Email Marketing ROI: How To Calculate and Use for Strategic Planning

What is the ROI of email marketing

Email marketing ROI is a measure of how much profit your email campaign brings to your business (or whether you’re spending more than getting back). It compares the revenue and the costs of your marketing efforts.

Each marketing channel has a different ROI. In this article, we won’t explain social media ROI or Google Ads ROI, for example. We’ll focus on email marketing ROI. Why? Because it can be the most impactful channel, with an average ROI of over 3500%!

ROI varies by industry, brand, and time, and not everyone gets these flashy numbers. Great email marketing ROI is built upon months, sometimes years, of good work with content and strategy to grow an exceptional list of subscribers. The journey starts with calculating your current results and moving forward from there.

Why measure email marketing ROI

The myth about email marketing success is that “you just have to send emails frequently.” But how do you know if your subscribers are enjoying the content and not marking it as spam? How do you know if your precious invested dollars will eventually return in the form of website or offline purchases?

When you measure email marketing ROI, you’ll know not only your revenue but how effective your campaign is, for example:

• With A/B testing, you can compare the ROI of emails with different copies or images to check which performs better.
• ROI of campaigns aimed at specific segments of your subscribership can show how effectively you divide the audience and which groups to focus your attention on. 
• A lower ROI combined with a high open rate can indicate that your campaigns hit the right way, but you may need to push offers or try to highlight sales.

Check out our article on marketing return on investment for even more compelling reasons to track this metric.

How to calculate the email marketing ROI

Let’s learn how to calculate email marketing ROI. The basic formula:

Spent here refers to all the costs associated with running your email marketing program: cost of tools, team salaries, etc.

For example: if you spent 2 dollars on a campaign that brought 10 dollars of revenue, your ROI was 400%.

That is, of course, a simplification. Some things to keep in mind when applying the ROI formula:

• The formula for email marketing ROI is the same for business or product ROI, you just have to include only marketing spending.
• In many cases, it’s hard to differentiate sales from email marketing, ads, or organic traffic. You can use link tracking in your email marketing software and special coupons to figure it out. 
• Be aware of the time frame. Sometimes an email marketing campaign performs well only because of previous work to boost engagement or teasers. Be sure to include this in your marketing investment analysis. 

To simplify the calculations and measure your email marketing performance, you can use the ROI calculators online. Check out Selzy’s Marketing ROI Calculator, where you can easily calculate your ROI based on revenue and account for profit margin and cost price.

Tools and resources for email marketing ROI calculation

As we have seen, there are a lot of components in email marketing ROI calculation, and every metric can affect it in some way. The good news is that there are tools to help you keep track of everything:

• ROI calculation templates and spreadsheets. Once you get the hang of ROI calculation, you can create your own spreadsheet to fill in the blanks each month or quarter. If you need help setting it up, you can download a marketing ROI spreadsheet on the internet. 
• Third-party analytics and reporting tools. You can integrate your email marketing platform with third-party tools such as Pipedrive or Hubspot, to get all email marketing and website traffic metrics on the same page. Or integrate shops, like Shopify or WooCommerce, to track your customers from email to sale. 
• Email marketing platforms with built-in analytics. Platforms like Selzy can serve metrics on a silver platter to you. 😉 From basic data like open rate and CTR to aggregated reports, it has all. Using built-in analytics, you can look at your email campaigns holistically.

Factors influencing email marketing ROI

Many factors determine email marketing ROI:

Campaign objectives and KPIs. As the saying goes, “What you measure is what you get.” The campaign objectives and KPIs have a huge influence on ROI. A sales campaign should get a better ROI than an awareness campaign, for example. If you’re investing heavily to get new subscriptions or paying for feedback (with coupons or cashback), your ROI can even become negative for a period.  

But even with a smaller ROI, a campaign without monetary objectives isn’t a failure. Understand what metrics to track for each type whether a content newsletter or sales announcement and learn how to play the long game, with each campaign being a step toward the email marketing success of your company. Campaigns with objectives unrelated to money can lower your ROI in the short term but may increase it in the long run. 

Target audience. Campaigns aimed at different segments can yield different ROI results, so it may be useful to look at the metric for each important subscriber group. You may find that the biggest ROI is associated with your email campaigns targeting dormant subscribers, for example, and then put more effort into it.

Time frame. The usual way to measure email marketing ROI is aggregating by time, not an individual email. Depending on your objectives, you should select a whole month or more time; group every dollar spent on those campaigns, and compare it with the revenue. However, ROI might be vastly different from one month to another. For example, it may spike in the holiday sales season and decrease in other months. We also recommend you calculate yearly ROI as a great overview of your email marketing strategy as a whole. 

Business industry. You should create your own benchmarks over time, to increase your ROI gradually and to understand how your actions and seasons influence the earnings. However, the industry your business is in can also affect your email marketing ROI, so it’s good to know the benchmarks.

In a survey of over 2,000 marketing professionals, Litmus found out that the average email marketing ROI is $36 in revenue for every $1 invested.

For specific industries, $1 invested brings:

• $32 of revenue for media, publishing, events, sports, and entertainment. 
• $36 of revenue for software and technology. 
• $42 of revenue for marketing, PR, and advertising services. 
• $45 of revenue for retail, e-commerce, and consumer goods. 

How to increase email marketing ROI

Every business and marketing metric you improve will likely increase your email marketing ROI. Here are some effective tips that will move the needle for you:

Set clear objectives 

Clear goals help you stay on track and analyze which strategies work and which need to be changed. If your campaigns have explicit goals, you can also combine ones that improve the results in the long run with those that have short-term effects.

Here are some clear goals, for example:

• “I want to reach new subscribers and double my list size by the end of the year.”
• “I want to increase the number of people buying my products by 5% next quarter.”
• “I want to increase the average ticket per purchase by 10%.”

In the first example, the objective is to find new subscribers. To achieve it, you will have to invest, maybe buy ads, book interviews, or write for other resources to promote your email program. This kind of campaign doesn’t get a good ROI in the short term.  

In the second example, you convert subscribers into buyers, perhaps with special offers or coupons that might reduce your profit margin.

The third one is not about finding new clients, but changing your copy or promotions to get your customers to add more products to their cart or to select premium services and goods. 

Segment your audience

Not every product in your catalog is right for every one of your audience members. Segment your audience and send emails about relevant products to your customers. You can segment by generation (for example, create a separate email marketing strategy for millennials), past purchases, behavior, etc. It’s an easy way to make them love your content and want to buy your products or use your services. 

Segmenting is key to improving ROI. Let’s think about a simple example: In a list of 20,000 customers, a quarter of them are men. You want to sell boxers.  

• In campaign A, you email the whole list (20,000 emails in total), spend $100, and make $800. Your ROI is 700%.
• In campaign B, you segment the audience and email only men (5,000 emails), spend $25, and make $750. Your ROI is 2900%!

Personalize

Once you segment your audience, you can be very specific! Make your client feel special with simple techniques like using their name in the copy or with more advanced personalization per customer profile. Think about it: an email with “Hey, Maria, happy birthday!” sounds warmer and will get better results than “Dear customer…” 

Automate your messages

The biggest advantage of automation is that the cost is diluted over time. Automation has a higher cost to set up, test, and create, but it keeps working for you automatically for a long time.

You can automate some simple emails like birthdays or welcome emails, but you can also automate more complex scenarios closely linked to ROI like abandoned cart emails, for example.

A/B test

When you test different variations of the same campaign, you can check what performs better according to your objectives. Over time, these little adjustments go a long way to improve the ROI of your whole email marketing program. For some campaigns, you can compare ROI directly, but usually, you’ll get to compare an analogous metric like CTR or open rate.

Manage your list

By now you have already figured out that sending emails to people who don’t buy or read is money thrown off the window. That’s why the final hint to increase ROI is to prune your lists. Automate re-engagement emails (an email sent to clients who didn’t click or read the last X messages), clean bounced email addresses frequently, and segment your audience into groups for frequent contact and groups that you can email occasionally. Good list management saves money by reducing your list size, and it also improves deliverability.

Key metrics that influence email marketing ROI

To boost your ROI, you need to improve your marketing results overall. That’s why actions to advance specific metrics will also influence your return on investment.

Open rate

Open rate is the percentage of people who opened your email. If you send a campaign to five people, and all of them open it, that’s 100%! The open rate is not a very reliable metric since some email providers (like Apple) block this kind of tracking to protect user privacy.

To have your customer open your email is the first step, only then can they enjoy your content, visit your website, and make a purchase. To increase the open rate, think about high-quality lists, compelling subject lines, sender reputation, and content.

Click-through rate (CTR)

Click-through rate is the percentage of clicks your email marketing campaign gets relative to the number of all successfully delivered emails. Every good email marketing platform provides this information using tracked links. More clicks relate to more traffic to your site and more purchases!

Conversion rate

Email marketing conversion rate is very related to ROI since it measures the percentage of people who received the email and completed a desired action, which can be a purchase, a website or landing page visit, filling out a form, or other. It is one of the most relevant KPIs to a marketing plan. The difference between conversion rate and ROI is that while the former measures the number of people who took an action, ROI is related to profit.

Revenue per email sent

Revenue per email is another way to track your ROI, or a step ahead that can reveal some hidden truths. To calculate revenue per email, you divide the total revenue from a marketing campaign by the total number of emails sent.

For example, sometimes your ROI is stable, but you’re emailing more people, so the revenue per email sent is lower than it was before. Inversely, with good segmentation, you can send fewer email campaigns but get higher revenue per email sent and possibly higher ROI as well.

Cost per email sent

To calculate this metric, you need to divide your email marketing spending over a period of time by the number of emails you send in the same time frame.c

The cost per email sent is a key component of ROI since it is part of email marketing expenses. Some email marketing providers charge per email, some have tier limits, some charge per size of the subscriber list, and some by company size. You also need to include your marketing team costs, in-house or hired, used to write the content, design, and track your emails. The bigger the list size, the more diluted the costs.

For example, if each email is created or sent manually by the team, the cost per email can skyrocket. The best solution is email marketing automation.

Subscriber growth rate

Subscriber growth rate is the growth of your list as a percentage over time, for example, “2% per month.” In a healthy marketing environment, your list should grow and get new subscribers organically. With a bigger list, you can expect a better ROI.

You can push this rate with specific marketing efforts to get new subscribers, such as campaigns where new subscribers get benefits (like coupons or raffle tickets).

Conclusion: ROI is the most important metric for marketers

Return on Investment is the metric every marketer justifies their job with. It is the only one that checks if the efforts are worth the money invested by the company.

And since we know that ROI for email marketing can average $36 per dollar invested, email marketing can be the most successful marketing channel, beating social media and online ads!

As a key metric, to boost your ROI, you can work on every other metric. You should also:

• Set clear goals.
• Check whether you’re segmenting your audience right.
• Personalize your content.
• Automate.
• A/B test.
• Manage your list.