Related terms

• Conversion rate
• Purchase funnel
• KPI (Key Performance Indicator)

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Return on Invesment

Return on Investment (ROI) is the percentage that relates expenses and income to evaluate the financial results of an action (such as a campaign) or a strategy (like email marketing). It is calculated by dividing net income (income minus expenses) by expenses. A higher ROI justifies the investment to a greater extent.

How to calculate ROI in email marketing?

The first step is to account for the list of income and expenses, considering only those that can be attributed to the company's email marketing and not the entire marketing department.

• Income: How much has been achieved? Whether it's through products from online stores or services, you need to add up the purchases directly obtained through links shared in one or more email marketing campaigns.
• Expenses: How much has been invested? This list includes everything dedicated to preparing and sending the campaigns, from template design to the email marketing platform.

To make this calculation, you can choose a time frame that covers multiple campaigns (e.g., a quarter) or do it for a single campaign (an individual action you want to evaluate independently).

How to improve your email marketing ROI?

If, when applying the ROI formula to email marketing, the result is negative, it means that adjustments need to be made to one of its two parameters:

• Income: To rethink the strategy and optimize it to generate more sales, you can change its elements, such as frequency, content, or copywriting of the call to action, and test those that yield better results.
• Expenses: To save money, you can seek better efficiency in internal processes, such as the time spent on validation, or leverage tools that other departments may already be using.

These same tips apply when the formula yields a positive result, and you want to increase profits for every euro invested.

Why is email the channel with the highest ROI?

An email can make an offer interesting, but if it's personalized as only email marketing can do, it becomes irresistible, which leads to more sales. Additionally, it works both in the short term with specific promotions and in the long term with loyalty newsletters, which also serve to encourage customers to make purchases.

That's why email marketing is considered cost-effective because it has a higher ROI than other marketing strategies, although it naturally varies depending on each business model.