, your estimated total gain from email is $90,000. In ecommerce, you can use sales conversion generated from emails as a more direct estimate than lead value.
6. Calculate your ROI with the equation (Gain – spend)/spend = ROI, or use an ROI calculator to automate this equation.
For example, you might spend $100 per month or $1,200 annually on your email marketing platform. You might also have a junior staff member managing your email campaigns for 10 hours a week at $25 per hour, which is $250 per week or $13,000 per year. Your email marketing spend with these numbers is $1,200 + $13,000 = $14,200. If your total estimated gain from email is $30,000, your ROI equation would look like this: ($30,000 - $14,200) / $14,200 = 111.2% ROI calculators like Sleeknote and EmailMarketingROI can also help to convert basic email metrics into a percentage-based ROI figure.
7. Analyze the performance of your individual emails against each other based on your KPIs and overall ROI to determine what types of emails convert the best, and why that might be the case.
Use email categories like: Promotional Newsletter Transactional Survey Onboarding or welcome Milestone. Your UTM parameters can help you separate and analyze each email type.
8. Segment out emails that perform below company and industry average and prioritize them for potential copy and design improvements.
Use your email marketing report spreadsheet to identify emails that are candidates for improvements. For example, you can build A/B testing experiments focused on improving emails performing below average.
9. Analyze individual emails based on your audience segments.
Through A/B testing, you can determine which segments within your audience convert the best, which offers tend to work the best, and more.