How Do You Calculate Email Marketing Roi?

Berry Mathew

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How Do You Calculate Email Marketing Roi?

Marketing and Return on Investment (ROI) go hand in hand. Businesses are interested in how much is required to fund a marketing effort until it produces an ROI and at what percentage. It goes without saying that the best marketing efforts are those with huge ROIs.

Over the last decades, marketing has been sectored into different arms, and email marketing remains one of the relevant arms to date. With email marketing, the cost is considerably low, and the ROI can be as high as $44 on each marketing dollar spent.

Hacking email marketing requires you to know what you’re doing as well as its best practices. Here are some insights into email marketing and ROI calculation.

What Is Email Marketing Roi?

Email marketing ROI measures how profitable your email marketing strategy is. It measures how effective your emails are in driving sales and engagements.

Calculating email marketing ROI is simple; Dollar gained – Dollar spent/ spent.

Email marketing ROI is expressed in percentage, i.e., the percentage of revenue generated from what was spent.

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Is Email Marketing Roi Relevant?

Yes, email marketing ROI is relevant in a lot of ways. However, it is important to note that not all ROIs are calculated in monetary value, especially if you aren’t selling a product or service.

You must first identify and understand the reason for your email before calculating your email marketing returns. Some common reasons for sending an email newsletter include the following;

  • Create brand awareness
  • Nurture leads through the buying journey
  • Increase sales and revenue
  • Website traffic.

Calculating Your Email Marketing Roi

With the email marketing ROI formula given above, you can start your calculation to understand how much revenue you’ve made from each email sent out.

Calculate Your Spend 

Your ‘spend’ encompasses everything you’ve put into creating the marketing email and sending it out. This can include the cost of drafting the marketing email template, the cost of copy, the cost of syndication tools, the hourly cost of each employee working on the marketing email from conception to implementation, etc.

It is important to capture the full width and length of the costs that have gone into creating and sending the marketing email. This can impact your ROI computation significantly.

Calculate Your Gain

Gain, in the form of sales or revenue generated, is an important part of your calculation. It tells you how much the marketing email you’ve sent out has pulled in.

Calculating gains from marketing emails were complex in the past, especially as there needed to be a data-backed way to identify where the sales or leads came from. In recent times, custom links could be created for specific marketing campaigns to measure the effectiveness of each campaign.

Calculating your gain is quite easy if you have a great setup in place. Your gain can be calculated by factoring in the value of each lead generated. You can also back the calculation using tools like Google Analytics to trace conversions and their attributes. You can calculate the total revenue generated by the email campaign with the number of leads generated by the email campaign.

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Calculate Your ROI

The two important data required to calculate email marketing ROI are total spending and total revenue generated. With the data readily available from the above steps, you can effectively calculate how effective your email has been.

An example;

Email marketing ROI = (gain-spend)/spend

Assuming you spent $12,000 on the email marketing ($1,200 per month) from template to employee hours and implementation and you made $76,800 in total revenue from the campaign. Your email marketing ROI will be;

((76,800 – 12,000)/12,000) x 100 = 540%

This calculation is also important when doing split A/B testing on email marketing templates and delivery solutions.

Does Your Email Marketing Roi Matter?

Yes. Your email marketing ROI tells you many things about your marketing strategy, audience, market, and products or services.

Business owners often use this data to determine what works in terms of email templates and what doesn’t. In addition to this, it can also help you to better understand what your customers respond to and the products they love the most. You can also use this data to estimate how much you could make from each marketing channel, ensuring that you optimize or eliminate the low-producing marketing solutions while fine-tuning the better platforms to generate more high-ticket sales.

Your email marketing ROI also points to how profitable your business can be in the short and long run. It gives you an idea of your target audience and can help you shift focus to a subset of the target audience based on distinct characteristics like demography.