Email Marketing Formulas and Key Indicators
By Mike O'Brien | September 14, 2017
Whether or not you’re leveraging email, let’s review some valuable email marketing formulas as described in the book, Email Marketing By the Numbers: How to Use the World’s Greatest Marketing Tool to Take Any Organization to the Next Level. An evergreen business and marketing favorite, the book is full of use cases, industry leader interviews, and detailed how-tos, should you want to delve a little deeper after reading this article.
Email Marketing Key Indicators:
- Deliverability: If you recognize the value of a subscriber, and your emails aren’t actually getting delivered, you can figure out how much money you’re losing when the emails never make it to the inbox. Clients are always amazed when they move to a reputable ESP and see how much their deliverability increases. Some of it is about the technology and some of it is about the trust that ISPs have with ESPs.
- Open Rate: This number is not as significant as it has been in years past. An “open” is registered when an image is requested from the server. Spammers used this method to validate authentic email addresses; as a result, most email client software, and even online email clients, are now blocking images by default so the request doesn’t go through – great for fighting spam, but not great for email open rate calculations.
- CTR: This is now the preeminent indicator of subscriber interest. If you were a car salesman, it’s equivalent to actually getting someone to take a test drive. They are interested…but did they buy or bail?
- Conversion Rate: This is the number of unique email addresses that “bought.” For a retailer, this is pretty simple; it can be the actual dollar amount resulting in a website purchase. For other businesses, a conversion could be different: It might be how many people subscribed to your podcast, if that’s the call to action. Your conversion rate will tell you how well you are “selling” your call to action.
- Unsubscribe Rate: This is the number of unique email addresses that “bailed.” They didn’t have an interest in your message, so they unsubscribed. Unsubscribe rates are key to recognizing whether or not your content sucks. Just as important, though, is calculating when people unsubscribe. Perhaps it’s on the second email, or perhaps it’s the f0urth. You need to figure that out to ensure you provide some great content, especially at the danger points when people are more likely to unsubscribe. You can find this by doing some Retention Analysis.
- Viral Rate: Hopefully you’ve got some viral component to your emails where they can be forwarded and measured. Don’t dismiss your viral rate. It’s a great way to acquire subscribers who stick, as well as add additional revenue to a great campaign. You have to make sure that your method for forwarding is simple, though.
- ROMI: You have to figure out whether or not you have a great business and whether or not your email marketing is successful. Calculating your Return on Marketing Investment is key.
- Value of a Subscriber: IMHO, most companies don’t value an email address as much as they should (or as much as the subscriber did when he voluntarily gave it to the company). For many companies, an email address can be worth thousands of dollars; for some, not as much. Figuring out the worth of an email address is important to determine how much you should invest in acquisition campaigns. If an email address is worth $100, then spending $10,000 on a campaign that acquires 10,000 email subscribers is a no-brainer. Just be sure to keep an eye on how well they retain. If 90% of the subscribers drop after the first email, it may not be such a good move.
Email Marketing Formulas
- Deliverability = ((Number of Email Addresses Sent – Number of Email Addresses Bounced) /Number of Email Addresses Sent) * 100%
- Open Rate = (Number of Emails Opened /(Number of Emails Sent – Number of Emails Bounced)) * 100%
- CTR = (Number of Unique Emails Clicked /(Number of Emails Sent – Number of Emails Bounced)) * 100%
- Conversion Rate = (Number of Unique Emails Resulting in a Conversion /(Number of Emails Sent – Number of Emails Bounced)) * 100%
- Unsubscribe Rate = (Number of Email Addresses who Unsubscribed /(Number of Email Addresses Sent – Number of Email Addresses Bounced)) * 100%
- Viral Rate = (Number of Emails Forwarded /(Number of Emails Sent – Number of Emails Bounced)) * 100%
- ROMI = (Revenue Obtained from Email Campaign / ((Cost per Email * Total Emails Sent) + Human Resources + Incentive Cost))) * 100%
- Value of a Subscriber = (Annual Email Revenue – Annual Email Marketing Costs) / Total Number of Email Addresses * Annual Retention Rate
Notice I sometimes use “Email Address,” and other places, “Email.” This is because some households actually share an email address. Example: I might have two cellular phone accounts with the same company that go to the same email address. So while I would send two emails to a specific email address (as requested by the subscriber), if that subscriber unsubscribes, for example… I might track that at an email address level. Hope that makes sense!
Read more here about Sailthru’s Email Automation Solutions and how they can help you get the most out of your email marketing campaign.
Douglas Karr is the founder of Martech.Zone.
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