How to Calculate ROI on Email Marketing

How to Calculate ROI on Email Marketing
03 Feb 2021

How to Calculate ROI on Email Marketing

In the past, salespeople used to market the product. Customers used to ask the sales marketer to know about the detail of the product. With the advent of technology and, most important, the internet, marketing methods have also evolved. However, we are living in a time where people get to know the complete detail with the mere touching of few buttons. You can get information about any product being sold anywhere in the world. This means that if you are marketing your product and service, you need more effective methods that can yield better results because now your audience is smarter and more knowledgeable. Not only this, but you also need to know effective ways of measuring the success of any marketing campaign. To get the maximum out of your campaign, you need to provide detailed information, including the technical aspects, details from the manufacturing point of view, durability, and usage. This is only when you can gain the trust of your customer and can qualify for a better ROI.

Everyone makes an effort to gain something in return. The same is the case with email marketing. Businesses started sending email campaigns to their audience to increase their revenue by reaching a vast audience. So, the goal behind any business marketing strategy is to increase return on investment. Email marketing is considered to be generating the maximum return as compared to other marketing efforts. It is estimated that email marketing can generate an ROI of about $44 on an investment of $1. This is really incredible. The problem out there in the business market is that marketers don't know how to calculate the return on investment of their business. There is no single marketing method, and hence determination of ROI from email campaigns is difficult to figure out.

The purpose of any business is the generation of revenue, and this is what everyone is evaluating at the end of the day. Profit is everything that matters. However, for email marketing ROI, there are no specific measuring criteria. The article aims at exploring how can an email marketer measure the ROI of his campaign.

Email marketing ROI

Return on investment is a term that is used to determine the revenue generated by any investment. In other words, in email marketing, ROI refers to the total profit that a marketer gains through email marketing by qualifying leads and conversions.

The basic formula for the calculation of return on investment is

Percentage of ROI = (Gain-spent)/spent

If you are a marketer, you must know that successful marketing means gain exceeds the amount spent, and ROI is always positive. If you want to measure the ROI of your email marketing campaign, you can calculate it by the above formula explained below.

Calculate your email marketing ROI

Let's dive into the detail of measuring the return on investment of email marketing.

Calculate your input

While calculating the ROI of your email marketing campaign, you first need to know what you have spent on your email marketing. This may feel very simple, but actually a very important thing to know for calculating the return on investment. In any marketing campaign, a major chunk of the budget is spent on ESPs, which is a pretty simple calculation. However, considering it alone cannot help you drive the accurate value of ROI because many other expenses cannot be ignored and must be taken into account while measuring the effectiveness of any marketing campaign.

You also cannot ignore the time spent on sending the campaign, and hence it is not easy to evaluate the cost of time spent.

For measuring the input or the amount spent on your campaign, you will need to evaluate the expenses of your Email service providers and the number of hours spent in sending the campaign multiplied with the cost of each hour.

It can be written in an equation form like

Email expenditure= ESPs + (no of hours* cost per hour)

Calculate your output

You have successfully measured the expenditure by the formula mentioned above. Now, you need to calculate the revenue generated by the email marketing campaign. This measurement becomes fairly easy if you market and sell your product online. If your email service provider has integrated Google Analytics, you can trace every visitor's journey and identify which visit has made which purchase. This makes it very easy to locate the sales generated by an email marketing campaign over a specific period.

By calculating each sale by the value generated by that sale and adding all the sales value, you can calculate your marketing campaign's output.

Total revenue= Number of conversions * value of a lead.

Calculate your email marketing ROI

Have you compiled all your data for measuring your email marketing campaign's return on investment?

Suppose you pay $100 to your ESP per month. When calculating for a year, it becomes $1200. Supposeyou have hired one email marketer for this purpose who works on your campaign for 2 hours daily and 5 days a week. It costs you $17 per hour. This amounts to $8840 for a year if he works all the year-round.

Your marketing input for a year becomes

$1200 + $8840 = $10040

However, if your lead is worth $120 and you qualify 250 leads in a year, then your revenue in a year becomes

$120 * 250 = $30,000

This is the output or gain of your email marketing campaign.

You can calculate ROI from it by

($30,000 _ $ 10,040)/10,040 = 198.8%

So, 198.8% is your return on investment in the case discussed above.

Final words

When you do any business, you must check its efficiency to determine whether it is profitable or not. For this purpose, you need to measure the return on investment. The same goes for email marketing. You can calculate your ROI on your own or can seek help from the CBT mass email sender.