A recent econsultancy.com study showed that 75% of companies have rated email as ‘excellent’ or ‘good’ for ROI, yet less than half of them know how to calculate this metric. As perhaps the most consistent marketing channel in an organizations mix, the price of using an email marketing service is relatively low. For this article, we will calculate the ROI of a single monthly email blast to 2,000 contacts.
$35.00 - Average monthly service fee from an email marketing service provider
$100.00 – If using a contract designer’s time to create artwork for the email template and landing page (assuming one hour of work)
$25.00 - Marketing manager’s time to craft message, target contacts and send email (assuming one hour of work at a salary of $50,000/year)
Not taking into consideration other intangibles, on a very simple level we could say the investment to send one email blast in a month is $160.
Now we will assume we achieve 100% deliverability and a 30% open rate. This gives us 600 recipients who read our message. Let’s assume our message is compelling enough to garner a 20% click rate sending 120 contacts to a landing page that urges the consumer to purchase our products. The average price of our products is $200 and our average conversion rate for that landing page is 5%. Of the 120 contacts that go to our landing page, six of them will purchase. At $200 per transaction we achieve $1,200 in revenue. We spent $160 to create and send our message and received $1,200 in revenue – that’s a return on investment of $7.50 per every dollar spent – pretty darn good.
Why is this important? This simple example demonstrates a successful email marketing campaign and gives you a model to plug in your variable numbers to know what type of open rate, click rate and conversion rate you need to achieve your forecasted sales goals.