How to Calculate Email Marketing Return on Investment
The claim that email marketing has great return on investment is shouted fairly loudly by anyone who sells email as a service, and for good reason. However for you, that may or may not feel like the case.
So when you come to evaluate your email marketing strategy, or the viability of continuing email – here’s two quick equations for working out your expected return on investment and expected value of subscribers.
Expected Return on Investment (ROI)
Understanding your return on investment will help you evaluate the success of your email campaigns, what you might need to change, and will show you what you need to get a positive return on investment.
(((expected number of clicks)*(expected value of a sale))÷(cost of email)*100 = ROI
You are expecting 50 people to click and purchase a $100 item from an email you send.
This brings your expected sales to $5000. Divide this by your costs (let’s say $750).
(5000÷750)*100 = 667% expected return on investment.
Average Value of Subscribers
Understanding the value of an individual subscriber can help with determining goals for gaining new subscribers, and how much you might be expecting to earn across the year.
(total income from subscribers)÷(total number of subscribers) = average value of subscriber
Over 12 months, you send emails that generate $24,500.
Your subscriber list is 1000 people.
24500/1000 = $24.50 per subscriber.