Return on investment, or ROI, is one of the most important concepts in the world of business. Calculating the return on your investment allows you to focus your energy – and your precious money – on what works while avoiding wasting funds on things that do not generate a real return.
When it comes to email marketing, calculating ROI is an essential part of the process. If you do not take the time to calculate your ROI, you could be wasting money with every marketing campaign and throwing away a chance to generate better returns.
Even though calculating ROI is a relatively straightforward process and very easy to do, studies suggest that many email marketers do not take the time to do it. A recent study by market research firm E-Consultancy found that a full 34 percent of email marketers cannot calculate the ROI of their marketing campaigns.
That is a shame, since those marketers could be missing out on some great opportunities to improve their processes and build their businesses. If you want to keep moving forward with your email marketing campaigns, you need to learn how to calculate your ROI.
How to Calculate Your ROI
We have already seen how important it is for email marketers to keep an eye on ROI. Now it is time to actually calculate the return. In order to effectively calculate your ROI, you will need to keep these six marketing metrics in mind.
- Open rate – calculate the open rate by dividing the number of opened messages by the number of emails you sent (after subtracting any bounces). If you sent 5000 messages, 100 bounced and 2000 were opened, your open rate would be 2000/4900 or just over 40.8%.
- Click-through rate – the click-through rate is calculated by dividing the number of click-throughs by the number of emails delivered to recipients’ inboxes. If those 2000 successfully delivered messages generated 1000 click-throughs, the rate would be 50%.
- Bounce rate – no matter how good your list, not every email will make it through. You will need to account for both hard bounces, which happen when the recipient’s email server does not accept the email, and soft bounces, in which the email gets through the server but the recipient still does not get it. If your 5000 messages generated 100 bounces, the bounce rate would be 100/5000 or 2%.
- Forward rate – this tracks the number of people who use the forward link to pass your message on to others. If 200 of your 2000 recipients forwarded the message, the rate would be 10%.
- Unsubscribe rate – tracking the unsubscribe rate is vital to the success of future campaigns. A high unsubscribe rate could mean you are failing to provide real value and quality content to your recipients. If your 5000 message mailing generated 200 unsubscribe requests, the rate would be 4%.
- Abuse reports – no matter how good your marketing campaigns, your messages will probably be marked as spam at some point. The abuse report statistic tracks how many times your messages generate spam reports.
In order for these metrics to be useful, you will need to establish benchmarks. You can use these benchmarks to compare your own results with what you expect from your campaigns. You can use metrics established by companies like Mail Chimp, but it is important to customize those standards for your own needs.
If your goal was to get five new clients to call you, then your campaign will have been a success if you get those five calls, even if it took 500 emails to get those responses. If open rate is your main concern, a message that prompted the majority of recipients to look at it can be considered a resounding success.
If you are looking for a simple way to calculate the ROI of your next email marketing campaign, you can use an online ROI calculator to do the heavy lifting. ROI calculators like the one at Emailtools can help you keep tabs on your marketing campaigns and keep improving your results.
In order to calculate ROI, insert the total number of your subscribers, the total campaign cost, the response rate and conversion rate you expect and how much a lead/a sale is worth to you.
When you do the calculation, you will see how much ROI can increase/decrease with just a slight change in the conversion and response rates!