Evaluating Email Through ROR (Return On Resources)

Return on investment (ROI) is the metric marketers most commonly use to compare ads, campaigns and even entire channels. ROI makes sense for evaluating marketing when the primary input is external spending: buying media, printing expense, postage, creative costs or sponsorship fees, for example.

Email, however, does not fit neatly into the same model. Sure, there is an expense associated with email, but the principal input into an email campaign -- where your audience is earned over time and not bought (or rented) with a lump sum -- is the amount of time and energy your company has devoted to it. Because the monetary “investment” denominator in email is comparatively low, using a strict ROI calculation will always allow it to shine. That’s fine with those of us in the email industry, as we always win the ROI contests. But it misrepresents what must actually be invested in email in order for it to perform: the internal resources that nurture and grow the program.



I’m sorry to be the one to blow the whistle on this ROI game email has been winning, but it’s high time we stopped looking at email in the context of ROI altogether. Now is the time to consider a return on resources metric. Am ROR measurement will better evaluate how relevant inputs affect results, which in turn can help ensure that email gets the resources it needs to perform at the highest level.

Here is why evaluating your email program through ROR can make your email program more effective and better understood:

Better absolute gauge of email’s return: Measuring marketing is not a popularity contest. The goal is not to anoint a winner, but to improve each channel. Email’s appeal is not its efficiency, which is what ROI measures. Rather, it is its effectiveness. ROR removes the emphasis from the direct expense and draws attention to what results email actually drives.

More accurate comparison to complementary channels: Email is not alone in benefiting from a ROR measurement. Social media, video, webinars, blogging and other forms of content marketing are similar to email in that the principal input is not money spent, but resources devoted. And in many organizations, the resources devoted to email are also involved in these other initiatives, so ROR helps organizations identify how much of the resource pie each should receive.

Renewed emphasis on the resources needed: I worked in the online advertising industry during its dark years. That industry had a very difficult time recovering once CPMs plummeted. Two things happened when the out-of-pocket expense (the “I” in ROI) for buying online media dropped: 1) ROI naturally increased, even when the actual return from lousy “Punch the Monkey!” ads was also dismal; and 2) Advertisers had a hard time justifying the need for better creative since the media expense was so low, and ROI appeared so high. As a result of the low expense and high ROI, advertisers took their eyes off the ball -- not necessarily to have an impressive ROI, but to actually drive results from the channel.

I see the same thing happening in email, even today. Because it costs so little to send a few hundred thousand messages, many marketers do not put the necessary energy and resources into campaign planning, segmenting, content strategy or creative. Focusing on ROR reminds us that the real input in email is not what you pay your ESP, but the years you have spent gaining the permission to contact tens or hundreds of thousands of people in the first place.

Improved understanding of scale: Ultimately, marketing metrics of all kinds should drive some action. Analyze your search advertising, for example, and you may find that it has among the highest ROI of all your channels, and that increasing search spending is the best way of spending the extra 10% in your marketing budget next year.

Again, email is different. Only in the largest organizations can an increase of 10% actually be actionable. If the staff tending email and/or social channels is small (and it is commonly part of a single person, right?) any change to the “budget” simply translates into “you need to spend more time doing this.” Email suffers when email marketers are responsible for a lot more than email, so better evaluating the return on the time marketers put into email can help protect the channel’s claim to that time. Keeping the emphasis on the actual results is the only way to affect headcount (or reallocate other responsibilities) in a way to scale email aggressively, which will lift email’s results more than squeezing more blood from the stone in the cubicle by the kitchen.

1 comment about "Evaluating Email Through ROR (Return On Resources)".
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  1. Liz Ryan from Hansa Marketing, May 2, 2012 at 11:25 a.m.

    Thanks for writing this. Great perspective and pointing out that although we win the ROI argument, we often lose when it comes to procuring resources. Taking a look at the bigger picture can create a win-win: more resources, increased ROI!

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