Are Your Email Marketing Campaigns Successful? Learn How to Measure ROI and More

Email marketingIf you’re new to email marketing, it’s vital you understand and learn how to measure email metrics. These metrics reveal whether your campaign did well, or if you need go back and tweak your strategy.

Here’s a quick 101 class on measuring ROI and other key metrics of email marketing.

Let’s suppose you’ve completed your first email marketing campaign, using an email service like MailChimp or Constant Contact. You’re selling widgets on your website and your mailing list comprises of 1,000 names.

After two weeks, you check your campaign report and review your results. Here are a couple of metrics you’ll see:

Open rate
This figure tells you the percentage of people on your list who opened (and hopefully read) your email. Let’s say 100 people ended up opening your email. This is how the open rate is calculated:

Number of opened emails x  100  =   100 x  100  =  10%
Total number of emails sent               1000

Click-through rate (CTR)
The CTR is the percentage of people on your list who clicked on the call-to-action link in your email. In this case, the link goes to your website. Let’s say 50 people clicked-through to your website. This is how the CTR is calculated:

Number of click-through emails x  100  =   50 x  100  =  5%
Total number of emails sent                       1000

Now the goal, in our scenario, is for you to sell widgets. The link included in your marketing emails should be a tagged link. This way you can track what people do when they click on the link to your website. If a person clicks-through on your link and buys a widget, that’s a conversion.

(To learn more about email tracking and link tagging through Google Analytics, check out this thorough article by Justin Cutroni.)

Conversion rate
This tells you the percentage of people on your list who purchased a widget. Let’s say 20 people bought one widget each. This is how the conversion rate is calculated:

Number of emails leading to a purchase x  100  =    20 x  100  =  2%
Total number of emails sent                                      1000

Finally, the most important metric to determine the effectiveness of your email marketing campaign is the return on investment (ROI). This figure tells you how much profit you made for every dollar you spent.

Return on investment (ROI)
Here’s the formula for calculating ROI:

Profit – Cost of email marketing campaign x  100
Cost of email marketing campaign

So let’s suppose you’ve calculated your campaign cost based on your staff hours, design fees and the cost for your email marketing service. It comes up to $2,000.

Each one of your widgets sells for $1,000, with a profit of $250. Since 20 people bought your widgets, you made a profit of $5,000 (20 x $250).

Therefore your ROI is:

$5,000 – $2,000 x  100  =  150%
$2000

This ROI tells you that for every dollar you spent on your email marketing campaign, you made a profit of $1.50.

Now that you understand email marketing metrics, you’ll be able to quickly determine how great (or not so great) your campaign did. Aim for a high ROI!

(Photo credit – RambergMediaImages)

 

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About Joseph Mutidjo

Joseph is a writer at Smallbiztechnology. His first taste of home computing was the Tandy 1000. He continues to be fascinated with how technology makes life easier and more efficient.