What Is The Average ROI For Email Marketing?

Technology has presented us with a variety of digital marketing tools. Today, we have many brands focusing on webinars, social media marketing, and the like. However, many people forget that email marketing is still a viable digital marketing tool, probably the best there is. The question that begs an answer is, “What is the average ROI for email marketing?”

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Answering this question presents you with several reasons why you should invest more in email marketing. This post will show you how to calculate email marketing ROI, the risks of email marketing, and some important email marketing ROI statistics you should know. Let’s dive straight in without further ado.

How Do You Calculate ROI For Email Marketing?

Experts consider email marketing to be the holy grail of customer interaction. The reason is that email marketing produces phenomenal results when you get it right. Before showing you how to calculate ROI for email marketing, let’s explain what it is.

ROI stands for return on investment and it measures the profitability and efficiency of an investment. In the case of email marketing, it measures how profitable your email marketing campaigns are. There is a simple formula to calculate email marketing ROI:

ROI: Gain – Spend/Spend (ROI is always expressed in percentage)

Calculating your email marketing ROI helps you to know if your campaign is healthy or not. It also helps you to figure out if you need to make changes to your approach or methods. Now that we have laid the foundation, let’s go into detail on how to calculate ROI for email marketing.

Step 1: Calculate your spend

The first thing to do when calculating ROI for email marketing is to know how much you are spending on the campaign. While it seems pretty easy, it could have complications.

Of course, the most obvious figure is your ESP(Email Service Provider), which is easy to calculate. The challenge is that you cannot depend on this figure alone to calculate your ROI. You also need to calculate the time each team member puts into the process and then calculate it as an hourly rate. As such,

Total Spend = ESP + team bandwidth

Step 2: Calculate your gain

After calculating your “spend,” your next action is to calculate your gain. This calculation answers the question, “how much does the campaign yield?” If you sell goods online, or have Google Analytics on your dashboard, calculating your gain is pretty easy. The reason is that you can easily track sales that come from emails.

The fastest way to calculate your gain is to calculate each lead’s value. Google Analytics allows you to trace each conversion gotten through your email campaign. Multiply the total conversions by each lead’s value to get how much revenue your email campaign generates.

Step 3: Calculate your ROI

Remember that we discussed the formula for calculating email marketing ROI above? All you need to do here is to input your figures into this formula and you should know your ROI. Here’s an example to help you out.

Imagine you pay $150 per month for your ESP. At the end of a year, it will amount to $1,800. Let’s say your email marketer works on your campaigns 5 days every week for 2 hours at an hourly rate of $15. This will equal $7,200 in a year.

Total Spend = $1,800 + $7,200 = $9,000

If the cost of a lead is $120 and the campaign yields 400 leads in one year, here’s how much you will gain in revenue:

Total gain = $120 x 400 = $48,000

Here’s how to calculate your ROI using the formula above:

Gain – Spend/Spend = ROI

$48,000 – $9,000/$9,000 = 433.33%

Does Email Marketing have the Highest ROI?

While some individuals may consider email marketing to be obsolete because of the arrival of new digital marketing methods, it is the complete opposite. Experts will tell you that email marketing is growing in power and popularity today more than it has ever done.

Over the last decade, we have seen the explosion of an array of digital marketing tools and platforms. One would have thought that marketers would have forgotten about email marketing because of this rise. Interestingly, they seem to always return to email marketing as their go-to digital marketing solution. Would you like to know the reason?

It is because email marketing keeps generating the highest ROI of all the digital marketing platforms. Email marketing specialists say that you generate about $38 for every $1 you spend on email campaigns. When you compare acquiring new customers via Facebook and Twitter to email marketing, the latter is about forty times more effective.

Email Marketing ROI Statistics

Knowledge of email marketing ROI statistics shows you how important this marketing tool is to your digital marketing campaigns. After combing the internet, here are a few important statistics you should know:

There are more than 4 billion daily users of email platforms. That’s more than half of the world’s current population.
More than 77 percent of marketers have experienced an increase in email engagement in the last year.
About 26 percent of marketers send emails more than once every month while 33 percent send emails weekly.
Over 37 percent of all existing brands are investing more in their email budgets.
The most effective email marketing strategy is “subscriber segmentation.”
Smartphone users prefer receiving brand communication in their emails.
You enjoy higher email marketing ROI from testing your emails.
According to Statista, revenue from email marketing should rise to about $11 billion by the end of 2023.
Over 306 billion emails are sent and received daily.
About 64 percent of all small businesses reach their customers through email marketing.
Fridays have the highest email open rates (19 percent) compared to Saturdays with the lowest (17 percent).
The subject lines that generate the most open rates are the ones that engage curiosity and are personalized especially promotional offers.

These are the general email marketing ROI statistics for the last year. The figures keep getting better with each year.

Risks of Email Marketing

Email marketing might offer the best ROI of all the digital marketing methods, but it has a few risks. Risks? Yes, there are a few things that you must be wary about if you will succeed with email marketing. Below are the top risks associated with email marketing:

Spamming

Many businesses feel like they don’t have the time to build email lists organically from scratch. Because of this, they purchase email lists. You should never do this and here is why. Sending emails to individuals that didn’t subscribe to your list is against the CAN-SPAM Act. This action can result in some of these subscribers reporting your emails as spam. If this happens, you will likely have your emails blacklisted or banned. For the best results, we suggest that you build your list from scratch. Add a subscription form to your website and make use of lead magnets to achieve this.

Business reputation

Each time you send a marketing email, your brand’s reputation is on the line. As such, you can destroy all you have been working for by making a simple mistake in your emails. Ensure that you get all your facts right before sending out emails. If the email is to promote a new product or service, make sure that you have done your due diligence ahead. The CAN-SPAM Act has also provided a few guidelines to help you protect your business reputation. Some of them include:

Add a valid physical office address to all emails.
Include an unsubscribe or opt-out button in your emails.
Never make use of deceptive subject lines.
Avoid using misleading or false header information.

Other risks associated with email marketing include:

Data and privacy protection.
Inactive subscribers.
Undelivered emails.
Unresponsive email formats.

All of these risks can result in poor email marketing ROI. Here are a few suggestions to ensure that you get the best results:

Always send emails with a purpose.
Avoid creating emails that are too busy.
Send emails regularly.
Sanitize your email list frequently.
Subscribe to a professional email service provider that suits your purposes.
Craft emails that meet the needs of the recipients.

FAQ

Here are answers to a few frequently asked questions about email marketing ROI:

Does Email Marketing Have The Highest ROI?

Yes, email marketing has the highest ROI of all the digital marketing tools. It generates 40 times the ROI you get from social media platforms, for example.

What is a Good ROI for an Email Marketing Campaign?

On average, email marketing ROI is between $36 and $40 for every dollar spent. There is no hard-and-fast rule regarding ROI for an email marketing campaign, however, it shouldn’t be less than this figure.

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Is Email Marketing Still Effective?

Yes, email marketing is still a very effective digital marketing method. Statistics show that most smartphone users open their emails through their mobile devices. They also prefer to access communication from brands via email. Many brands are increasing how much they spend on email marketing. All these pieces of information point to one fact, email marketing is still very effective.