Monetary Performance Figures in Email Marketing – Determining the Economic Success
Published on 15 July 2014 | Author Stefan von Lieven0
Every company pursues monetary goals, which can be operationalised by means of values, such as profit, turnover, cost or ROI. To fulfil those corporate goals, marketing communication must contribute directly or indirectly, but in any case, measurably. For email marketing, this means, in the analysis, we must not only consider responses, e.g. click rates, and quality indicators, e.g. retention rate, but also monetary indicators. In the following, we will present you the most important monetary values:
The central value to assess the economic success of an email marketing campaign is the return on investment (ROI). This includes the profit gained through the campaign, as well as the capital used and puts both values into a ratio. It allows us to determine how economically efficient the capital has been used.
Correctly Allocating Turnover and Costs
When determining the profit, only costs associated with the campaign can be taken into consideration. This may be the case when an offer is clicked and the promoted product on the downstream landing page is purchased directly without interrupting the conversion process. However, if we only take into consideration the turnover generated by one campaign, we can get a distorted picture. We must bear in mind that email campaigns also contribute indirectly to sales, e.g. by strengthening brand awareness. Furthermore, an email campaign in an integrated communication mix is usually not the only measure influencing the user in his decision. Even when the purchase eventually is completed by clicking in an email, a significant part of the work was possibly done by other measures, e.g. display advertising or social media. It is therefore important to recognise the interdependencies of the used tools to enable a more precise allocation of sales to individual campaigns. It is not easy to assign costs to a campaign, either. The cost drivers differ from company to company. In addition to labour costs for the fulfilment, there may also be costs for technical operation.
Return on Investment = profit from the campaign / costs of the campaign
Cost per Action
Especially with campaigns, which are run via an external service provider, it is common to put costs in relation to the achieved responses. We can then specify how expensive an open, click, lead or a conversion was and determine, e.g. the most cost-efficient service provider.
Cost per View = costs of the campaign / generated opens
Cost per Click = costs of the campaign / generated clicks
Cost per Lead = costs of the campaign / generated leads
Cost per Order = costs of the campaign / generated orders
Cost per Thousand
Another important value is the Cost per Thousand (CPT). It indicates how high the costs are to reach one thousand contacts with a campaign. We distinguish between the optimal, the forecast and the real CPT.
The optimal CPT assumes that each recipient on the mailing list opens the mailing, i.e. a mailing of the campaign.
Optimal CPT = costs of the campaign / number of recipients * 1,000
In the case of the forecast CPT, only those recipients, who have probably opened the mailing, are counted. In order to determine this likelihood, open rates of previous mailings are taken into account. The average open rate of the last ten mailings is taken as a reference here.
Forecast CPT = costs of the campaign / (number of recipients * (open rate t0 + … + open rate t10) / 10) * 1,000
The real CPT can only be determined after the sending. For this purpose, the actually achieved open rate is calculated.
Optimal CPT = costs of the campaign / number of recipients * open rate * 1,000
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