What is the Real ROI of Email Marketing?

Wondering if email marketing is worth the effort? There's no better way than to look at ROI!

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Is email marketing still worth the investment? Today’s world of digital advertising is constantly evolving, and new ways to market to audiences pop up every day. With all of these fresh, current methods, this question isn’t an unreasonable one to ask.

Well, the answer, plain and simple, is yes. One thousand times yes.

Email marketing remains one of the most important ways to reach audiences. Even with all of the new, innovative marketing ways emerging, emails hold their value. Email marketing is accessible and affordable to all businesses, small and big, and provides an ROI that makes it hard to overlook. What many marketers don’t realize is that the mean email marketing ROI is 122%, four times higher than any other digital marketing channel. On top of that, for every $1 businesses spend on email marketing, they see a return of about $40.

ROI of digital marketing channels
ROI per $1 spent for multiple digital marketing channels

One reason that many companies fail to realize the value of email marketing is that they are unable to track it properly. In a survey conducted in 2018, it was found that only 30% of brands were able to measure the ROI of their email marketing well.

It’s clear that email marketing isn’t going anywhere. So we’ve come up with a guide to help you grasp the true value of email marketing ROI. We’ll cover what ROI is, how to measure it, and the real ROI of email marketing below.

Let’s get started!

What is ROI and how do we measure it?

Return of investment (ROI) is a measure that marketers use to evaluate the performance of an investment. In our case, ROI looks at the efficiency and profitability of email marketing. ROIs are typically measured to compare the efficiencies of multiple investments at once.

Here is a basic formula for you to measure ROI:

ROI = sales – cost / cost (expressed as a percentage)

Calculate the amount you spend on emails, subtract it from the amount you gain from your email campaigns, and divide this by the amount you spend. Marketers are looking for high ROIs with their investments. A high ROI means that what the investment has gained is favourable compared to what it cost. To truly measure your ROI, you also have to be aware of your marketing goals. Email marketing can be used for many different goals, such as:

  • Boosting brand awareness
  • Nurturing and developing leads
  • Increasing sales and conversions
  • Increasing website traffic

Knowing what to track in terms of your goals will help you evaluate your ROI.

Benefits of Email Marketing

So, now that we understand what ROI is and how to calculate it, let’s look at the returns that email marketing offers.

1. Revenue

Email marketing is great way to increase your company’s revenue. One reason for this is that email is one of the most widely-used forms of communication. It is estimated that around 4 billion people will be using it by the end of 2020. This number will grow next year, and the year after that. As the number of people using email increases, the number of potential customers to engage with increases.

Number of email users per year

And the majority of people actually prefer emails as a way to engage with their favourite brands. A study by MarketingSherpa shows that 72% of people prefer to receive promotional content through email rather than social media. This is probably why this method of marketing accounts for 1/4 of overall revenue for companies.

In addition to this, email marketing is generally affordable for companies of all sizes. Big companies can invest easily and expect a good return, and small companies can invest even with limited budgets.

Tracking the ROI of email revenue is typically done through email analytics. You can calculate revenue by tracking purchases a customer makes after clicking on a link in your emails.

2. Conversions and Leads

Email marketing improves sales and increases conversions. In fact, email has the highest conversion rate (66%) when compared to social, direct mail, and other forms of marketing. This is due to its ability to nurture leads. Companies are able to reach out to customers that have visited their website in the past and provide them with information that may push them to make the decision to buy. This way, consumers are guided through the marketing funnel until they are converted into customers. You may use emails to provide them with encouragement and even a coupon or two!

There's something in your cart email
Email marketing example from FiftyThree

Emails also help loyal customers that are willing to buy. For example, customers that have wishlists on a website can be notified when their wishlist item goes on sale or is back in stock. This notification will drive them to purchase, especially when there is a button in their email that leads them directly to the product. Studies show that including a call-to-action (CTA) button in your emails instead of a simple text link can increase conversion rates by as much as 28%. In the example above, FiftyThree includes a CTA button labelled “Resume your order” for a customer that has left something in their cart, encouraging them to go through with their purchase.

To calculate ROI, you can use several different measures. One way is to calculate lead acceleration: comparing how long it takes a nurtured lead to purchase vs. an unnurtured lead. Another way is to measure open and click rates for your emails. In most cases, companies use email analytics to measure ROI. They may also set up Customer Relationship Management (CRM) or email automation programs with built-in algorithms to track the ROI of email campaigns.

3. Website Traffic

Companies everywhere have reported that website traffic is one of the most difficult challenges they have when it comes to marketing. Well, email marketing can help. A steady flow of emails to the consumers’ inbox will provide them with reminders as well as clickable links to visit the company website. And because they have chosen to receive these emails, they are more likely to click on a link or CTA button than someone that sees a link or button on other platforms. Emails make it simple and easy for consumers to visit your site.

On top of increasing traffic, emails also ensure that your website visits are relevant. People that are receiving your emails are already a part of your marketing funnel, meaning they are interested in your company and its product/service. These are leads that simply need to be nurtured and are more likely to lead to conversions.

To measure ROI of website traffic email campaigns, measure click-through rates (CTR). Click-through rate is a measure of how many people click on the links in your emails.

4. Brand Awareness

The final return that we will take a look at is brand awareness. When you use emails to market, you create relationships with your audience. Email subscriptions typically last a long period of time during which companies can create a positive relationship with their subscriber. When you engage with a consumer consistently and directly, you build trust, and that consumer is more likely to convert into a purchasing customer.

A great idea is to ask users for their birthday when they subscribe to your email. This allows you to send them a fun, personalized birthday email (and maybe even a coupon) that will further foster the relationship your company has with them. 🎂

birthday email
Example of an email that fosters a positive relationship with customers: birthday emails!

Final Words

Email marketing was, and still is, one of the greatest ways to reach your audience. With the right email content, valuable information, and solid marketing goals, you’ll be able to see a favourable ROI for your email marketing campaigns.

Need more help? Check out SH1FT’s Email Marketing Agency.

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