Don't Forget Profit When Tracking Email Metrics

By Kevin Hillstrom

Email marketing is an enigma; it represents the first step in the digital evolution of marketing. Prior to the mid-90s, marketing was generally expensive. With the advent of email, the expense largely disappeared, with the variable expense associated with delivering an email to a customer approaching zero.

When there isn’t a significant cost associated with a marketing channel, the channel evolves to a set of metrics that don't reflect marketing cost. Email marketing is famous for this, with business leaders focusing on open, clickthrough and conversion rates.

Honestly, how often does anybody talk about profit dollars per email delivered? Here's a typical example of the metrics email marketers report on:

emails delivered = 100,000
open rate = 20 percent
clickthrough rate (as a percentage of those who open) = 30 percent
conversion rate (as a percentage of those who click) = 5 percent.

So often marketers take email down to this level.

And when they do that, they miss the story, don’t they? For instance, the metrics listed above fail to capture the fact that only 300 of the 100,000 customers who received the email campaign actually purchased something.

Let’s assume this campaign had an average order value of $100 and 35 percent of the business generated by this email campaign converted to profit. Let’s also assume that the entire campaign cost $1,000 to execute.

Using those assumptions, profit = 100,000 * 0.20 * 0.30 * 0.05 * $100 * 0.35 - $1,000 = $9,500.

In total, the email campaign drove $9,500 of profit. Profit per email delivered is calculated as $9,500 / 100,000 = $0.095. Each email delivered is responsible for generating almost a dime of profit.

This matters, folks, because too often marketers are willing to “give away the farm” in order to gain a sale. They offer 25 percent off orders and free shipping, for instance. And subject line testing says this works. Take this example: