For the new year, Webbula is launching a series of blog posts about email marketing metrics. We have a variety of esteemed authors from the email industry lined up to participate. If you missed January's article, Understanding and Leveraging the Power of Open and Click Reach Rates in Email Marketing by Jeanne Jennings, you can view that here.
If you missed the discussion, watch it here!
A few days back I happened to attend an online discussion on Email where some participants stated that Email was not a conversion tool but just a means to get your customers to the website/app. On the other hand, some participants were of the view that Email can bring genuine conversions from your customers.
In my opinion, Email can be a genuine ROI spinner if you optimize it smartly and know how to track your results. It can be used as a conversion magnet if you put in the due diligence of measuring your investment and campaign performance.
What doesn't get measured, doesn't get managed.
In the email marketing world, that translates to if it doesn’t get tracked then it is not making a difference to your revenue. What I have observed in the past few years with marketers is their inability to track their email performance to the finer details. Engagement and transactions are lauded as signs of progress but are that all that needs to be measured? Higher open rates don’t inform you of the quality of your email program, neither do the high transactions if you are not sure of the source from where they happened.
There are other metrics like I have talked about below which can give you clarity on the actual revenue your email program makes for your business. You can then analyze and make the necessary tweaks to improve them further.
Why is it necessary?
Because email is known as a low-risk high returns channel as it provides the ROI which other marketing channels only dream about. Some statistics for you to ponder:
- For every $1 you spend on email marketing, you can expect $42 in return. (DMA,2019)
- 59% say marketing emails influence their purchase decisions. (Salecycle,2020)
- 31% B2B marketers say that email newsletters are the best way to nurture leads. (Content Marketing Institute)
The last year was poor for marketers who wished to use email marketing solely for revenue or lead generation purposes. You might have prioritized customer engagement and retention over sales, acquisitions. That was how 2020 ripped apart many marketing programs and loyalty marketing evolved as a result.
But 2021 will be different as businesses will resume the old normal of chasing their KPIs(Key performance indicator) and revenue growth. If you have an online business then, getting purchases from your customers, acquiring new customers, and generating leads will get back on your KPI boards for the year.
So, if you work for an online business, you might expect a Jerry Maguire conversation from your marketing manager / CMO / CRO...
Because it's all about the money
But as a marketer your goals could be different depending on your business model. This year you might need to convert leads into customers, you need more subscribers for your newsletter, or you need to get more demo requests for your product (MQLs/SQLs) from your prospects. Your definition of conversion will differ, but the metrics to measure will remain the same.
Following are 5 email metrics you need to track and measure to determine how much value is your email program bringing to the table.
1. Conversion rate
Your campaign's conversion rate is the number of recipients who took the desired action you needed from your CTA. Example: Filling a product demo request form, newsletter signup form, downloading a content asset, purchasing a product from your website/app.
Conversion rate = (Number of people taking action / Total number of emails delivered) * 100
Example: Out of your mailing list of 10,000, if 200 users download your latest digital watch, then the conversion rate is 2%.
The conversion rate depends strictly on your marketing objectives. It is tied very closely with your overall campaign strategy. We always advise the brands we consult on marketing strategies to integrate their website/app analytics with the email provider platform. You can create special UTM codes to track the source of the conversion coming from your email campaign. Therefore, you can determine how many of your subscribers converted from a specific campaign.
Why measure conversions?
If you are an online business like an E-commerce store, SAAS platform, etc. this is the right email metric to measure for your marketing program's success. If your objective is to generate sales from your product offer or get prospects to enquire about your product then measuring your conversion rate is crucial. You will get an indication of how persuasive your email copy is, after measuring how many people clicked and converted. You can optimize your campaigns to get better returns once you track and analyze how they are currently performing with your audience.
2. Email ROI
Your email ROI is the total returns you receive from your email campaigns. The campaigns can be lead nurturing or promotional offers sent to your customers. It can be calculated as (total revenue/total spend ). The way to calculate will differ for different business models.
If you want to calculate your ROI based on sales then you need to consider email engagement, average cost spent by customers, and time taken for a customer to make a purchase decision. If your objective is to gain website traffic then your parameters will be based on user clicks, CTOR, etc. And if it is merely brand popularity then you need to consider your domain authority rank, website traffic, external links for your website, etc.
Example: For an E-commerce brand, say the average transaction per customer is approximately $100 and you receive 500 conversions per year then your email revenue becomes 100X500=$50,000. If you work with an ESP then the spend will be the charges for your total delivered emails plus the charges for campaign creation, technology, and time spent by marketers. Say it is approximately $10,000 per year. Then your email ROI = ($50,000 - $10,000/$10,000)* 100 = 400%.
That’s right...400%. That’s how cost-effective email can be for some businesses.
Your way of calculating this metric could be different with some extra factors added, but the basic premise remains the same.
** The parameters will change depending on your business model.
Why measure email ROI?
Because for the majority of B2B, B2C marketers, this is the holy grail.
Your returns from email should justify the investment made. You need to track it to know if your email program is making enough revenue or is it underperforming and draining your resources. You will have to get deep into the funnel tracking like:
- How many transactions did you generate through your email campaigns per quarter?
- What's the exact revenue you are making through this channel?
These numbers if positive will help you to present your case for increasing investment into Email in your next management meeting. And this doesn't need to be as high as $44:$1 but you need to make sure that your email program is making a difference to your organization's bottom line.
3. Win-back rate
Now, there is already a debate raging on targeting active vs inactive users of your mailing list. My opinion is that a customer could be inactive but that should not stop you from engaging with them till they explicitly say that they don’t need your communication. (abuse complaints, unsubscribes)
This metric will tell you how many of your customers are currently not paying attention to your emails. They could be formerly active now turned inactive or current non-openers. These users need your extra attention to turn them into regular customers. You need to study this segment and develop a different messaging strategy for them.
You may ask, are they important for your conversions? Think of it as every inactive customer as a business opportunity loss. If these users are not engaged, they could turn dormant and at risk of churning out. It is possible to turn those disengaged users into your next loyal customers. All it takes is stringent tracking and a smart email strategy. Don't turn a blind eye to these inactive users as that behavior is leaving a lot of money on the table.
Example: If you have reached out to 25,000 unique subscribers for the last 3 months. Out of these for the last 3 months, 5,000 have not opened your emails at all. Then your inactive ratio is (5000/25,000)*100 = 20%
Naturally, if you have a bigger mailing list your number could be higher. But the intention is to reduce this number by strategizing different content and delivery to engage with them and win them back. Personalization will help you in gaining back these customers by providing them with offers and information they expect from you. It's all part of audience management and your inactive and active users will keep on interchanging according to interest levels during those periods. The aim should be to cater to all the types of customer expectations from your mailing list.
Why measure the win-back rate?
It costs 5 times more to acquire a new customer than to retain a current one. Hence, if you ignore your disengaged customers and just sunset them out without knowing what they need from you, that's a missed opportunity in making more revenue. Something an online brand can’t afford to do in 2021.
The aim is to engage with your list completely and increase the conversions by turning inactive recipients into regular customers. You can track them easily using your list segmentation and checking how many opens, clicks, purchases you have received from this inactive segment post targeting. You can try to calculate how many customers you were able to convert after a brief period of time from the disengaged list to get your win-back rate. This metric should provide you with an update on how your content strategies are panning out.
4. Leads-to-customer conversion rate
This metric is mostly for B2B marketers trying to convert their prospects by getting them to buy their product/service. Example: You have released an important industry benchmark report. Your prospect has downloaded the asset and permitted you to reach out to them via email newsletter.
Now the drip campaigns you will send them will decide on whether this prospect shows interest in getting your product/service. Ideally, you will have to send them automated campaigns based on more information about how your product/service can benefit them. Your call to action here will be on getting them to sign up for a product demo or starting a free trial of your service.
The metric here to measure will be how many clicks does it take for your drips to convert the lead into a customer. How many campaigns did it take you to make the prospect decide on your offering?
The way to calculate this metric will differ depending on business models and how they define leads. For an E-commerce business, the lead-to-customer conversion rate, is the proportion of qualified prospects that result in actual sales. The metric is critical to evaluating the performance of your company's sales funnel.
Leads-to-conversion-rate = (Number of qualified leads / Number of actual sales from those leads) * 100
Track and analyze these metrics every month to optimize your campaigns.
Why measure it?
Many marketers I have observed tend to set ambitious goals regarding leads to customer conversions but then halfway through the process, stop tracking the metrics. You need to be detail-oriented if you want to dig deep into your customer journey and figure out the gaping holes in the process. The extra diligence and analysis keep you a step ahead in achieving your goals. Keep tracking the metrics to understand what content prompts your prospects to turn to you and what keeps them away. This will help you plug those holes in your funnel journey and get better conversions.
5. Customer Life-time value (CLV)
According to the Pareto principle, 80% of revenue comes from 20% of your customers.
The customer life time value provides you with the revenue you can expect from a customer throughout your business relationship.
You need to know what are the actual profits your brand’s loyal customers provide. If it is a substantial amount, then you need to do your best to retain them and get them to do repeat purchases. You will need to keep track of this metric to improve it each year. The longer your customer continues to purchase from your company, the greater the CLV becomes.
A generic formula to calculate it :
Customer value = Average order value of the customer / Average frequency of purchases
Average customer life span = Sum of the customers’ retention spans / Number of customers
CLV = Customer value X Average customer life span.
Your ESP will be able to provide you with a detailed approach on how to calculate this value for your business.
Why measure CLV?
It costs much less to retain your current customers than it does to acquire new ones. Your company will always have a set of loyal customers to cater to as they are the ones who get you a major chunk of your email revenue. Stay loyal to them, roll out the red carpet and make them feel exclusive. Tracking this metric will also inform you if your regular customers are staying with you or leaving to the competition.
If your company wishes to retain highly valuable and loyal customers then it is essential that you learn what CLV is and how to increase it. It will keep you on your toes to better your products and promotions to get them coming back every time.
Tracking and analyzing conversion metrics
We know how much data and excel sheets a marketer has to see through every day to make decisions and look at trends affecting their email program. But, tracking and measuring these conversion metrics is essential for knowing if you are on the right path to achieving your goals or have been sidetracked.
Make the best use of a web/data analytics platform (if your email provider has one, all the better for you). A customer data platform (CDP) can provide a unified view of all your customer interactions in one place. Alternatively, you can also have your ESP provide these analytics on a dashboard for you.
If not, prepare a dashboard where you can get all your conversion data in one place. Google Analytics is crucial for tracking the sources of your leads/website traffic and you can extract data from here to observe the trends affecting your program. You can benchmark your performance by looking at your peers and what results they have been getting. Our recently released email benchmark report 2020 is a comprehensive study of 50bn+ emails sent from Netcore's AI-powered delivery platform. This consists of data collected from 15 major industries. You can easily access this report and compare the email metrics with your’s for cognizance.
Email is often praised for engagement and building customer relationships. But, let’s not forget that it is also a prime source of revenue generation. Many marketers decide on their email objectives and strategize on their campaigns but fail to track the metrics which indicate whether they are achieving their goals or not. You cannot leave the analysis to chance.
Using the above metrics will help you to use email effectively and know how much ROI it is generating for your business. It can also help you to know more about how email is impacting your organization’s goals. Be smart on your marketing objectives and metrics you need to track your conversions. Doing this could have positive repercussions: a spike in your next email marketing budget or making an actual difference in your company's profits.
Have a unified place where you can track all your ROI related data. Benchmark your conversion metrics based on your past performance as well as what your peers can achieve to stay on track.
If you enjoyed this post be sure to look for our future posts in this series on metrics! Sign up for our weekly newsletter to get all the future metrics posts, plus other great content from around the email industry, delivered to your inbox.
About the Author
Tejas Pitkar is a product marketer and also handles Industry Relations at Netcore Solutions. He likes writing blogs, sharing email knowledge, and making thought-provoking videos on all things email on the youtube channel - “For the love of emails”. In his free time, he enjoys hiking, backpacking, working out, reading books, and drinking his favorite Chai.