The Marketing Technology Blog

Yesterday, I finished Email Marketing by the Numbers, written by good friends Chris Baggott and Ali Sales.

I would recommend this book to any marketer, regardless of whether or not you’re leveraging email (although after reading you’ll wonder why you never did!). The book isn’t just Chris’ opinions - it’s full of Use Cases, interviews of industry leaders, and detailed ‘how-to’s’.

For the marketer who doesn’t have much time, there’s a great feature in the book - a concise summary at the end of each chapter. A couple disclaimers - yes, I’m biased because they are friends of mine, but I also provided some advice in the automation chapter on picking your provider.

There’s obviously too much content to fully review the book right here. I’ve wrote about it when the book was released and it’s on my reading page as a Business and Marketing favorite.

I thought it might be good just to review the formulas used in Email Marketing. Much of this is described in the book, and there are a few extras here.

Email Marketing Key Indicators:

• Deliverability: If you recognize the value of a subscriber, and your emails aren’t actually getting delivered, you can figure out how much money you’re losing because the emails never make it to the inbox. Clients are always amazed when they move to a reputable ESP and see how much their deliverability increases. Some of it is about the technology and some of it is about the trust that ISPs have with ESPs.
• Open Rate: This number is not as significant as it has been in years passed. An open is registered when an image is requested from the server. Spammers utilized this method to validate which email addresses were authentic; as a result, most email client software and even online email clients are now blocking images by default so the request doesn’t go through. Great for fighting spam, but not great for calculating opens.
• CTR: This is now the preeminent indicator of subscriber interest. If you were a car salesman, this is when you actually get someone to take a test drive. They are interested… but did they buy or bail?
• Conversion Rate: This is the number of unique email addresses that ‘bought’. For a retailer, this is pretty simple… it can be the actual dollar amount that resulted in a web site purchase. For other businesses, a conversion could be different, though. It might be how many people subscribed to your podcast if that’s the call to action. Watching your conversion rate will tell you how well you are ’selling’ your call to action.
• Unsubscribe Rate: This is the number of unique email addresses that ‘bailed’. They didn’t have an interest in your message so they unsubscribed. Unsubscribe rates are key to recognizing whether or not your content sucks. Just as important, though, is calculating when people unsubscribe. Perhaps it’s on the 2nd email or perhaps it’s the 4th… you need to figure that out and ensure that you provide some great content, especially at danger points when people are more likely to unsubscribe. You can find this by doing some Retention Analysis.
• Viral Rate: Hopefully you’ve got some viral component to your emails where they can be forwarded and measured. Don’t dismiss your viral rate… it’s a great way to acquire subscribers who stick as well as add additional revenue to a great campaign. You have to make sure that your method for Forwarding is simple, though.
• ROMI: You have to figure out whether or not you have a great business and whether or not your email marketing is successful. Calculating your Return on Marketing Investment is key.
• Value of a Subscriber: IMHO, most companies don’t ‘value’ an email address as they should (or as much as the subscriber did when he voluntarily gave it to the company). For many companies, an email address can be worth thousands of dollars… for some not as much. Figuring out how much an email address is worth is important so that you can determine how much you should invest in acquisition campaigns. If an email address is worth $100, then spending $10,000 on a campaign that acquires 10,000 email subscribers is a no-brainer. Just be sure to keep an eye on how well they retain. If 90% of the subscribers drop after the first email, it may not be such a good move.

Email Marketing Formulas

• Deliverability = ((Number of Email Addresses Sent - Number of Email Addresses Bounced) /Number of Email Addresses Sent) * 100%
• Open Rate = (Number of Emails Opened /(Number of Emails Sent - Number of Emails Bounced)) * 100%
• CTR = (Number of unique Emails clicked /(Number of Emails Sent - Number of Emails Bounced)) * 100%
• Conversion Rate = (Number of unique Emails resulting in a Conversion /(Number of Emails Sent - Number of Emails Bounced)) * 100%
• Unsubscribe Rate = (Number of Email Addresses who unsubscribed /(Number of Email Addresses Sent - Number of Email Addresses Bounced)) * 100%
• Viral Rate = (Number of Emails forwarded /(Number of Emails Sent - Number of Emails Bounced)) * 100%
• ROMI = (Revenue obtained from Email Campaign / ((Cost per Email * Total Emails Sent) + Human Resources + Incentive Cost))) * 100%
• Value of a Subscriber = (Annual Email Revenue - Annual Email Marketing Costs) / Total Number of Email Addresses * Annual Retention Rate

Note: Sometimes you’ll see that I utilize Email Address and other places, Email. The reason for this is that some households actually share an email address. Example: I might have 2 cellular phone accounts with the same company that come to the same email address. This means that I would send two emails to a specific email address (as requested by the subscriber); however, if that subscriber takes an action such as unsubscribes… I might track that at an email address level. Hope that makes sense!