Email marketing works. For example, Marketing Sherpa recorded that approximately 60% of marketers believed that email marketing produced a positive return on investment for their company. Similarly, according to the Direct Marketing Association, approximately 60% of customers have made a purchase as a result of receiving an email marketing message.
Today, email marketing messages are used by businesses to communicate with their customers and increase sales, but not all email messages are equally successful. Fortunately, there are email marketing key performance indicators (KPIs) that can help eCommerce businesses determine which email messages work and why. Understanding these KPIs is one of the keys to achieving success.
In this article, I will share the most important email marketing KPIs with you to which you should pay attention to ensure that your campaign is performing effectively. Let's jump right into the details!
What are email marketing KPIs and why are they important?
KPI is an abbreviation for Key Performance Indicator. Simply put, KPIs are quantifiable indicators that assess your success in relation to your objectives. They are crucial because they represent the most important indicators that you have chosen to improve to achieve your objectives.
KPIs also assess your performance concerning your goals and indicate whether or not you were successful in meeting them. KPIs are an integral component of the SMART framework (a.k.a specific, measurable, attainable, relevant, time-bound).
They address the observable component of the framework by providing you with quantifiable metrics upon which to base your goals. Without them, you won't know what you're trying to do and won't be able to track your success.
The particular email marketing metrics you choose vary slightly based on your business’s unique goals and priorities, but there are email marketing KPIs that every marketer should consider.
Most important email marketing KPIs and Metrics
1. Open Rate
The open rate is a metric that shows how many emails that were successfully delivered were opened by the recipients. It is determined by dividing the number of emails opened by the total number of emails sent (minus the emails that were not delivered). A high open rate indicates that your email's subject line is appealing to your target audience.
The average email marketing open rate, in 2017, was 24.7%. So if your open rate is 25% or higher, your campaign is doing well.
How to Improve Email Marketing Open Rates:
Test subject lines: High email marketing open rates indicate that your subject lines are resonating with your subscribers, but you can experiment with different variants to see if you can get better results. Create a couple of slightly different subject lines, such as "Home-based business ideas for female entrepreneurs" vs. "Women love these home-based business ideas." Then compare the outcomes.
Clean your mailing list often: A stale mailing list full of unengaged subscribers would eventually result in lower open rates. To deal with this, regularly review to see which subscribers are opening and engaging with your emails, and delete those who haven't engaged in a long time. When you get rid of the ones that aren't engaged, your open rates will increase.
2. Click-Through Rate (CTR)
The click-through rate is one of the most significant email marketing KPIs because it tells you what percentage of recipients clicked on the link to your offer in your email.
It is determined by dividing the number of links clicked in your emails by the number of emails opened. Then multiply the result by 100 to get a percentage.
A high CTR in email marketing indicates that your contacts are engaged with your messages and want to learn more about your brand.
According to email marketing statistics, the average click-through rate was 3.42 percent. CTR, on the other hand, varies by sector.
Another email marketing research found that the Consumer Services, Nonprofits, Computer Hardware & Telecommunications, and Associations & Government industries had click-through rates of more than 4% on average. If your campaign has a high click-through rate or more than 4%, your emails' content and calls-to-action (CTAs) are successful.
Make appealing content: To increase the click-through rate of your email promotions, you must create content that is both interesting and relevant to the recipients. If they like what they read in an email, they'll want to learn more by clicking the link.
Test CTAs: You can experiment with the CTA text in your emails to appeal to different customer segments. Build two distinct CTAs to use with the same connection, such as "Click here for more information" and "Learn more about XYZ's benefits." Then, see if adjusting the wording leads to an increase in the total number of clicks.
3. Conversion Rate
The percentage of subscribers who opened your message and took the desired action is referred to as email marketing conversion. This activity may be a visit to a particular website, a product purchase, or something else – it all depends on your target.
The conversion rate is determined by dividing the number of recipients who performed a desired action by the number of emails sent. Multiply the amount by 100 to get your percentage, as with the other percentage-based KPIs.
What is a good conversion rate for email marketing? Depending on the type of email received, the number varies. For instance, the average conversion rate for newsletters is 1%. It is 5% for follow-up emails (emails that remind people to complete an action). If your email marketing conversion rate is greater than 2%, it indicates that your campaign is performing well in generating interest.
How to Improve Email Marketing Conversion Rate:
Provide value: Make sure you're getting enough value in exchange for the action you want people to take. You might, for example, focus on making tailored suggestions for various customer groups and tailoring your deals to them. It is important to remember that true value can vary among different individuals, and your data will help you get closer to determining that value.
Avoid making false statements: Nothing is more frustrating than arriving on a website via an email only to discover that your experience differs from the claims made in the email. Don't let people down with misleading or exaggerated statements; instead, be honest.
4. Unsubscribe Rate
"Unsubscribe" means the customer doesn’t want to receive emails from you anymore. The unsubscribe rate, in the sense of email marketing metrics, is the number of recipients who opt out of your email list. Unsubscribes indicate that the individual does not want to receive any more messages or emails.
Remember to provide a simple unsubscribe option in each text. Otherwise, you can face fines under the CAN-SPAM Act in the United States. The email unsubscribe rate is determined by dividing the number of unsubscribes by the number of messages delivered.
The average unsubscribe rate for email depends on the industry you are in, but anywhere below 0.5% is considered acceptable.
How to Reduce Unsubscribe Rate:
Update your mailing list. Make sure you're only sending emails to those that have agreed to receive them, and keep your list fresh by adding new, interesting contacts and removing old, inactive ones. New subscribers are more likely to be interested in getting news and special offers.
Make sure your emails are responsive. Mobile email marketing open rates are skyrocketing. If your website isn't mobile-friendly, this may be one of the reasons for a high unsubscribe rate.
5. Bounce Rate (Hard and Soft)
The bounce rate for emails is the number of emails that were not sent. Emails that are not sent are returned to the sender. Typically, the bounce rate is divided into two categories:
When an email address is incorrect, it causes a hard bounce.
Where there is a temporary distribution problem, this is referred to as a soft bounce. The reason can be a server is down, or the recipient's inbox is full.
You can measure the bounce rate by dividing the number of bounced emails by the number of emails delivered.
The bounce rate is one of the KPIs that you’ll want to keep as close to 0% as possible. Nevertheless, the average bounce rate does vary for different industries.
How to reduce Bounce Rate for email marketing:
Clean your email list. Bounces occur because email addresses have no longer existed. See if you can find any contacts who haven't had any opens, clicks, or interactions in a long time and delete them from your list. Your email marketing automation software will most likely be able to assist you with this.
Check to see if your email has been identified as spam. Check that your templates are up to date and do not contain any characteristics that might land you in the spam folder. Tools such as mail-tester.com will assist you in avoiding accidentally creating emails considered spam.
6. List Growth Rate
The email list growth rate, as the name suggests, indicates how rapidly the email list is increasing. It does count your unsubscribes and invalid addresses. One of the most significant email marketing KPIs is the list growth rate since a healthy email list needs to be refreshed with new subscribers.
If you continue to use the same email marketing list, it will automatically shrink as people change jobs, email services or stop using their accounts entirely. To measure your list growth rate, take the number of subscribers you've earned, and subtract it by the number of subscribers you've lost from the total number of invalid addresses. Divide the result by the total length of your list.
To retain the same number of subscribers, it is estimated that you will need a positive list growth rate of 25% or higher each year. This is due to the inevitable deterioration of an email marketing list, which expires around 22.5 percent each year. As a result, it is more important than ever to increase your email list and decrease the number of unsubscribes.
How to Increase Your Email List Growth Rate:
Host a contest. Hosting a contest is a perfect way to obtain more email addresses from people who are interested in your product or service. For instance, you might request that people enter their email addresses in order to be eligible for a free giveaway. The winner will be chosen at random.
Get feedback from people who unsubscribe. It is an email marketing norm to provide a way for recipients to unsubscribe. However, you might be unaware that you will gain input when doing so. When a user clicks "unsubscribe," for example, you will show a multiple-choice or text box asking for input.
Feedback will assist you in identifying the reasons for unsubscribes, allowing you to reduce the unsubscribe rate, as well as have a positive impact on your email marketing campaigns as a whole.
7. Forward and Sharing Rate
Your campaign's forward and sharing rate indicates how often your subscribers forward your emails to someone else. One of the email marketing KPIs can show when users click on a social sharing button inside your email to share its content on platforms such as Twitter or Facebook.
This measure is useful not only because it represents the degree of enthusiasm for your posts, but also shows if you've received any referrals. Getting referrals is one of the most effective ways to develop your email list with new, high-value subscribers.
If your current subscribers forward or share your email, it means they are recommending you to others and probably creating new subscribers for you. You can measure your forward and forward rate by totaling the number of forwards and shares obtained through your sharing or forward button (SFB).
Divide this figure by the total number of emails sent. Then multiply the result by a hundred to get the percentage. According to Return Path's email marketing survey, the average email forward rate across all industries was 0.02 percent.
How to Increase Your Forward and Sharing Rate:
Provide value. When people find your email valuable, they will want to share it with their friends.
Integrate social networking buttons. By including a social sharing button in your newsletters, you will allow your subscribers to send appealing content directly to the inboxes of friends, family, and colleagues, increasing your campaign's exposure and list growth rate (new subscribers, remember?).
8. Average Order Value (AOV)
The average order value (AOV) is the amount of money spent by your subscribers as a result of your email marketing campaign.
You should strive to increase your AOV because it justifies your email marketing budget, allowing you to continue reinvesting to boost your company's profitability. Higher AOVs suggest that you are making more money from each email campaign, resulting in a more profitable business. Divide overall revenue by the number of customers referred by email to determine the average order value from email campaigns.
When measuring this metric, bear in mind that AOV represents revenue earned per email campaign rather than revenue earned per customer. Compare AOV from email campaigns to total AOV as a best practice to see whether emails offer better quality conversions and customers.
How to Increase Average Order Value:
Give free shipping to your subscribers. Offering a free shipping threshold to your subscribers is one of the easiest ways to raise average order value from email campaigns. “Free shipping on all items over $100,” for example. After you've calculated your AOV, add 20% to it. As an example, if your average AOV is $100, it becomes $120. That might be the new free shipping threshold, with free shipping for all orders above $120, covering expenses and enticing subscribers to purchase.
Give first-time customers discounts. If you've just added new subscribers to your email list, the bulk of your prospective customers will be first-timers.
Offering them discounts will help increase AOV. For example, you could offer this new audience a special discount if they purchase your product in larger quantities than normal, or you could offer exclusive package offers to new subscribers.
9. Customer Lifetime Value (CLV)
In email marketing, The average order value (AOV) refers to the average monetary value that a customer spends with your business over their entire customer lifetime as a result of your email marketing campaign.
The longer a customer remains a customer of your business, the greater their lifetime value becomes. The higher your CLV, the higher ROI you’re going to get from your investment. Take the number of orders a customer (referred via email) has put in a year to measure CLV. Multiply this by their AOV, and then by the number of years they have been a customer of yours. For example, if a consumer spends $100 on three transactions per year for five years, their CLV would be $1,500.
How to Increase Customer Lifetime Value:
Offer exclusives. You can create an email campaign with exclusive deals that are only available to customers with a higher CLV. There are several ways to show your appreciation for these customers, such as providing VIP experiences, insider access, and exclusive discounts.
Consider packs and subscriptions. Do you sell a product with a lot of add-ons? Consider building relevant packages in order to produce higher order values. To get ideas, check for your product on Amazon and look through the "Frequently bought together" section. A PlayStation 4 console, for instance, can be bundled with a wireless controller.
10. Gross Profit Margin
Your gross profit margin indicates how much profit you make by deducting the cost of goods sold. This is a particularly significant KPI for email marketing since many strategies provide some form of discount.
Unfortunately, many retailers lose money because the discounts they get consistently surpass their gross profit margin. This is why it is important to consider your gross profit margin and how it applies to your discount strategy.
Your gross profit is the difference between your net sales revenue and your cost of goods sold. This expense, however, should include any ad spend that is directly related to a purchase.
Consider the following example. Assume you're marketing a $100 commodity with a $70 cost of goods. You run a Facebook advertising campaign that costs you $20 to get a customer. This means you've made a profit of $10. You would make no money if you were offered a 10% (or $10) discount. You would potentially lose money if you discounted more than 10%. Divide your gross benefit by your sales revenue to get your gross profit margin.
How to Increase Gross Profit Margin:
Be strategic about your discounts. Before you give discounts and sales to your customers, make sure you understand what you're getting in. Remember that there are ways to incentivize consumers without providing large discounts, such as loyalty packages, bundles, or freebies on low-cost products.
Create a value-based brand. If your customers begin to rely on you to heavily discount your items, you're in big trouble. Try instilling trust in the heart of your brand through high-quality items, exceptional customer service, and a simple and pleasant shopping experience. According to one survey, 8 out of 10 customers are willing to pay more for positive experiences.
11. Return on Investment (ROI)
This is one of the most significant email marketing KPIs to tracking because it shows you how successful your emails are in terms of cost. Simply put, ROI is a calculation that compares the total revenue generated by an email marketing campaign to the cost of operating that campaign.
This can include, for example, the expense of the person doing the email marketing. Positive email marketing ROI indicates that you are receiving more from your campaigns than you are investing to run them.
What is the formula for calculating email ROI? Consider the number of sales generated by a campaign. Subtract the net expense of launching and maintaining the campaign. Then split the result by the same cost.
How to Increase ROI:
Segment your email list. When you segment your email list, you can send customized messages to each subscriber. It divides each subscriber into distinct categories based on common interests including on-page actions, personas, pain points, and so on. You will improve your chances of making a sale and, as a result, your ROI by sending targeted messages to each separate group.
Plan your emails for the best days and times. Ideally, you can send your emails on days when your subscribers are most likely to click and read them. Monitor your open and click-through rates to compare and calculate the results when determining the best time and day to send your email. If Tuesday mornings are ideal for sending informational emails, Friday afternoons are ideal for sending special offers.
That's it! I hope this article has provided you with valuable information about the vital email marketing KPIs and how to calculate them. Please feel free to leave comments below for a further discussion on this topic!