Return on investment (ROI) is a common profitability ratio. Email marketing ROI refers to an indicator that assesses the efficiency of the investment in a specific email marketing campaign and evaluates the performance of specific email campaigns.

In this article, we’ll uncover some reasons to know your ROI, find out what an average and a good email marketing ROI is, provide some formulas to calculate your email ROI, and share tips for excellent email campaigns.

Why should you know your ROI?

There are numerous reasons to identify your ROI. Let’s talk about them in detail below.

Measuring your ROI helps you understand whether your campaigns, advertising, allocation of financial resources, and other strategies are effective and bring the results you were striving for. After making all the calculations, you’ll get to know whether your business brings more revenue than you spend. Estimating ROI for different campaigns allows you to identify those with the highest returns and allocate resources accordingly. By directing more resources to high-ROI campaigns, you can achieve better results, particularly in terms of revenue.

ROI can demonstrate to investors that your business generates good revenue and is worth investing in. By analyzing your ROI, you and your shareholders can make well-informed decisions about future investments and budget allocation. It also enables you to identify areas for improvement, optimize campaigns, and adjust strategies to increase revenue.

Now that you know why calculating your ROI is essential, it’s time to figure out what the average email marketing ROI looks like. This will help you determine whether your ROI meets industry standards.

The Average Email Marketing ROI

If you want to understand how your ROI reflects your business's performance and success, it's crucial to know the average email marketing ROI. In this section, we’ll provide you with this information.

According to research from Litmus, the average email marketing ROI might vary depending on the industry, your company size, and other crucial factors, yet it’s somewhere between $38 and $46 for every dollar you spend. Knowing these figures, you can determine your goals and compare them with those numbers businesses usually get when their email campaigns are effective.

Now that you know the average email marketing ROI, it’s time to understand what a good email marketing ROI is. These numbers will help you determine what percentage to target.

What is a good email marketing ROI

Every business owner may wonder not only about the average email marketing ROI but also what qualifies as a good ROI. The answer varies by industry. Generally, a good ROI ranges from 7% to 30%, depending on the niche. For example, a 7% ROI is excellent for stock investments, while large companies typically aim for around 10% to be considered successful. For small businesses, an ROI of 15-30% indicates strong performance and effective email campaigns.

Now that you know what a good email marketing ROI is, it’s time to determine how to calculate it.

How to calculate email marketing ROI

Billions of emails are sent daily, according to multiple resources. Does this mean that all of them have positive ROI?

For each dollar invested in email marketing, most businesses can expect an average return of £32, as reported by DMA in 2018. How can you estimate your ROI? Let’s start with a formula, as this is the most common approach for estimating email marketing ROI:

(Gained − Spent) ÷ Spent = Return on Investment represented as a percentage

"Gained" refers to the estimated amount of money that an email campaign has brought. If your email service provider has Google Analytics integrated into its dashboard, it is simple to trace every sale generated from an email.

"Spent" stands for the cost of the email campaign.

Estimate the value of a lead – it’s the simplest approach. Some SEO tools can help with this task. You can follow this manual method:

  1. Identify a lead. A lead is a qualified site visitor: a user has not purchased your service or product yet, but they are prospective buyers interested in your offer;
  2. Come up with a formula. It might seem a bit complex at first glance. The formula is the average sale × conversion rate. Imagine that you sell USB cables. If an average sale is $150 and your site converts at 3%, the value of a lead would be $150 x 0.03 = $4.5. In other words, every lead your business obtains is worth $4.5. Put simply, every individual who stumbles upon your site – via search, clicking an advertisement, or from social media – possesses a value of $4.5.

The next formula is simple and quick to calculate for online sellers. Experts recommend integrating Google Analytics with your ESP to get the calculations faster. The most common method used to estimate gain is to take into account the value of a lead:

The number of conversions × Value of a lead

If you cannot accurately track the revenue generated from every email, estimate the average ROI. Do the following:

Number of conversions made via email × cost of an average order

For those who are not sure about the accuracy of their estimations or lack some information, the best way is to try email marketing services that involve analytics.

SendPulse provides reports and deep analytics for each campaign that you send.

If you have no desire to waste time on manual calculations, you may benefit from using online email marketing ROI calculators. If you decide to use one like Sleeknote, consider the following:

  • the necessary currency;
  • total number of subscribers;
  • the final cost of the campaign;
  • open rate;
  • click-through rate;
  • conversion rate (look for it in Google Analytics);
  • the average value of a conversion (look for it in Google Analytics).

Additionally, there’s one more way to assess your ROI. Lead acceleration refers to estimating how long it takes a nurtured lead to transfer from the awareness phase to making a decision. As for the impact on revenue, this measure represents the value of every engagement across the specific marketing campaign.

Knowing how to calculate your email marketing ROI isn’t enough for better performance because you should also take action. That’s why we’ve listed some effective ways to drive your email campaign ROI.

10 Tips to Improve Your Email Campaign ROI

  1. Apply email segmentation
  2. Personalize your email campaigns
  3. Ensure mobile-first design
  4. Add engaging subject lines
  5. Consider using automation
  6. Use actionable CTAs
  7. Clean your mailing list
  8. Take advantage of A/B testing
  9. Focus on quality
  10. Provide social proof

You can improve your ROI in various ways, but not all methods guarantee success. That’s why we’ve compiled a list of effective tips for you to consider.

1. Apply email segmentation

Group your subscribers into segments based on specific criteria, such as demographics, behavior, and interests. This allows you to deliver email campaigns that are relevant to each group, provide solutions to specific customer problems, address their challenges, etc.

You can segment your audience based on their customer journey stage. For example, if these prospects are in the awareness stage, it’s essential to share links to your blog, send infographics, and deliver information about your brand and product. Besides, you can group your leads based on their demographic data and provide them with relevant products and content. For instance, if you have a cosmetics company with both men and women on the list, it’s worth segmenting your audience based on gender. Later, you’ll be able to deliver relevant product recommendations for them.

Below, you can see an example of an email Deel sends to customers after they have used the service for some time. Besides showing users the company cares about their feedback, this email campaign allows business owners to figure out what works well and what requires immediate improvement.

2. Personalize your email campaigns

Email personalization is a must when it comes to better engagement, more conversions, and, eventually, higher ROI. That’s why, before sending email campaigns, it’s crucial to analyze subscribers' interactions with your website. Pay attention to the following details: past purchases, browsing behavior, or customer preferences. By using this information, you can make your emails more relevant and engaging. People will be more likely to open your emails and perform specific actions.

Below, you can see how Temu effectively applies personalization in its email marketing campaigns. The company provides customers with items similar to those they have already explored in the app or on the website.

3. Ensure mobile-first design

Since more and more people are going mobile and checking their inboxes right from their smartphones, it’s important to make emails look good on any device. That’s why it’s necessary to optimize your email campaigns for all screen sizes and ensure that subscribers can take the desired action seamlessly.

In the example below, you can see how the design and layout of the same email campaigns from Salesforce differ depending on the device you use. On the right side, there’s an email adapting to small mobile screens and making it comfortable and readable for users. Subscribers can search the email for all the necessary information and CTAs regarding the webinar. On the left, you can see how the same email campaign looks on laptops and PCs.

4. Add engaging subject lines

Subject lines can both encourage higher open rates and prevent subscribers from opening your email. If you want to drive interaction with your emails, it’s essential to create compelling subject lines to encourage action. Use intriguing words, fear of missing out, enticing discounts, keep it short and sweet (40 characters or less), strive to resonate with subscribers’ needs and challenges, make it clear and concise, add words like exclusive", "secret," "instant," and "new.” Additionally, take care of preheaders. They should be informative to add context to your subject lines and encourage curiosity.

Below, you can see how Ryanair encourages subscribers to pay attention to the email by adding a subject line that informs them about an enticing offer.

5. Consider using automation

You can significantly improve your ROI and performance by leveraging automation. Using automated workflows allows you to deliver relevant content at the right time. They include welcome emails, abandoned cart reminders, and post-purchase messages. With the help of automation, you can send appropriate emails after subscribers perform a specific action, enabling them to explore the information they might need at a certain point of the customer journey. SendPulse provides you with a powerful automation tool that helps you reach your prospects not only through email marketing but also through web push notifications and chatbots.

Below, you can see how Coursera uses automated emails to welcome new students.

6. Use actionable CTAs

Make sure to add visible and prominent call-to-action buttons. They will tell subscribers how they can proceed to the desired action, such as “Shop Now,” “Sign Up,” “Reserve a Spot,” “Claim the Offer,” etc.

To create powerful calls to action, ensure that they are short and straightforward, containing up to five words. It will help you avoid overwhelming potential customers with information. You can use action verbs like “Shop,” “Get,” “Grab,” and “Discover” to encourage subscribers to complete a specific action. When you use these verbs, you should also use first-person language. It helps you sound like a casual conversation.

Below, you can see how Wizz Air encourages customers to join Wizz Priority by adding a visible and actionable call to action button.

7. Clean your mailing list

The quality is over quantity when it comes to the contacts on your mailing list. Start with cleaning up duplicates. The duplicates might appear after the same people subscribe to your email newsletter several times. This way, emails end up in your mailing lists, influencing your email metrics and spam indicators.

Then, you should identify and remove spam email addresses. You will easily notice them because they usually look like names of popular companies with typos or complete nonsense. These addresses look like an inconsistent set of letters and numbers. When you clean your mailing list, consider correcting simple typos. For example, johnsnow65@gmail.com. Seems like a lot of work unless you have a special service like SendPulse. Its email verifier enables you to keep your mailing lists clean after verifying all the email addresses and ensuring that they are valid.

Below you will find the process of verifying the mailing list when using SendPulse.

8. Take advantage of A/B testing

A/B testing is the process of comparing two versions of the same email to understand which of them has better performance. Marketers can experiment with various email elements, including email copy, email sender, subject line, visuals, etc. After identifying the best version, businesses can attain better engagement, such as open and click-through rates.

To successfully implement A/B testing into your business, consider choosing one variable you want to test. By starting small, you’ll be able to evaluate the performance of a specific element and figure out which of the variables impacts the whole campaign and engagement associated with it. You can try a different layout, subject line, sender name, or even more personalized elements. Additionally, you should think of the goal of this test. If you want to do everything on autopilot, consider using a special service like SendPulse. With its help, you’ll be able to test various elements and pick up the most performing seamlessly.

Below, you can see how to set up an A/B test in SendPulse.

9. Focus on the quality and frequency of email campaigns

Pay attention to the frequency and timing of your email campaigns. Schedule your campaigns and deliver them at the right time. For example, send welcome messages when new people subscribe to your email newsletter, deliver product recommendations after subscribers explore specific items, or remind them about abandoned products in the shopping cart after they leave your site without checkout.

In the example below, you can see an email from Pegasus that is short, simple, and straightforward. This automated email is sent out when the user logs in to the account and helps verify that this is the real owner of the account.

10. Provide social proof

Social proof refers to the evidence that other people have purchased and have reaped the benefits of a specific product. The practice of adding social proof to various campaigns and websites often happens because people make decisions based on the actions of other customers who are satisfied with a product or service. Since prospects often trust the recommendations, it’s necessary to ensure that your email campaigns have them.

Social proof can be presented in various forms and ways, including the number of clicks, likes, and reviews of the product, different awards, customers’ feedback and success stories, etc. Use this information to your advantage to encourage trust and loyalty. Consider adding testimonials, reviews, case studies, or user-generated content establishing a good reputation for your products or services.

Below, you can see how The North Face incorporates social proof into its email marketing strategy. Above every outfit in the email, you can see the number of reviews customers left, meaning that there are a lot of people who have purchased and liked the item.

When you create your email copy, consider adding some social proof, including testimonials, reviews, case studies, or user-generated content. It will help you establish trust and credibility. By showing the real value of your product and the benefits your customers reap, you encourage prospects to interact with your email campaigns and proceed to your website.

All in all, email marketing ROI is one of the most crucial metrics for those who take advantage of email marketing. It requires you to stick to the recommendations above and keep an eye on deliverability, opens, and clicks. You can develop a structured plan in which you’ll be able to create compelling subject lines and eye-catching CTAs, clean your mailing lists, perform A/B testing, develop schedules, share social proof, etc.

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