Email produces a return on investment of 38:1 — the highest of all digital channels. But it’s not just there for the taking: Many firms fail to achieve that level due to mismanagement and other causes, according to Email Marketing ROI: The Factors That Lead To Better Returns, a study by Litmus.
And ROI isn’t everything — it tends to dip as firms invest in more sophisticated technology. Indeed, Litmus says that you should be aiming at a much lower ROI.
The problems affecting ROI begin with measurement. Only 17.8% of brands can measure email ROI well, and a paltry 12.1% can do it very well.
In contrast, 27.6% measure ROI poorly, and 10.6% are very bad at it. In the middle are the 31.9% that can measure adequately.
What does this prove? Simply that firms that measure very well pull an ROI of 48.1. Companies that do it adequately achieve 33:1.
Similarly, brands that measure email deliverability have a higher ROI than those that don’t — at 38:1 versus 33:1. Firms that track revenue per subscriber also do better, at 39:1 vs. 34:1.
Here are some other factors that can influence ROI:
Regulatory environment — Contrary to what you might think, given the GDPR, EU companies produce an ROI of 39:1 — slightly better than the U.S.
Company size — Firms with 500 or more employees report an email ROI of 44:1, versus 34:1 for outfits with 100 people or less.
Email list size — Brands with one million subscribers or more enjoy an ROI of 44:1 — higher than the norm. But the study notes that “the true power here isn’t in the absolute size of a list, but in the engagement and productivity of that list.”
Permission practices — Double opt-in leads to an ROI of 50:1, versus the normal 38:1 for emailers with single opt-in.
Blocks in the past year — Companies that have been blocked by inbox providers several times average 33:1.
Email frequency — This doesn’t have a marked impact. But the sweet spot appears to be between five and eight emails per month.
Email preview testing — Firms that run preview before every email campaign generate 40:1.
A/B testing — Brands that never test end up with an ROI of 36:1. Those that always conduct an A/B test hit 41:1.
Email revenue from marketing automation—Companies that drive 25% to 50% of their revenue with marketing automation have an ROI of 41:1. Those in the lower category see 37:1.
Program resourcing level — Adequately resourced programs hit 41:1, versus the norm.
Email team size — Teams with three to five full-time employees help them get to 42:1, compared with 36:1 for those with two or less.
Here is one caveat: Brands achieve their highest total returns only after email ROI crests. “Don’t be afraid of a dip in your email marketing ROI as you invest more in the sophistication of your program,” the study states.
Chad S. White, director of research at Litmus, adds that "these sky-high ROIs are actually a sign of mismanagement. Companies should be investing so much more in their email marketing programs that they drive their ROIs down to somewhere closer to 20:1, if not lower."
The results are based on responses from 372 email marketers who answered questions about ROI, out of a total worldwide survey sample of 3,000.