What Is Email Marketing ROI and How Do You Calculate It?

Email marketing is one of the most, if not the most, cost-effective ways to promote products and services to your target audience. 

Experienced email marketers generate as much as $38 for every $1 spent on email marketing, which makes the return on investment—ROI—an insane 3,800% for this mode of communication. 

ROI is one of the most important metrics for a business. It tells you exactly how successful your marketing efforts are, in terms of how much profit you’re generating from your marketing activities compared to the amount of money you’re spending on advertising. 

Email Marketing Return On Investment

Email marketing ROI is a metric that shows you how fruitful your campaigns are. It gives you a clear view of the efficiency and profitability of your email marketing efforts, represented through percentages. The higher the ROI percentage, the more money you’re making through your email marketing campaigns. 

While this is straightforward when you measure the money spent vs. the money gained from closing sales, email ROI can be a bit more difficult to ascertain when sales conversions aren’t the main goal of your campaign.

The Basic Email ROI Formula

Image source: Omnisend

The trouble with the standard email ROI formula stems from the fact that, unless you’re looking at sales alone, it can be difficult to determine how much you’ve “gained” from a specific campaign. 

An email marketing campaign can have multiple goals. Sales aren’t the only thing you’re gaining from your campaigns. There are a number of different metrics that you should pay attention to if you want to determine the success of your campaign and discern how much value it generated for your business.

Before you can calculate your email marketing ROI, it’s important to set the goal of your campaign and determine which metrics you’ll use to measure its effectiveness.

Here are the metrics you should measure:

1. Email sales

2. Click-through rates

3. Conversion rates

4. Lead acceleration

5. Website traffic

Email Sales

Calculating email ROI based on the number of sales is pretty straightforward. You need to:

1. Take the amount of money you’ve gained

2. Subtract the money you’ve spent on the campaign

3. Divide it by the money spent. 

To get the ROI percentage, multiply that number by 100. 

Let us give you an example. 

To be able to calculate the return on investment on email marketing, you’ll need to use an advanced autoresponder that will track all of the click-through rates and conversions. 

That way, you’ll know exactly which sales resulted from your email campaign and which were the result of your other marketing efforts, including: 

• Content marketing

• SEO

• Paid advertising 

Click-Through Rates

The CTR (click-through rate) shows you how many of the people who opened your email took the desired action and clicked the link inside it. This gives you a clear picture of how effective your email CTAs (calls-to-action) are. 

To calculate the CTR, you’ll want to divide the number of unique clicks with the number of emails delivered, then multiply the result by 100. Unique clicks refer to clicks by different customers. 

You’re not gaining anything if the same person opens the email and clicks the link three times. This rarely happens, but they might want to visit your website again at a later time, and might use the link in the email if they don’t remember the URL.

A good email marketing software will track the unique clicks for you automatically, so you don’t have to worry about getting a skewed CTR percentage. 

The question here is—how will you determine the value of the clicks? The same can be said for every other email marketing metric apart from email-generated sales. While determining the value you’re getting from different types of engagement can be tricky, it’s not impossible.

Conversion Rates

A conversion is not the same thing as a sale. Your CTA can prompt the subscriber to download a case study, schedule a consultation call, request a demo, or read a blog post on your website. You want to track your subscribers' behavior in order to determine how successful you are at guiding them to take a specific action.

In this sense, the conversion doesn’t strictly indicate that you’re converting someone from a lead into a paid customer—it merely suggests that you’re getting them a step closer to making that buying decision. Still, higher conversions inevitably lead to higher email marketing ROI, as leads that have been nurtured and have engaged with your free offers have a much higher likelihood of becoming customers in the future.

To calculate your conversion rates:

• Divide the number of conversions with the number of emails sent

• Multiply the result by 100

Lead Acceleration

Although lead acceleration sounds like a term you’d expect to hear at car races, it’s a rather useful metric in email marketing. 

Lead acceleration shows the speed at which you’re moving the leads through your marketing funnel. The faster you get them to the bottom of the funnel—where they’re one step away from buying—the better. 

If your leads’ journey through the funnel has accelerated, thanks to your email marketing efforts, you can be satisfied with the results of your campaigns. 

Website Traffic

The more traffic you’re driving back to your website, the higher the chances that you’ll generate sales and make a profit. It’s vital to remember that nobody makes a purchase through the email. Even if they click the “buy now” button, they’ll be redirected to your website—the product page or the checkout—and will have to make the purchase there.

This metric doesn’t necessarily tie in with sales, though. Here, you’re looking at how many of your email subscribers visit any page of your website—homepage, particular blog, pricing, etc.—and how often. 

Email marketing software with advanced tracking features can show you exactly how much monthly website traffic you’re generating from your campaigns. If you want more people to circle-back to your website from the emails, the best approach is to send them valuable, relevant information in the form of blog post digests.

These emails can be short—three to five sentences—and briefly present the topic you’re discussing at length in your article. Let’s take this blog post as an example. If we wanted our subscribers to read it, we’d write a short email promoting it, telling them it explains why email ROI matters and how to calculate it.

That’s enough to pique your readers’ interest. If they’re curious about the topic, they’ll click the link and read the article. 

Once the subscribers are back on your website, you’ll have multiple opportunities to convert them through:

• Banners

• CTAs in the article itself

• Pop-ups

Calculating Lead Value

This is where the calculations get a bit tricky, and you might get confused with the math. We’re sure you’re aware of just how valuable leads are for any online business, but expressing their exact value through numbers and percentages can appear like a daunting task.

In reality, there is a simple, straightforward way to calculate the value of a lead:

Lead value = Average sale value x your conversion rate

In essence, you’ll be taking a look at how much money each customer brings to your business on average and how many leads you actually manage to convert into paying customers. 

Let’s say you’re selling a bunch of products, but the average sale value amounts to somewhere around $100. We’ll also assume that for every five leads, you’re getting one customer. The value of each lead in this example would be $100 x 20% (1 customer/5 leads x 100%). With that in mind, the value of your leads would be $20. 

If you’re spending more than $20 on your marketing campaigns, you’re at a net loss. This is where all of the metrics we mentioned above come into play. If you improve your CTR and conversion rates, your average lead value—and therefore, your email marketing ROI—will increase proportionally. 

How to Calculate Your Email Marketing ROI

Email marketing isn’t a guessing game. Now that you know which variables go into the equation, it’s time to talk about how you’re going to measure the exact value of your email marketing spend and gain.

Calculating Your Email Spend

Most people fail to accurately assess just how much money they’re spending on their email marketing efforts. The most common mistake is equating the cost of email marketing with the amount of money you’re paying for the monthly autoresponder subscription.

Apart from the ESP (Email Service Provider), a lot more resources go into creating and launching an email marketing campaign. You cannot overlook the fact that you’re spending both time and money to craft the emails and set up the campaigns. 

Here’s what you need to include in your calculations of the amount of money spent on your campaign:

1. The money spent on email copy

2. The money spend on design

3. ESP subscription fee

Ask yourself how much time it takes you to create an email campaign from scratch. Let’s say the timeline is two weeks—this involves planning, designing the visuals, writing the email copy, A/B testing the emails, and monitoring and tweaking the campaign. 

How many people are working on the campaign? If you have an internal designer and a copywriter, that’s two people at the very least, assuming one of them will actually handle the campaign setup as well. 

According to PayScale, average hourly rates for graphic designers and copywriters are $17.5 and $20, respectively. If a graphic designer can finish the visuals for the campaign in a week, you’re looking at a $700 spend ($17.5 x 8 hours x 5 days). Following the same logic, a copywriter will run you about $1,600 for two weeks’ worth of work. 

On top of that, let’s say you’re paying somewhere around $50/month for an autoresponder, and the campaign will run for one month only. In total, you’re looking at a $2,350 spend. 

Calculating Your Email Gain

With a list of 1,000 subscribers and an average sale value of $100, you’d need to convert leads at a rate of 2,35% to break even. Everything on top of that is pure profit. 

An average email conversion rate is closer to 15%, which goes to show you why email marketing is still the preferred method of advertising for most businesses. 

Your gain with a 15% conversion rate and an average sale of $100 would be $15,000. Applying this to our example, you’d be looking at a staggering ROI of 538% ($15,000 in sales - $2,350 email spend, divided by $2,350, times 100%). 

If the goal of your campaign isn’t to generate sales, but to boost engagement or build brand awareness, the calculation is a bit more complex. Still, rather than using email-generated sales in the equation, you’ll simply be inserting the average lead value. 

The best way to calculate email marketing ROI without having sales to lean on is by utilizing an email marketing software that integrates with Google Analytics. This will allow you to see how many website visits originated from your email marketing campaign, and how many of those visits resulted in sales. 

Using the data Google Analytics provides and the formula we provided in this article, you shouldn’t have a hard time calculating your average lead value and, in turn, your email marketing ROI. 

Why Is Email ROI So Important? 

Seeing all of these calculations, variables, and equations, most people who are new to the world of online marketing would wonder if they should even bother with email ROI in the first place.

The main reason is, of course, being able to accurately determine the profitability of your email marketing efforts. If a campaign isn’t providing the expected results, it might be best to tweak certain elements to improve its performance, or even completely discontinue it. 

There are many different ways to reach your customers and generate sales—paid advertising, search engine marketing, social media marketing, etc. Small businesses, solopreneurs, and affiliates rarely have the budget to utilize all of these marketing channels. You want to opt for the one that nets you the highest profits. 

When it comes to ROI, email marketing stands firmly at the top. 

Average ROI of Different Advertising Methods

Image source: Lyfe Marketing

One thing to keep in mind here is that the image above shows an average ROI on email marketing. In other words, one business might generate $400 for every $1 spent on email marketing, while another might be at a huge net loss. 

That’s why it’s important to calculate your email ROI. While email can be a hugely profitable marketing strategy, you want to know, at all times, whether your campaigns are working and just how much money they’re bringing in. 

It might just turn out that SEO is a smarter investment for your business at this point in time, but instead of guessing, you should leverage data and make smart decisions. If you’re simply running email marketing campaigns without paying any mind to how they’re performing, you’re essentially wasting money. 

In that regard, email ROI should be viewed as an indicator of your campaigns’ performance. You should strive to optimize every aspect of your email marketing—from email subject lines and visuals to the copy and CTAs. 

Shoot Your Email ROI Through The Roof With White-Label Email Software

If you’re looking for powerful yet easy-to-use software that will help you optimize your email marketing efforts and skyrocket your ROI, we have just what you need!

At Sell SaaS, we specialize in creating white-label email marketing software that helps businesses generate thousands of leads and maximize their sales and conversions. The best part about our software is that you can both use and resell it! 

What better way is there to increase your email marketing ROI than to use the same tools that the experts use, and leverage them to create a passive, additional revenue stream? To start reselling, all you need to do is add your company name, logo, and colors to the software. 

There are no reseller licenses you have to purchase or any additional fees. You can literally get started today, completely free. We’ll handle everything on the tech side, so you can fully focus on generating revenue. 

Reselling our powerful email marketing software under your own brand will also help boost your credibility, as your subscribers will perceive you as a professional SaaS company. This will not only give you an opportunity to add a bunch of in-demand products to your offers, but it will also facilitate the sales of your current products and services. 

The best part about becoming a Sell SaaS reseller is that you’ll get to keep between 60% and 80% of each sale, depending on your partner status. You also get to dictate the price you want to resell the software for!

Here are a few of the most popular white-label solutions you can start reselling today for huge profits: