How to Calculate Email Marketing ROI?

In the world of email marketing, one of the most important measurements you can make is the return on investment from your email marketing campaigns.

It is no secret that email marketing has one of the highest returns on investments possible.

Adding this to the fact that email marketing is the primary marketing tool for many businesses, it becomes paramount to understand exactly what it is and how to properly calculate it.

Join us, here at the Emailable blog, as we explain and explore how to calculate your email marketing return on investment.

What exactly is Email Marketing ROI?

Email Marketing return on investment (ROI) measures the return, as a percentage or ratio, of a given investment. The calculation itself is very simple and provides immediate insight into the performance, efficiency, and profitability of your investment by measuring the amount of return in relation to the investment’s cost.

As mentioned above, the calculation of return on investment is very simple, mathematically speaking. However, it is important to note that calculating an Email Marketing return on investment accurately depends on how well you can track your expenses, meaning that you must be well aware of the costs involved in your email marketing campaign.

Alongside the necessity of having in-depth knowledge of your own email marketing operations and the associated costs, email marketing return on investment might also require you to fully understand what part of your revenue is generated from your email marketing campaign.

Understandably, you might already be thinking about how this is too complicated and detailed - I want to leave you at ease dear reader when I say that your email marketing return on investment calculations need only be as detailed as you want them to be.

If you need to know every detail of your return on investment, I highly recommend you spend some time fully understanding what costs and revenue sources are inherently associated with your email marketing campaign. This will help you in optimizing your campaigns in the future, subsequently increasing your email marketing return on investment.

However, if you prefer a general eagle-eye view of your email marketing efforts, you can simplify your email marketing return on investment calculations by limiting it to more generalized and absolute numbers, without the need of identifying every little piece of your operations.

Regardless of how you approach your calculations, you will find that your email marketing return on investment is probably one of the most cost-efficient revenue-generating sources. Email marketing ROI can go as high as 4400%.

That’s a big number, and if that doesn’t catch your interest, I don’t know what will.

Now, you might be asking yourself:

How do I calculate Email Marketing return on investment?

Great question!

I said the calculation itself is simple - twice now, actually.

Here it is:

Investment cost: 250 schlaberlopers

Current investment value: 1000 schlaberlopers

Return on investment: ?

Calculations:

What if you need to calculate your email marketing return on investment over a given period of time? Your email marketing doesn’t happen at a single point in time, often businesses will do multi-phase plans that stretch over time.

The fundamental logic is exactly the same, we just need to account for the time that passes.

Here is how you do it:

Start date: 1st of January ‘22

Investment cost: 250 schlaberlopers

Current investment value: 1000 schlaberlopers

End date: 31st of May ‘22

Return on investment: ?

Calculations:

That’s around 2,753% a year! - Now that is a lot of schlaberlopers!

Naturally, these examples assume consistent returns, which isn’t always the case - however, they do demonstrate the potential of your email marketing return on investment.

As a secondary note, in the introduction of what return on investment is, we did specify email marketing ROI can go as high as 4400% annually - so the example we give here actually plays around with relatively realistic returns with an average result - just some food for thought.

Calculating your Email Marketing expenses

Okay, so you now understand the simplicity of calculating your email marketing return on investment.

It’s time to make an overview of your expenses - what exactly is correlated with your email marketing expenses on your day-to-day operations?

Here are some of the most common expenses relating to your email marketing efforts:

• Email service provider costs
• Marketing personnel
• Outsourced or miscellaneous expenses

Email service provider costs - this is an obvious and straightforward expense, however much you spend on your ESP of choice is naturally directly related to your email marketing campaigns.

You can simply take the total amount per month/year that you spend on these software services and add them to your email marketing expense pile.

Marketing personnel - Not every activity from your marketing team can be budgeted toward email marketing, it is important to know how much time they spend on email marketing per day/week and convert those numbers into the appropriate timeframe, so your calculations stay consistent.

The more detail-oriented you manage to be while tracking this, the closer to reality your calculations will be.

Outsourced or miscellaneous expenses - These expenses can be anything that either does not belong in the previously mentioned categories or simply is somewhere in between.

Here are some examples of expenses that might fall under this generic category:

• Consulting fees
• Purchased assets
• Outsourced art or images
• Various third-party tools
• Data analysis software solutions

It is also important to consider that there are expenses associated with mismanagement or improper planning for your email marketing campaigns - bounces from bad emails is one that obviously comes to mind.

This is why it is important to clean your lists, using a service such as Emailable, to minimize your expenses and maximize your profits!

Please refer to the above sentence as an example of how to never miss a plug opportunity!

Calculating your Email Marketing Revenue

Now you know how much you spent, great!

What next? The most important part, of course - how much you earned for your hard work!

Calculating how much a particular campaign earned can be tricky because it is highly dependent on your criteria, or better yet, the very purpose of your campaign.

If your campaign was meant to generate sales, that is a very straightforward and easy-to-calculate revenue stream. However, what if you were doing something a bit more complex?

Imagine your campaign’s goal was to gather new users through the introduction of a referral system - new users will come, certainly and you can use estimates to calculate their lifetime value based on their initial behavior or any otherwise useful data you might have collected during the campaign’s time.

I said it once and I will say it again, this only needs to be as complex as you want it to be.

Here are some things to consider when calculating your email marketing revenue:

• Sales directly correlated to the campaign
• New customers and their potential value
• User conversions
• Behavioral changes
• Lead nurturing

All of these can directly contribute to your email marketing return on investment, even if it is outside of the timeframe of your campaign - keeping in touch with your customer base and placing your business in their mind and worldview will have long-lasting effects that may seem daunting to track at first, but are essential data to confirm the value of your marketing efforts.

The silver lining amongst all of this complexity lies in the fact that as you continue to sharpen your data analysis skills you will significantly improve your revenue, as you continue to acquire more knowledge regarding your customer base, their preferences, and desires - making you that much more proficient in your business.

Summary

Let us review the information above, shall we?

Your email marketing return on investment matters, it is a powerful metric that validates your efforts in email marketing and it showcases how efficient your campaigns are. The potential for growth is huge and when done correctly, this measurement can be extremely insightful for your business to continue growing and developing according to best practices.

Knowing how to calculate your expenses and revenue requires intimate knowledge of your operational costs and a good understanding of your strategic decisions when it comes to email marketing, the more you know your business and what makes it tick, the better.

That’s all for today, we hope that you found some valuable information in this article - happy calculations!