Return on investment (ROI) refers to the profit you get in return for what you invested. In other words, it is the money you make after applying a well-designed promotional strategy.
Tips on How to Calculate the ROI of Email Marketing
1) The Number of New Customers Acquired Through Email Marketing
The first step is to count the number of customers acquired by email. You can do this by tracking the number of new leads who subscribed to your list.
If you have an eCommerce site, you can track the number of subscribers who actually made a purchase online and how many total sales were made with their subscription.
2) The Amount Spent on Each Acquisition
Next, evaluate how much you are spending to acquire a lead or a sale. To do this, subtract the acquisition cost from the number of their purchases, and your profit is your return.
3) The Average Order Value And Conversion Rate
You must also understand the average order value (AOV) generated by your email clients. This number is a critical metric in calculating your ROI.
By understanding this number, you can calculate the average sale per subscriber acquired, boosting your profits. You can do this by analyzing the AOV of a company and then comparing it to what they spent on a new subscriber to determine how many subscribers have made $100+ in sales with them.
The Conversion rate is the percentage of people who click on your links and buy your products. This value is also significant in calculating email marketing ROI, as it will help you determine how many items are sold as conversion per subscriber.
4) Testing The Time And Frequency of Your Email Campaigns
Testing the email frequency is very important in ROI calculation because you need to test different emails and see which one generates more subscribers. The key is to keep testing and changing the others until you get a clearer picture of what works best.
The timing of your emails can also affect your cash flow. This means that people tend to stop receiving emails after a while. An email marketing service is usually a good decision if the company wants to get the maximum number of subscribers and increase its conversion rate.
5) Make Sure You Include Social Media in Your ROI Calculation
Another factor is how many of your subscribers are also social media users. According to many experts, this number should be much higher than the actual amount of subscribers you have.
The main reason is that people share a lot of information on social media and will be more likely to buy products advertised there. You need to ensure that the share ratio is high enough for the number of subscribers and your desired ROI.
6) Customize Your Conversion Rate Formula
You can make your calculations more accurate by understanding the mathematical formula used to determine the conversion rate. For example, if you want to measure how many sales are made monthly with all email subscribers, you’ll need to do some math. This is because 1 sale/month can be calculated differently depending on who receives your emails.
If you have 100 subscribers, 2 of them will make monthly sales. One conversion occurs for each purchase. If you have 1,000 subscribers, you must divide the total number of purchases by the number of subscribers. According to this example, 4% of your emails will make sales each month.
This way, it is easier for marketers to calculate how many sales per month they get from their email campaigns.
7) Let Your Email Leads Give Feedback
Most email marketing services help you to send emails to your subscribers. This is essential for calculating the return on investment in email marketing, as it will let you know how many subscribers are sending feedback about your campaigns.
As this information is very valuable, collecting as much feedback from your subscribers as possible is advisable. You can ask them questions about the content of your emails or use their responses and continue using them in future campaigns.
8) Understand Why Your ROI Was Successful or Unsuccessful
Finally, you must understand the reasons for a good return on investment in email marketing to use this information to create new promotional strategies.
For example, if your ROI is very low and you get few clicks or sales from your subscribers, you need to analyze why people do not respond. You need to find out if people do not click on your links because they are too difficult to understand or just do not know what to buy.
If you have a low ROI, you need to test and modify your email marketing campaign until you find what works best.
9) Use a Dedicated Server For Your Email Marketing Campaign
When you send emails, use a dedicated email server to prevent your subscribers from receiving spam. If you do not use a dedicated server, the anti-spam protection of your ISP can stop you from sending emails to everyone on your list. This situation can negatively affect your ROI.
10) Keep Your Emails Short And Easy to Read
Even though you want to transmit your information in the clearest way possible, it’s still important to keep your email short and simple. This is because if an email is too long and complicated, there is a risk that subscribers will not read it carefully. Instead, they will just delete it without reading any of it. Therefore, you need to keep your emails short and let subscribers know what you expect from them.
The best way to do this is by providing clear links to the content of your email. This will let subscribers know exactly what they need to do to receive the information.
Moreover, you must make sure your emails are easy to read because if your subscribers are not getting what they need, you can change the structure of your email campaigns and send them differently.
Conclusion
To sum up, many factors contribute to the success of your email marketing campaign. If you want to achieve a good return on investment in email marketing, then you need to follow this guide and ensure that you create a good strategy for your business.
