Email marketing still carries one of the strongest reputations in digital marketing, with some commentators claiming it provides a 40x return on the investment placed into the tool cost and labour required. Survey statistics from Mailgun broadly agrees with those figures, but states that such margins, while achievable, are only realised in certain cases and under specific criteria.
Despite the possibility of fourfold return on investment, however elusive, the survey’s authors claim that most companies are not confident as to the efficacy of their email campaigns, and find it difficult to measure their own success rates with any accuracy.
Mailgun survey big picture
The survey comprised the responses of around 1,200 email senders, and while the collated figures indicate that email is still central to many organisations’ operations (78%), less than half of the respondents said they can measure the ROI of promotional or transactional emails. Many companies don’t measure the effectiveness of their email sends, and some of those questioned stated they weren’t sure whether or not their organisation took measurement data at all.
Among those who do measure, 60-62% said their ROI is tenfold on spend, with the much-vaunted $40-return-per-$1-spend results happening in around 13% of campaigns – among, to reiterate – those companies that do take the trouble to collate all the relevant data.
There are two issues here. The first is whether or not measuring the effectiveness of email increases its success rate. One would have to assume that those taking the time and trouble to measure spend and calculate returns would be able to and willing to alter a campaign’s elements to improve outcomes. The second issue is the source of success metrics. Black box email management platforms may be unlikely to over-stress unsuccessful outcomes, and regardless of their individual veracity, the definitions of success will vary from platform to platform.
Promotional vs. transactional emails, metrics
Promotional email, close to the standard in a typical digital marketing model, is usually tied to clicks and sales. Transactional email is harder to assess, as its value stems from prevention and enablement, not direct selling. As such, its effects are hard to manage. For example, an order confirmation or password reset message can reduce demand placed on customer support, or a simple payment reminder might reduce customer churn. Indirect cost savings are a tough figure to predict accurately.
The survey’s authors note first-click, last-click, linear, position-based, and time-decay models tell different stories about the same customer journey, and again, any ROI figures are only as credible as the attribution models behind them. Incomplete metrics raise the level of overall uncertainty as to efficacy, and more detailed data gathering raises the cost of any campaign overall. Many organisations, the paper states, work with partial or uncertain methods. Even a basic formula – revenue attributed to email minus cost, divided by cost – depends on wildly varying assumptions from company to company.
Measuring cost
While there are problems of scope in measuring return on investment, measuring costs was cited by a surprising number of respondents to the Mailgun survey. From one company to another, there was a distinct difference in what made up ‘cost’. The components of cost included, to varying degrees, infrastructure, software tools, data management and maintenance, compliance, creative production, and labour. Only about one in five of respondents included labour costs in their ROI analyses. Two teams working on campaigns in separate companies may report similar returns, but thanks to the difference in how they measure cost, one might achieve a tenfold ROI, the other a forty-fold. Email may be cheap and easy to optimise, but not free.
The survey results also suggest a gap between what marketers say they measure and what Mailgun states would be effective in helping marketing teams improve. Click rates and open rates are the most common measurements, followed by delivery and bounce rates. Measuring more complex, meta-indicators like revenue per campaign, revenue per email, and total channel revenue, is less common. Only 12% per cent of all email-sending teams say they use email ROI to measure performance.
Competing pressures
While the budgets teams have to work with remain problematic, competing channel priorities and leadership buy-in are also cited as problems. Email is often thought of as an indispensable part of any larger marketing activity, but arguing for greater investment in measuring its effectiveness is where data-first teams hit the rails. Data collation and measurement is not an attractive sell to the Board, despite the wide-held knowledge that email is critically important to every organisation.
Clearly, a company with skin in the game (a product to sell) publishing a report will emphasise the problems that its services can solve. Nevertheless, the report’s authors highlight common issues around email marketing which impact teams every day. More accurate metrics, drawn from right across the company, will give professional marketers a clearer picture of their effectiveness. Pulling information from very different areas of the business is an issue that would need inter-departmental action and buy-in.
(Image source: Workers at the Jamaica Plain Post Office, 71 Green Street, near Cheshire Street” by Boston Public Library is licensed under CC BY 2.0.)
Find out more about the Digital Marketing World Forum series and register here.
