How to Calculate and Improve Your Email Marketing ROI

There’s no doubt that email marketing is among the most effective channels to communicate and create connections with your subscribers. But, how profitable is it actually for your business? Are you getting the returns you expected, or are you getting a good number of clicks and considering that as an achievement?

Don’t get us wrong; clicks are micro-steps that can lead to high results, but you need to calculate your email marketing ROI to get a holistic view of your email performance. If calculated correctly, it can give you insights into your email campaigns' performance and budget. ROI can also help you and your team make better decisions on upscaling your email marketing performance.

But, calculating email ROI is not as easy as it sounds. It varies depending upon your goals, email campaigns, and budget. To help you, we’ll share industry benchmarks you can use as reference and 4 super effective ways to improve your email ROI.

Table of contents

• How do you calculate the ROI of email campaigns?
• What is the email marketing ROI by industry?
• How to increase your email marketing ROI
• How does Mailmodo boost your email marketing ROI?
• Wrap Up

How do you calculate the ROI of email campaigns?

Generally, email marketing ROI is calculated by this formula:

(Total revenue from email - Total email costs) / Total email costs = ROI

So, if you spent 1000$ and generated 1100$ revenue, your email marketing ROI will be (1100-1000)/1000*100 = 10%. This means on every dollar you are spending, you get a 10$ return on that.

Simple, right? Not exactly.

Email marketing is a versatile strategy used to achieve several goals - increase brand awareness, drive website traffic, lead nurturing, increase sales and revenue, etc.

There is so much more at work, and it isn’t easy to assess the email performance tangibly. There are many factors you need to know to calculate email ROI accurately, and some of these factors are

• Revenue from email marketing.

• Cost of email marketing tools.

• Cost of in-house email team.

• Cost of outsourced support.

A survey conducted by Litmus revealed that 50% of marketers measure email ROI ‘poorly’, ‘very poorly’, or ‘not at all.'

In contrast, only 25% of companies said they adequately measure ROI from their email efforts.

Although measuring ROI helps marketers validate their efforts, it’s still a challenge for many. But, in simple terms, you can measure the return on your email marketing by analyzing how much you spent and what you got in return.

To ease your pain, let’s discuss the ROI of different industries.

What is the email marketing ROI by industry?

The below data reflects the ROI of different industries through email marketing:

The E-commerce industry tends to have higher ROI than the software industries due to its versatility of products and ability to send creative campaigns to leverage the seasonal trends; holiday offers that lead to higher purchases. Besides, these industries have access to extensive customer data, which they can use to send highly relevant and targeted campaigns.

How to increase your email marketing ROI

Here we have listed 4 actionable ways to help you exponentially increase your email marketing ROI:

1. Use automation to send personalized emails

Automation is becoming more and more crucial to launching relevant email campaigns to capture the right audience when they’re most active. You can integrate your web and email analytics with email automation software and set up triggered emails to be sent based on user's behavior, preferences, and purchasing history.

As Google announced disabling third-party cookies by the end of 2023, emails can become an essential source of collecting first-party data through behavioral marketing. Using analytics you can see when and where users clicked most, which product they checked out, and use this data to send hyper-personalized targeted messages. Such targeted emails will be more relevant and valuable, and thus, chances of conversions are higher with such emails.

Statistics also support that automated personalized emails can help you generate higher ROI:

• 91% of consumers are more likely to shop with brands that recognize, remember, and provide relevant offers and recommendations. - Accenture, Pulse Check Report 2018

• 72% of consumers said they only engage with personalized messaging. - SmarterHQ

The increased use of update and triggered messages also highlights the increased use of automation to provide timely, relevant content to customers without the need for marketers to generate a new campaign or message.

2. Clean your email list regularly

You are wasting your money, time, and efforts by sending emails to win over the unengaged users. Not to say, impacting your deliverability rate too.

As you know, quality wins over quantity, so it's the number of active and engaged users that will drive your email ROI, not the number of emails you are sending to your entire email list.

So, ensure that you clean your email list by removing inactive users or those who have unsubscribed. To avoid sending emails to such users, you can add them to a suppression list which your ESPs will help you with.

3. Thoroughly test your emails

You can risk your hard work, time, and efforts due to typos or missing alt text. This can impact your email ROI. Therefore, you need to thoroughly test your email to avoid deliverability issues or a bad user experience. Here are some of the tests you should run:

• Spam tests

To even think of getting your emails opened, they need to get delivered to the user’s inbox. But what if emails get trapped in the spam folders?

To avoid such unjust scenarios, you should run a spam test to check any spam-triggered issues such as

• the use of spam trigger words such as jACKPOT, 100% FREE, CLAIM NOW!, etc.

• Low IP and domain reputation score.

• Blacklisted IP address.

There are many spam checker tools available you can use to ensure that emails are spam-free. Some of the most widely used tools are Google Postmaster, Mail genius, and Mail tester.

• Preview emails

Almost every email service provider (ESP) allows you to preview your email before hitting the send button. You should not ignore this as even if you think you wrote a foolproof, you never know when some error caught your eyes. Thus, go through your emails entirely - check for typos, design, formatting, etc.

Besides, to avoid rendering issues by the user’s email provider, it’s best to add a fallback version. So, for example, if an email client doesn’t support a carousel in an email, you can add static images as a fallback. Fallbacks ensure that users can access and engage with your email without rendering issues.

• A/B test

Email marketing is not a guess-and-win game. Your subscribers have entrusted you with getting relevant emails that resonate with them and give them value in return for their time. Thus, even if you are in slight doubt about CTA choices, layout choices, or even color combination choices, you should run an a/b test to reach a data-driven decision.

Simply create two slightly different variations of an email - maybe change the CTA copy and send them to two different segments simultaneously. Run the test for adequate time to see which email performed well and use that email for future email campaigns.

4. Make emails responsive

As more and more people use their mobile to read emails, your emails must be accessible and readable on these devices because 71.6% of consumers will delete emails if they don’t look good on mobile. Responsive email design also helps you get higher engagement.

Weird Fish, a clothing company, saw a 10% increase in the CTR to its website by adopting responsive email templates.

Another interesting case study comes from Deckers Brands, a footwear manufacturer that owns several brands. When they realized that between 35% and 65% of its subscribers were opening their email on mobile devices, they ran an A/B test with its Tsubo brand.

Source: Google

The results were impressive - a 10% increase in click-through rates and a 9% increase in mobile opens on responsive emails. As a result, they now use responsive mail templates for all their brands.

These case studies clarify the importance of designing responsive email to get a higher ROI on your email campaigns. To know the ins and outs of making emails responsive, you can read our guide on creating responsive emails to enhance customer experience.

Related guide: 19 Email Marketing Best Practices to Follow in 2022

How does Mailmodo boost your email marketing ROI?

Mailmodo can help you generate higher ROI in the following ways:

• Preview your emails

After you create your email, you can preview it to check for any errors and rendering issues. The preview features also allow you to check your email's AMP and HTML versions on both desktop and mobile. This feature is helpful to check the responsiveness of your email templates.

Besides, Mailmodo automatically sends a fallback version (HTML email) if the mail providers don't support AMP emails. As you can see, the reader will see a redirect link instead of a form if their mail provider doesn't support AMP emails.

• All-in-one email analytics

The analytics dashboard gives you an extensive view of your email performance. Such an overview helps you gauge which campaign is performing and which might be costing you money without driving any substantial ROI.

• Send interactive AMP emails

The USP of Mailmodo is that it allows you to send AMP email, which is an interactive email framework launched by Google in 2019.

AMP allows you to create a website-like experience within the email, thus, reducing the painful redirects users need to complete an action. Such functionality results in higher conversions and thus boosts your email ROI.

Razorpay, a full-stack finance provider, increased its survey response by 257% using the AMP NPS survey and an 87% increase in lead conversion rate. The AMP survey facilitated filling out the feedback within their email, thus reducing the redirects.

Related guide: A Comprehensive Guide to Interactive Emails in 2022

Wrap Up

Yes, email marketing ROI can be tricky and difficult to measure, but it is the most insightful metric. As email is the higher revenue-generating channel, you might lose on many improvements if you are not enhancing email ROI.

With the right data, you can segment and personalize emails and automate the entire process to reap the benefits of email marketing and drive higher ROI for your business. Besides, AMP emails bring interactivity within the email, breaking the traditional myths about email being boring or right. So, why not leverage it to improve your return on investment!