Email ROI is more than just a (bigger) numbers game

Email is the highest ROI channel by far, just ask any marketer managing a house file. Email marketing returns $57.25 for every dollar spent, more than 150 percent greater than the ROI for other types of online marketing (DMA, 2007).

Who’s a bigger fan of email than me? Yet I risked getting kicked out of the email marketing club during a panel discussion at OMMA East with OgilvyOne’s Jeanniey Mullen, eROI’s Dylan Boyd and Lee Sherman of Avenue A/Razorfish when I suggested that the true ROI of email isn’t captured solely in that big number. In fact, I believe it’s misleading to think about email’s contribution without factoring in the risks of batch and blast, complaints, irrelevancy and acquisition costs.

That’s a downer, you say. Not at all. I find it inspiring because it means that email success and ROI is a direct result of our ability to build a relationship with our subscribers. Email, done well, creates the kind of relationship that drives incremental revenue, loyalty and word of mouth.

To get there, we need to be honest with ourselves. Let’s say you are sending 5 emails a month, about once a week. Your CFO says, “We need more revenue, send more email!” (This happens pretty often, unfortunately.) So you send twice as much, 10 messages a month. That is now two emails a week per subscriber. Voila! The revenue number at the end of the month goes up, probably 30% to 50% (based on what I’ve seen with clients). Everyone is happy, right?

Well, maybe not everyone. Look at your unsubscribe rate. Check the complaint rate (subscribers clicking the “this is spam” button). Both will rise when you send more email. The cost to replace these subscribers and maintain your file size will cut into that incremental boost – you have to count this acquisition cost in your figures. Plus, in every case we’ve seen, the non-responder rate (subscribers with no opens or clicks) also goes up dramatically.

It’s not so hard to see why. When we abuse the trust that subscribers put in us and send more email than could possibly be relevant, subscribers tune all our messages out. Even if they don’t unsubscribe or complain, but they basically unsubscribe with their delete button. These subscribers are now lost to us.

Add up all that collateral damage, and the ROI boost may be much less or even negative.

I’m a huge fan of sending more email, but only when the subscriber is “in market.” How do you know who’s in market? By understanding the buying cycles and life stages of your subscribers.

Think about subscribers who …

  • Just signed up for email
  • Are ready for product or service renewal
  • Recently purchased
  • Visited a particular section of your website
  • Abandoned their shopping cart
  • Clicked but didn’t convert
  • Downloaded a whitepaper
  • Haven’t opened or clicked in the last quarter

All these lifestage points are great opportunities for tailored email messages. Even if the number of subscribers in each category is small compared to your total file size, the response rates on targeted, high relevancy offers will blow away your normal rates. These additional messages will not only increase relevancy, drive new revenue and build higher value in your email program (which drives future response), they will improve your brand, lower complaint rates, improve deliverability and make you better looking (seriously – success will make you glow!).

Calculate your email program ROI to include acquisition as well as list quality factors. Review it not just as a whole but also at the subscriber level (or at least by key segment). You’ll have a much more realistic picture of how you can optimize.

Have you done any calculations to figure out the value of an email address to your organization? We are doing some work in the Roundtable I co-chair for the DMA’s Email Experience Council to build some calculators for the industry. If you’d like to help us beta test, please let me know.

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