Email Marketing, Campaign Goals and Measuring the ROI!

If you're going to do email marketing, then to achieve satisfactory results, you must do it properly. This series of articles should have illuminated that high-quality email marketing is challenging. It takes time and effort to get your contact database organized; it takes technology and the ability to use it, it takes creative talent to prepare content, and it requires the ability to set email marketing campaign goals, measure performance against those goals, and to calculate the return on investment.

This is a demanding set of requirements and explains why much email marketing we see for aftermarket office supplies is hopelessly misdirected, ineffective, and a leading contributor to why the strategy has developed a bad reputation for spamming. However, as we've seen, not all email marketing is created equal, and in this, the last of a five-part series, I'm going to focus on how to:

  • Set goals.
  • Measure performance against those goals.
  • She is calculating and measuring the ROI (return on investment).

The series so far:

Introduction: The Importance of an email strategy for office products resellers

Campaign Goals and Calculating the ROI

Let's not forget the headline that email marketing is one of the most cost-effective forms of marketing, capable of generating 4,000% returns (or $40 for every $1 spent). However, suppose you've read my previous blogs in this series, while I've acknowledged that earning these kinds of returns may be possible. In that case, you must be operating among the elite email marketers.

I've evaluated numerous online calculators, and while they may display compelling ROIs of up to 4,000%, most don't take into account that the ROI should be calculated off margin (or better still profit) dollars rather than revenue dollars (which most do) and, nor do they help a marketer understand all the steps required to achieve the ROI results in they indicate.

One-time Campaign Setup Costs:

Never forget the old saying "You get what you pay for" - it applies to potential returns on email marketing investments. If you fail to invest sufficiently in your campaign, you will waste what you spend and fail to get the results you hoped for.

The example I've included below details over $15,000 in one-time setup costs. These costs consist of time, in fact, 260 hours, with each hour invested valued at $60.

Nearly 80% of this time resource investment is required to prepare content offers. This allocation should make intuitive sense as it's associated with time spent preparing content to be offered in exchange for completing a form. If the content (the campaign foundation) is not high enough quality or deemed relevant by the target audience, it will not be opened, clicked, or converted.

Campaign Goals and Conversion Rates:

Remember, your contact database contains leads at different places in the three buyer lifecycle stages of awareness, consideration, and decision. It should be logical for you to expect you'll get different engagement levels from the contacts at various locations in the lifecycle, with higher engagement rates at the consideration and decision stages than at the awareness stage.

Also, as explained in Part 3 of this series, Planning Email Campaigns & Strategy, conversions are the most vital metric to measure. A conversion occurs when a reader fills in a form in exchange for the free content you provide. It should be clear that a transformation cannot happen until an open and a click have already occurred.

If 500 emails are sent to contacts in the awareness stage, and you achieve 20% open, 20% click, and 50% conversion, then the result is ten conversions. (500 x 20% x 20% = 10).

A contact in the awareness stage doesn't know you well, if at all, so it's logical to expect lower engagement rates than in the consideration and decision stages, where a contact has previously engaged with your content.

In the example below, engagement rates (opens, clicks, and conversions) at the consideration and decision stages are higher than at the awareness stage.

Assuming you've already segmented your database according to the lifecycle stages, and you're sending relevant content purposed for these different stages, then 500 contacts at the awareness stage result in 10 conversions, 200 at the consideration stage result in 14 mutations, and 50 at the decision stage results in 7 modifications.

The ten conversions at the awareness stage will move those contacts into the consideration stage, where they will go through the 30/40/60 conversion rates (10 x 30% x 40% x 60% = 1), resulting in one addition to the decision stage, where a new total of 65 (50 + 1 + 14) x 40% x 50% x 70% will result in a total of nine (9) conversions.

Based on this example and the assumptions I've used, the goal of this campaign would be to achieve nine (9) demos to prospective customers.

Email ROI Example 2.png

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Click the button above for the interactive version of the calculator!

The Return on Investment Calculation:

We have established clearly defined goals for conversion rates at the three different lifecycle stages and have calculated the plan for nine (9) product demos; we can finally calculate the projected return on investment.

Certain assumptions have to be made that can usually be established from the historical performance of a business:

  • The average conversion rate from demo to closing (we have assumed 50%)
  • The average gross margin earned per customer (we have taken (25%)
  • The average order size (we have taken $1,000)
  • The middle order frequency (we have taken 12 per year or one per month)
  • The customer lifetime (we have taken an average of 3 years)

Using these assumptions, we know a new customer's lifetime (revenue) value is $36,000, and the lifetime (margin) value is $9,000. With five (5) new customers projected, the return on investment (using gross margin, not revenue, as the determinant) is calculated at 188% - not too shabby, but still a long way from 4,000%!

There are numerous variables affecting the ROI. Obviously, the gross margin percent, the average order size and frequency, and the customer's lifetime value are crucial, but so are the number of contacts and where they are placed in terms of the lifecycle stages. Experienced marketers with an engaged contact database will most likely have higher proportions of contacts in the consideration and decision stages, which will likely lead to higher ROI outcomes.

However, even experienced marketers launching new products must take their contacts through the beginning (awareness) stage before they can expect to achieve the higher conversion rates associated with the consideration and awareness stages. So, whether you are an email marketer starting, or a veteran of numerous campaigns, it will be necessary to move contacts through each of the three stages at all times.

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