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The Great Office Supplies Caper

Email Marketing, Campaign Goals and Measuring the ROI!

by Ian M. Elliott | 5/23/17 8:27 AM

If you're going to do email marketing then, to achieve satisfactory results, you must do it properly. This series of articles should have illuminated that high-quality email marketing is not easy. It takes time and effort to get your contact database organized, it takes technology and the ability to use it, it takes creative talent for preparing content and, it requires the ability to set email marketing campaign goals, measure performance against those goals, and to calculate the return on investment.

This is a demanding set of requirements and explains why a lot of the email marketing we see for aftermarket office supplies is hopelessly mis-directed, ineffective, and a leading contributor as to why the strategy has developed a bad reputation for spamming. However, as we've seen, not all email marketing is created equal and, in this, the last of a five-part series, I'm going to focus on how to:

  • Set goals.
  • Measure performance against those goals.
  • Calculating and measuring the ROI (return on investment).

The series so far:

Introduction: The Importance of an email strategy for office products resellers

Campaign Goals and Calculating the ROI

Let's not forget the headline that email marketing is one of the most cost-effective forms of marketing, capable of generating 4,000% returns (or $40 for every $1 spent). However, if you've read my previous blogs in this series then, while I've acknowledged it may be possible to earn these kinds of returns, you must be operating among the elite of email marketers to do so.

I've evaluated numerous online calculators and, while they may display compelling ROI's of up to 4,000%, most don't take into account that the ROI should be calculated off margin (or better still profit) dollars rather than revenue dollars (which most do) and, nor do they really help a marketer understand all the steps required to achieve the ROI results they indicate.

One-time Campaign Setup Costs:

Never forget the old saying "you get what you pay for" - for sure it applies to potential returns on email marketing investments. If you fail to invest sufficiently in your campaign, you will waste what you do spend and fail to get the results you hoped for.

The example I've included below details over $15,000 of one-time setup costs. These costs consist of time, in fact 260 hours, with each hour invested valued at $60.

Nearly 80% of this time resource investment is required to prepare content offers. This allocation should make intuitive sense as it's associated with time spent preparing content to be offered in exchange for completing a form. If the content (the campaign foundation) is not high enough quality or deemed relevant by the target audience, it will not be opened, clicked, or converted.

Campaign Goals and Conversion Rates:

Remember, your contact database contains leads that are at different places in the three buyer lifecycle stages of awareness, consideration and decision. It should be logical for you to expect you'll get different levels of engagement from the contacts who are at different stages in the lifecycle, with higher engagement rates at the consideration and decision stages, than at the awareness stage.

Also, as explained in Part 3 of this series, Planning Email Campaigns & Strategy, the most important metric to measure is conversions. A conversion takes place when a reader fills in a form in exchange for free content you're providing. It should be clear, a conversion cannot occur until an open, and a click, have already taken place.

If 500 emails are sent to contacts in the awareness stage and you achieve 20% open, 20% click and a 50% conversion, then the result is 10 conversions. (500 x 20% x 20% = 10).

A contact in the awareness stage doesn't know you well, if at all, so it's logical to expect lower engagement rates than in the consideration and decision stages where a contact will have engaged previously with your content.

In the example below, you can see engagement rates (opens, clicks, and conversions) at the consideration and decision stages are higher than those at the awareness stage.

Assuming you've already segmented your database according to the lifecycle stages, and you're sending relevant content purposed for these different stages then, 500 contacts at the awareness stage results in 10 conversions, 200 at the consideration stage results in 14 conversions, and 50 at the decision stage results in 7 conversions.

The 10 conversions at the awareness stage will move those contacts into the consideration stage where they will go through the 30/40/60 conversion rates, (10 x 30% x 40% x 60% = 1), resulting in one addition to the decision stage, where a new total of 65 (50 + 1 + 14) x 40% x 50% x 70% will result in a total of nine (9) conversions.

Based on this example and the assumptions I've used, the goal of this campaign would be to achieve nine (9) demos to prospective customers.

Email ROI Example 2.png

Click Here for Access

Click button above for the interactive version of the calculator!

The Return on Investment Calculation:

Now we have established clearly defined goals for conversion rates at the three different lifecycle stages and have calculated the goal for nine (9) product demos, we can finally calculate the projected return on investment.

Certain assumptions have to be made that can usually be established from the historical performance of a business:

  • The average conversion rate from demo to closing (we have assumed 50%)
  • The average gross margin earned per customer (we have assumed (25%)
  • The average order size (we have assumed $1,000)
  • The average order frequency (we have assumed 12 per year or one per month)
  • The customer lifetime (we have assumed an average of 3 years)

Using these assumptions we know the lifetime (revenue) value of a new customer is $36,000 and the lifetime (margin) value is $9,000. With five (5) new customers projected, the return on investment (using gross margin, not revenue, as the determinant) is calculated at 188% - not too shabby, but still a long way from 4,000%!

There are numerous variables affecting the ROI. Obviously the gross margin percent, the average order size and frequency, along with the lifetime value of the customer are key but, so also are the number of contacts and where they are placed in terms of the lifecycle stages. Experienced marketers, with an engaged contact database, will most likely have higher proportions of the contacts in the consideration and decision stages which, in turn, will be likely to lead to higher ROI outcomes.

However, even experienced marketers launching new products must take their contacts through the beginning (awareness) stage before they can expect to achieve the higher conversion rates associated with the consideration and awareness stages. So, whether you are an email marketer starting out, or a veteran of numerous campaigns, it will be necessary to be moving contacts through each of the three stages at all times.

There are many variables affecting the goals and potential returns on investment from email marketing. To develop an even better understanding of how all these variables interact, and to learn how you may fine-tune your email strategies and focus your efforts to achieve the highest returns, please access our interactive email ROI calculator and experiment with your own numbers. To do so, just click the access button below.

Click Here for Access

Learn how the aftermarket industry has failed the independent office products resellers and compromised the future for office supplies dealerships. Its own failure to understand the digital revolution, and the impact that's now having on the industry, small business and sales channel development.

Our free e-book casts a critical look on the industry shortcomings.

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