Email Marketing’s ROI: 3 Insights for Retailers

Email remains one of the most effective marketing channels, generating a 38-to-1 return on investment across all industries, according to Litmus’ Email Marketing ROI: The Factors That Lead to Better Returns whitepaper. Companies in the retail and consumer goods and services industries generate email marketing ROIs nearly as high, getting 37 times their investment back.

Our research, which involved more than 430 brands, also provided insights into three issues that are important for retailers to understand.

1. Retailers shouldn’t be afraid that tougher email laws will hurt their email marketing returns.

Despite having to comply with the strongest anti-spam and privacy laws in the world, brands in EU countries see an average ROI of 39:1, edging out American brands’ 38:1.

Based on that, it would appear that business fears around tougher email and privacy regulations are overblown, whether it’s concern about the General Data Protection Regulation (GDPR), the California Consumer Privacy Act (CCPA), or a national law to supercede CCPA. Tighter rules appear to have a neutral to slightly positive effect on the returns seen by legitimate marketers, while improving the overall email environment by reducing spam and giving consumers more control.

2. Stronger permission practices have a sizable positive effect on email ROI.

For example, companies that use a double opt-in (DOI) process for all or most of their subscriber acquisition sources generate a ROI of 50:1, compared to a ROI of 38:1 for those using mostly single opt-in (SOI) processes.

DOI requires would-be subscribers to confirm their subscription via an email sent to them. This process generally sacrifices list size to improve quality, while SOI boosts list size at the expense of quality. While a larger list size also correlates with higher ROIs, list quality has a much stronger correlation.

This finding, along with the data on the effect of regulations, supports our assertion that CAN-SPAM is so lax that it actually harms U.S. businesses rather than helping them as it was intended.

3. The better you can measure your email marketing ROI, the higher it’s likely to be.

For instance, brands that can adequately measure their email marketing ROI report returns of 33:1 on average. However, brands that can measure their ROI very well report returns of 46:1. Therefore, those with with the ability to measure returns better report ROIs that are 39 percent higher.

While it’s safe to assume that brands with more accurate methods to measure ROI are likely more sophisticated in other ways that increase their ROI, some of that difference is purely due to greater accuracy in measurement.

Considering that only 12 percent of brands can measure their email ROI very well, the chances are high that whatever ROI you’re able to measure for your email program is probably under-reported. That's likely affecting your company’s budgeting for email and preventing your program from making the necessary investments in staff and capabilities to increase its success.

The future of email marketing is bright. Stronger regulations, which mandate strong permission practices, are much more likely to help email programs than hurt them in the long run. The biggest impediment to email marketing success is underbudgeting and understaffing. That's a critical oversight for most brands since email marketing is their highest ROI channel.

Chad S. White is the author of "Email Marketing Rules" and research director at Litmus, which provides email teams with powerful tools for email creation, testing, analytics, and collaboration.