Email has long been an essential weapon in the marketer’s arsenal and many businesses have increased their reliance on the channel during the pandemic.
In Validity and the DMA’s Marketer Email Tracker 2021, almost three quarters (72%) of brands reported that email is their preferred and most used channel to engage with customers across the customer journey, compared to 66% who said social media.
While email’s popularity and effectiveness aren’t disputed, calculating exactly how valuable it is as a marketing channel can be tricky. In fact, Validity found that one in three marketers aren’t confident calculating the ROI of email, which presents a significant challenge when it comes to reporting on performance and securing budget and resources ongoing. (This can become a vicious cycle – with less budget and resources, performance is likely to decline).
Industry benchmarks and ROI
To better understand email ROI, let’s look at some industry benchmarks. The average ROI of email is 38:1 and this has continued to increase year on year, even during the pandemic. Meanwhile, the average customer lifetime value – what each subscriber is expected to spend over the course of their time on the sender’s list - is up to $67.
Validity and the DMA’s Email Marketer Tracker shows there has been improved performance across the board for email marketers. Metrics that have improved include mailable list size, delivery rates, open rates and click through rates. Meanwhile, undesirable metrics like opt-out rates and spam complaints have gone down. These statistics aren’t a once-off either. Averaging out over the past three years, the proportion of marketers reporting improved deliverability, open rates, click rates, etc. outrank those reporting declines by 4:1. This is contributing to the improved ROI the vast majority are reporting.
The increasing importance of email is reflected in growing email budgets which have gone up progressively over the years. The average email budget as a percentage of total marketing budget is now over 20%, the first time this has happened in the ten years the DMA’s Email Marketer Tracker has been produced. This is nearly double the low point of 11% which was reported in 2018. (This squeeze was due to the implementation of GDPR in the UK and Europe that year). Looking to the future, the majority of email marketers believe their budgets will continue to increase over the next 12 months.
Challenges in calculating email ROI
While roughly two thirds (71%) of email marketers are confident in their ability to calculate ROI (and this has trended up consistently for several years), this still leaves around 30% who are aren’t confident in their ability. Incidentally, Validity’s research shows that marketers in more senior roles are more likely to be able to calculate ROI, and that this decreases sharply for mid-level and junior roles.
A big challenge in calculating email ROI is attribution. Clicks (which are easy to measure) account for approximately a quarter of actions in response to a compelling email. Recipients are also highly likely to engage with brands that send interesting emails via channels other than email, such as the company website or app, social media, or by making a phone call or even visiting a physical store. This poses significant measurement challenges because all these positive responses that aren’t clicks are less straight forward to measure, yet represent a considerable amount of action taken and can double the reported effectiveness of a campaign.
Another challenge is data quality. While 52% of email marketers cite budget and resources as their primary challenge to email success, this figure has fortunately fallen year on year. Concerns around data (access to data, data visibility, and data quality) are now on a par with budget and resources as the most significant challenge to success. Another concern that has grown significantly is access to technology. This is central to the ROI discussion – we need good quality data and up to date technology to do a great job, but budget and resources will remain a challenge unless we can improve and establish ROI.
When calculating email ROI, by relying on a simple formula such as ‘conversions – investment = ROI’, you’re doing yourself and your efforts a considerable disservice. This is because as discussed earlier, there are lots of positive email outcomes where value can’t be measured by a click. Therefore, the most sophisticated marketers use a number of metrics to calculate ROI, taking into account things like net promoter score (NPS) and acquisition/cost ratios. Some companies also integrate their email platform with their analytics platform in order to gather customer insights and track end-to-end customer experience. This helps them to ascertain when customers are taking positive action such as filling out an online form or phoning the call centre – actions where value can’t be measured by solely monitoring open rates or click throughs.
When calculating ROI, it’s important to also consider complementary metrics, not just those relating to conversion. For example, if an email is designed to encourage attendance at an event, then registrations should be taken into account when calculating ROI.
Steps you can take to move the needle
It might sound obvious, but key to improving your email program’s ROI is ensuring your emails are getting delivered, because for every email not delivered, that’s ROI you’re not generating. During the pandemic we saw a significant rise in global email volumes, and this hasn’t made deliverability any easier, in fact one out of seven emails still fail to achieve inbox placement. Therefore, looking at your business’ email deliverability performance is a good place to start to improve ROI. Think about it this way – if you make a restaurant booking, you expect a confirmation immediately. If it doesn’t arrive, this will likely prompt a webchat or a call to customer service, where the fulfilment cost is significantly higher, ultimately bringing down your ROI.
Marketing automation in the form of triggered emails are incredibly effective in moving the ROI needle. In email programs where 5% of total volume consists of triggered emails, 50% of revenue is generated from these emails. And when it comes to revenue per email and revenue per click, cart abandonment emails generate ten times more revenue than other emails, due to how targeted and relevant they are. Wish list emails also perform very strongly, so if you’re not already, consider including more of these types of messages in your marketing mix.
Channel optimisation is another consideration, as we know only a quarter of responses are clicks. Therefore, businesses would be wise to ensure other mediums such as a phone number to call, option to leave a review, etc. are all prominent within emails, as only three out of five recipients will read below the fold (the point where they need to scroll down), which is where these important links are often found in the footer.
While the extraordinary circumstances of COVID-19 have certainly contributed to email solidifying itself as consumer’s preferred marketing channel, its increased popularity is set to maintain given its proven effectiveness. By taking the time to evaluate and invest in your measurement capabilities, you’ll be setting yourself up for success in the future, as not only will you know where your program can be improved, but you’ll be able to confidently demonstrate your successes, helping to ensure ongoing budget and support from your organisation.