In B2B marketing, measuring your email campaign’s success is crucial to determine how your efforts are paying off. Understanding how to calculate the ROI of email marketing is important to prove these efforts.
The email campaign ROI is a true performance indicator that shows the effectiveness and profitability of your email marketing campaigns. In this blog post, we will discuss how to calculate email marketing ROI, why it matters to focus on email conversions and look out for the various factors that can impact your email’s ROI.
The Simple Formula for Email Marketing ROI
The Data and Marketing Association highlights an impressive ROI from email marketing, ranging between $35 and $40 for every dollar invested. But how is this figure derived?
To measure your email marketing ROI, you just require these two numbers:
- Email-related expenditures
- Revenue generated from emails
To calculate the profit, subtract the email costs from the revenue generated, and divide this by the email costs.
Formula- Total revenue from email – Total email costs) / Total email costs x 100 = ROI
Let’s say a company has launched an email marketing campaign and wants to calculate the Return on Investment (ROI) for it.
Overall ROI Calculation
- Total Revenue from Email Campaign: $10,000
- Total Email Costs: $2,000
An alternative method involves dividing your total revenue by the number of emails sent, giving you the revenue per email. Further, you can calculate the cost per email and determine the ROI per email. This approach takes into account all emails sent within a particular timeframe.
What is Email Conversion?
An email conversion happens when the recipient takes the desired action after reading your email. This conversion doesn’t necessarily have to include a monetary transaction. There are emails that include various types of content (like blogs, newsletters, etc), requesting to vote in polls and take surveys, asking for reviews, requesting people to download gated content, and encouraging subscribers to revisit their midway abandoned actions (retargeting) can qualify as conversion.
Factors that Impact the ROI
Building a robust email subscriber list is a big win, but turning these subscribers into loyal customers requires some smart moves. Below are some factors that can impact your email ROI:
- Industry: Different industries have their own unique email marketing landscapes. For example, e-commerce may see higher open rates than B2B industries, which can affect ROI.
- Email List Size: A larger email list usually means a wider reach, potentially leading to increased ROI. However, it’s important to focus on the quality of data and email content rather than the quantity of contacts in the list and bombarding your audience with unnecessary content.
- Verified Email Addresses: Having accurate email addresses improves deliverability, reduces bounce rates, and improves your chances of reaching the recipient’s inbox.
- Email Campaign Frequency: Sending too many emails can bother subscribers, and sending too few might not keep them engaged. It’s important to find the right balance.
- Email Segmentation: Dividing your audience into smaller groups based on shared characteristics helps you send more targeted & relevant emails.
- Content Value: Providing valuable content that resonates with your audience builds trust, encourages them to engage, and drives conversions.
- Personalization: Tailoring email content to individual preferences or addressing their specific needs can boost open rates.
By digging into these factors and using the right strategies, you can make big improvements to your email ROI and drive some business growth.
Top 5 Common Attribution Models for Email Programs
Attribution models help businesses understand the impact of their email marketing efforts by assigning credit to various touchpoints during the buyer journey.
These models are vital because they help you understand which campaigns or strategies are most effective in driving user engagement, customer retention, and revenue. They can also help you understand which of your traffic sources are delivering value and how to allocate marketing resources successfully.
Consider a situation where a customer interacts with your brand through different channels before making a purchase. Their customer journey may involve clicking on your Google ad, Instagram ad, and landing page before making the purchase. Determining which touchpoint is most responsible for the conversion is the core challenge addressed by these models.
First-click Attribution
In the First-click attribution Model, all the credit for sale goes to the first marketing channel where the customer interacted.
Imagine a user who wants to buy a new pair of running shoes.
First, he searches for ‘’best running shoes’’ on Google and clicks on an ad for your online store. As per the first-click attribution model, the complete credit for the potential purchase goes to the Search Ad because it is the first interaction of the user.
A few days later, the user is browsing Instagram and sees an ad for the same running shoes. Hereafter, he clicks on the ad and comes to your website once again.
After spending some time browsing, they added a pair of shoes to the cart and made the purchase. The conversion credit goes 100% to the search ad, even though Instagram and landing pages were also included in the process. This is because the search ad was the first touch point for the user.
Last-click Attribution
As the term suggests, this model attributes all the credit to the final click a user made. Last-Click Attribution is the exact opposite of First-Click Attribution.
In the above scenario where the user purchased the new pair, under the Last-Click Attribution model, the landing page will receive 100% of the credit for the conversion because it was the last touchpoint before the user made the purchase.
Linear Attribution
This model gives each step of a customer’s journey equal credit for the purchase.
For the above scenario, under Linear Attribution, each touchpoint (Search Ad, Instagram, and Landing Page) would receive 33.33% credit for the conversion. This model assumes that all interactions are equally important in influencing the purchase decision.
Position-based attribution
Position-based attribution is a multi-touch attribution model that gives different weights of credit to marketing touchpoints at the beginning, middle, and end of the customer’s journey. It’s a set of rules that assigns a percentage of credit to each touchpoint, with 40% assigned to the first and last touchpoints & 20% to the middle touchpoints. The goal is to ensure that the touchpoints that have the most influence on customer decisions and contribute the most value receive the appropriate credit.
Using “running shoe” purchase journey:
- Search Ad: Gets 40% of the credit as the first touchpoint.
- Instagram Ad: Gets 20% of the credit as the middle touchpoint.
- Landing Page: Gets 40% of the credit as the last touchpoint.
Time-decay Attribution
This model assigns more credit to customer interactions that happen closer to the conversion goal. It also identifies that most recent interactions are most influential in a customer’s decision to make a purchase, and thus reduces the credit given to previous interactions.
Using user’s running shoe purchase journey:
- Search Ad: Gets the least credit as it was the earliest interaction.
- Instagram Ad: Receives more credit than the Search Ad but less than the Landing Page.
- Landing Page: Gets the most credit as it was the final interaction before the purchase.
Challenges You Might Face While Measuring the ROI of Email Campaigns
Calculating email ROI can be tricky due to a few complexities. Let’s break it down:
Data tracking limitations
Attribution models require reliable data tracking efforts to keep an eye on customer interactions as well as revenue generation. Advanced analytics help but the quality of data generated is not quality refined. Organizations with inadequate data infrastructure might struggle with accurate ROI calculations.
Assigning value to conversions
It’s quite simple to measure conversion value in transactional scenarios with a clear amount per sale. However, figuring out conversion value becomes trickier in B2B situations. One solution is to use customer lifetime value (CLTV) to estimate the total revenue generated by a customer. This approach provides valuable long-term insights rather than focusing solely on immediate monetary impact.
Understanding these complexities is key for marketers aiming to accurately measure email ROI and effectively allocate resources.
Conclusion
It’s essential to calculate the ROI of email marketing to get the most out of your investment. By understanding attribution models and the factors that impact email performance, you can make decisions to enhance your campaigns. Overcoming challenges like tracking data and assigning value to conversions is essential to get a clear view of how your email campaigns are performing.
To unlock the full potential of your email marketing campaigns and drive significant ROI, consider partnering with Marketboats. Our B2B lead generation experts can help you optimize your email strategy, improve lead quality, and ultimately boost your revenue. Book a consultation today to learn more about how Marketboats can improve your email marketing efforts.
