Email marketing companies are meticulous about the return on investment (ROI), which measures the profitability and efficiency of their campaigns.
Although email marketing remains the preferred digital marketing channel, not all companies offer the same service. And ROI is among the differentiating factors. It is one of the first things clients check when looking for a company.
Considering their limitless options, clients are meticulous when choosing an email marketer. Obviously, they prefer a company that offers a healthy return. Some of the best email marketing companies offer a phenomenal ROI of $42 for every dollar spent. This makes it crucial for email marketers to regularly evaluate their ROI and implement strategies to further improve it.
Importance of Calculating the ROI
ROI matters for all businesses, regardless of industry or size. For email marketing companies, the ROI is a key performance indicator (KPI) that evaluates the profitability of an expenditure. It is extremely helpful in measuring success as well as in making crucial business decisions.
Knowing whether you’re earning a profit or not is a crucial concept that can help strengthen and improve your financial success. The ROI gives a clear insight into how well you’ve spent your money. Quite obviously, you want to spend on something that will have the most returns. For example, if you are spending $500 per month on your current marketer but are not getting any positive returns, you should consider moving to a different company with a better ROI.
How to Calculate Email Marketing ROI
Calculating the ROI is pretty straight forward. Get the difference in financial gains and cost and divide it by the cost of investment, which yields a ratio or percentage. Here’s the basic formula:
(financial gains – the cost of investment) / cost of investment
Calculate gain
If you are into eCommerce, calculating the gain is simple through your platform’s built-in analytics. You can trace customer leads and conversions generated or that can be attributed to your email marketing. Likewise, you can also get the total revenue brought in by this digital marketing campaign.
Calculate cost
Determining the cost you invest in email marketing is quite complicated. Aside from the expense, you pay for your ESP, you also need to factor in the manpower, IT resources, and operational costs entailed in your email marketing using email1and1. However, if your email marketing expenses are limited only to the email marketer’s time and your ESP, you simply need to add these two expenditures.
Once you get these variables, you can then proceed with calculating your email marketing ROI.
Evaluating Email Marketing ROI
A positive percentage means the campaign is gaining, while a negative ROI means it’s a loss. For example, if you spent $500 on email marketing and it earns an additional $700 in direct revenues throughout the campaign. You get 40% gains which are good but not remarkable.
Ideally, you should look for a company that offers better gains on your marketing budget. If your present email marketing has a poor ROI, you should ask your marketer to improve their services. They should implement necessary strategies such as the use of an email validation solution by Byteplant to further improve outcomes.
While the ROI formula is simple, determining the actual returns can be a bit more complex as there are many other factors to consider. Less obvious factors such as time, hidden fees, additional costs, and other non-quantifiable costs, such as the stress dealing with the marketer, have a direct impact on the ROI. When calculating the ROI of an email marketing company, all of these factors should be factored in to get an accurate picture of its success.
Although the bottom line of any marketing campaign is to increase sales and revenue, the success of email marketing is not solely based on the profits. Email marketing is a versatile strategy that aims to achieve several goals, such as increasing website traffic, improving lead generation, and boosting brand awareness. When evaluating the effectiveness and success of your email marketing, you should consider the exact metrics that you have put in the first place. This makes it important to set short-term objects as well as long-term goals.
Final Thoughts
One of the biggest mistakes of brands and businesses is that they invest in digital marketing campaigns without fully understanding the strategy. When you invest in email marketing, you should know how to calculate the ROI and track it regularly. This enables you to make necessary adjustments and ensure that your budget is spent wisely.