One of the most important aspects of leading a mass emailing campaign is determining your Return On Investment, or ROI. Good marketers know that email marketing to unlimited subscribers is great, but results are what matter, and division managers and executives constantly ask “how much are we spending on that?” It’s important to know not only how much you’re spending, but how much you’re getting back in revenue, and the ratio of those two components make up ROI.
THE FORMULA
((Email marketing revenue/email marketing spend)) / (Email marketing spend) = ROI
This is fairly intuitive. If you spent $1 on a marketing campaign which yielded $11 in revenues, your ROI would equal (11-1)/1 = 10. For every dollar you spend on the campaign, you will get $10 back. This is usually expressed as a percentage – in this case, 1000%. Incidentally, this figure is not atypical for email marketing campaigns and is a big reason why email marketing remains one of the most profitable areas of a company’s marketing budget.
HOW TO GET THE DATA
The first and easiest piece of the puzzle is determining costs. I suggest looking at a broad horizon when estimating these things – initiative by initiative is great, but quarterly or yearly figures at minimum likely provide more accurate results. Whichever timeline you choose, assign costs based on the total hours the marketing team spent on email marketing multiplied by the cost per hour of each employee. Then add any fixed costs – the cost of software subscriptions, for example, or the costs incurred in making any sales. Shipping or retail employees can be added here as well. All of these added together should be a good estimate of your email marketing spend.
Email marketing revenue is a little more difficult to obtain. In addition to your unlimited email marketing software, you’ll want to invest in a good tracking program. Google Analytics for example can track the links provided in your emails as well as use cookies to determine which emails results in site visits and ultimately sales. You can then determine probabilities based on this number. For example, if 40% of customers who sign up for specialized emails purchase a certain product on your website, you can approximate expected revenue by multiplying 40% by the number of customers who sign up for specialized emails and by the cost of the certain purchased product.
THE FINAL RESULT
Once you’ve calculated your top-line ROI, start tracking it for your email list subgroups. You can then tailor your emails to better serve certain groups of customers. You’ll be getting more bang for your email marketing buck in no time!