You’ve Got KPIs: Email Marketing Metrics You Need to Master
Perhaps you’ve heard terms thrown around like “conversions” and “bounce rate.” If you’re not familiar with this kind of marketing jargon, it might as well be a different language.
And while it may seem appealing to ignore these and go straight to building emails, setting up your campaign is only half the battle. To find out if people are actually opening, reading, and taking action from your messages, you have to turn to email marketing KPIs.
Email marketing metrics and KPIs show how well your emails are performing and if you’re meeting your objectives. Think of them as a grading system for your emails. Being able to see what’s working and what isn’t can help you modify and improve your campaign (when it matters the most).
But they can be a little tricky to understand, especially if you’re new to email marketing. And in the time-strapped world of entrepreneurship, which KPIs for email marketing matter? How do you even know what’s working?
Email marketing strategist Val Geisler believes that the process of finding effective strategies never actually stops.
Here’s the cold hard truth about email marketing: all the data in the world doesn’t mean a thing if you’re not implementing new strategies and evaluating the results often.
What works for one brand may not work for another.
The approach you take when you start your email marketing journey might look nothing like what you do when you’ve been at it for a while, testing and trying out what works on your audience.
And that’s a good thing.
So we can see that measuring, testing, and evaluating email marketing KPIs is a process that should be built into your whole strategy. The kind of thing you do just as regularly as sending the emails in the first place.
In this chapter, we’ll cover:
- Key terms and definitions you’ll need to know to measure your performance
- Tips and advice to make sure you’re constantly improving each of these KPIs for email marketing
- The basics of how to perform A/B testing to apply and analyze these email marketing metrics
2.1. Glossary of Terms
Here’s a handy email marketing KPIs glossary to dissect some of the most important email marketing metrics and learn how to improve them.
We’ll look at:
- Open rate
- Click-through rate
- Conversion rate
- Unsubscribe rate
- Bounce rate (hard and soft)
- List growth rate
- Forward and sharing rate
- Average order value (AOV)
- Customer lifetime value (CLV)
- Gross profit margin
- Return on investment (ROI)
Let’s do this.
The open rate is a metric that tells you how many successfully-delivered emails were opened by recipients. You calculate it by taking the number of emails opened, and dividing it by the total number of emails sent (minus the emails that cannot be delivered). A high open rate basically means your email’s subject line resonates with your audience.
In 2017, the average email marketing open rate benchmark was 24.7%. So if your open rate is 25% or above, your campaign is doing well.
How to Improve Email Marketing Open Rates
- Test subject lines: Strong email marketing open rates mean your subject lines are resonating with your audience, but you’ll want to test other variations to see if you can get better results. Draft a couple of subject lines that are slightly different, like: “Home-based business ideas for female entrepreneurs” and “Women love these home-based business ideas.” Then compare the results.
- Cull your mailing list often: A stale mailing list full of disengaged subscribers will automatically mean lower open rates. To combat this, check to see which subscribers are opening and engaging with your emails, and delete the ones who haven’t engaged for a while. When you get rid of the ones who aren’t engaged, your open rates will practically improve overnight.
Click-Through Rate (CTR)
Regarded as one of the most important email marketing KPIs, the click-through rate tells you what percentage of recipients have clicked on the links in your emails. It’s calculated as the number of clicks on links in your emails divided by the number of emails opened. Then multiply by 100 to get a percentage.
Good CTR email marketing performance implies that your contacts are engaging with your messages and want to learn more about your brand.
According to email marketing stats from 2017, the click-through rate average was 3.42%.
However, CTR varies across industries.
Another email marketing metrics study revealed a click-through rate average of more than 4% for Consumer Services, Nonprofits, Computer Hardware & Telecommunications, and Associations & Government industries.
If your campaign’s click-through rate is high, or more than 4%, your emails’ content and calls-to-action (CTAs) are working.
How to Increase Click-Through Rate on Email
- Create enticing content: To increase your click-through rate for email campaigns, you’ll need to produce content that’s interesting and relevant to recipients. If they enjoy what they read in an email, they’ll want to learn more by clicking the links inside that email.
- Test personalized CTAs: You can try modifying the CTA link text in your emails to cater to different types of customer segments. Create 2 different CTAs to use with the same link, like: “Click here for more information” and “Learn more about XYZ’s benefits.” Then see if specific phrasing leads to an improvement in the overall volume of clicks.
Email marketing conversion measures the percentage of recipients who opened your message and completed the desired action. That action could be a visit to a specific webpage, a purchase of a product, or something else – it all depends on your goal.
You calculate the conversion rate by taking the number of recipients who completed a desired action, and dividing it by the number of emails delivered. Like the other percentage-based KPIs, multiply that number by 100 to get your percentage.
What is a good email marketing conversion rate? The percentage varies depending on the type of email sent. For example, the average conversion rate is 1% for newsletters. It’s 5% for follow-up emails (emails that remind people to complete an action). Sumo estimates the average email conversion rate is 1.95%.
If your email marketing conversion percentage is higher than 2%, it means your campaign is successful in generating interest.
How to Get a Better Email Marketing Conversion Rate
- Offer value: Make sure you’re offering enough value in return for the action you’re expecting people to take. For example, you could work on making personalized recommendations for different customer groups, and catering your offers to them. It’s important to consider that real value will be different for different people, and your data can help bring you closer to finding that value.
- Avoid misleading claims: There’s nothing more frustrating than arriving on a webpage through an email only to find out that your experience is different than the claims made in that email. Don’t disappoint people with false or exaggerated statements – be genuine instead.
The term “unsubscribe” means to remove your email address from someone’s mailing list. In the context of email marketing metrics, the unsubscribe rate measures the percentage of recipients who opt out of your email list. Unsubscribes are an indication that they don’t wish to receive any further communications or emails.Remember, you’ll need to include an easy unsubscribe option in every email. Otherwise, you may face penalties through the US CAN-SPAM Act, like we noted as part of our email marketing strategy discussion in Chapter 1.
The email unsubscribe rate formula is the number of unsubscribes divided by the number of messages delivered. Multiply this number by 100 to get a percentage.
The average unsubscribe rate for email largely depends on the industry you are in, but anything below 0.5% is considered desirable.
How to Reduce Unsubscribe Rate
- Update your mailing list: Make sure you’re only emailing people who agreed to receive messages from you and continuously refresh your list by adding new, interested contacts and deleting old, inactive ones. New subscribers are typically more open to receiving news and special offers.
- Make your emails responsive: Email marketing open rates on mobile are skyrocketing. So if you’re not optimized for mobile, this could be a contributing factor for a high unsubscribe rate.
Bounce Rate (Hard and Soft)
The bounce rate for emails refers to the percentage of emails that were not delivered. Undelivered emails go back to the sender. Typically, the bounce rate is split into 2 categories:
- Hard bounce: When an email address is wrong.
- Soft bounce: When there’s a temporary delivery issue. Perhaps a server is down, or the recipient’s inbox is full.
You can calculate your bounce rate by dividing the number of bounced emails by the number of emails sent. Multiply the answer by hundred to express it as a percentage.
The bounce rate is one of those email marketing KPIs that you’ll want to keep as close to 0% as possible. However, the average bounce rate for email marketing varies for different industries.
How to Get a Lower Bounce Rate for Emails
- Clean up your email list: Many bounces occur because the email addresses are no longer valid. See if you can spot any contacts you haven’t gotten any opens, clicks, or engagement from in a while, and remove them from your list. Your email marketing automation tools can likely help with this.
- Make sure your email isn’t marked as spam: Ensure your templates are up-to-date and don’t have any traits that can land you in a spam folder. Tools like mail-tester.com can help you avoid sending spammy emails.
List Growth Rate
As the name implies, email list growth rate shows how quickly your email list is growing. It also takes your unsubscribes and invalid emails into account. List growth rate is one of the most important email marketing KPIs because a healthy email campaign needs to be refreshed with new subscribers.
If you stick to the same email marketing list, it will naturally shrink as people change jobs, switch email programs, or stop using their account altogether.
To calculate your list growth rate, take the number of subscribers you’ve gained. Then subtract the number of subscribers you’ve lost, as well as the number of invalid emails. Divide the answer by the total size of your list. Then multiply the result by a hundred to get a percentage.
It’s estimated that you’ll need a positive list growth rate of 25% or higher per year to maintain the same amount of subscribers. That’s because an email marketing list experiences a natural decay, expiring by about 22.5% each year. Therefore, it’s more important than ever to focus on growing your email list and reducing the number of unsubscribes.
How to Increase Your Email List Growth Rate
- Host a contest: A great way to capture more addresses from those who are interested in your product or service is to host a contest. For example, you could ask people to enter their email address to become eligible for a free giveaway. The winner is picked at random.
- Get feedback on unsubscribes: It’s an email marketing rule to offer recipients a way to unsubscribe. But you may not know that you can get feedback while doing it. For example, when the user clicks “unsubscribe,” you can present a multiple choice or text box asking the user to provide feedback. Feedback will help you identify the reasons behind unsubscribes so that you’re able to reduce the unsubscribe rate and have a positive impact on your email list.
Forward and Sharing Rate
Your campaign’s forward and sharing rate tells you how often your subscribers forward your emails to someone else. It’s one of those email marketing KPIs that can also reveal when users click on a social share button within your email to share its content on channels like Twitter or Facebook.
This metric is valuable not only because it reflects the level of enthusiasm for your messages, but also because it reveals if you’ve gotten any referrals.Getting referrals is one of the best ways to add new, high-value subscribers to your email list. If your existing subscribers are forwarding or sharing your emails, that means they’re actually referring you to others and potentially generating new subscribers for you.
You can calculate your forward and sharing rate by looking at the total number of forwards and shares you received through your sharing or forward button (SFB). Divide this number by the total number of emails delivered. Then multiply the answer by hundred to express it as a percentage.
According to Return Path’s email marketing metrics report, the average email forward rate was 0.02% across all industries.
How to Increase Your Forward and Sharing Rate
- Enhance personalization: The more personalized the email, the more likely the recipient will forward it to their peers. Put anything related to the recipient (photos from an event they attended, one of their Facebook comments, etc). in the email to make it personal. In such a context, it makes perfect sense that subscribers would forward that email to others, as it gives them a chance to boast a little about themselves.
- Integrate social media buttons: By planting a social share button in your emails, you can empower your subscribers to share enticing content via email directly to the inboxes of friends, family, and coworkers, which should increase your campaign’s visibility and list growth rate (new subscribers also impact your list growth rate, remember?).
Average Order Value (AOV)
Average order value (AOV) measures the amount of money your subscribers spend as a result of your email marketing campaign.
You should want to increase your AOV as it makes your email marketing spend justifiable, enabling you to continue reinvesting to improve your company’s profitability. Higher AOVs show that you’re making more money from each email campaign, making your business more profitable.
To calculate your average order value from email campaigns, divide total revenue by the number of customers referred via email.
When calculating this metric, keep in mind that AOV reflects the revenues earned per email campaign, not per customer.
According to Klaviyo’s industry performance benchmarks, the average order value for ecommerce email marketing was $99.80 across all industries.
As a best practice, compare AOV from email campaigns to overall AOV to see if emails bring higher quality conversions and customers.
How to Increase Average Order Value
- Offer free shipping to your subscribers: One of the best ways to increase average order value from email campaigns is to offer a free shipping threshold to your subscribers. For example, “Free shipping on all items above $100.” Once you’ve determined your AOV, add 20% to it. So if your average AOV is $100, it becomes $120. That can be the new number for your free shipping threshold, where you’d offer free shipping on all orders over $120, covering costs and encouraging subscribers to buy.
- Give first-time deals: If you’ve just added new subscribers to your email list, most of your prospective customers will be first-timers. Offering deals to them can help increase AOV. For example, you can provide this new audience a special discount when they buy your product in a higher-than-normal quantity or exclusive bundle deals for new subscribers.
Customer Lifetime Value (CLV)
Customer lifetime value in email marketing refers to the total monetary value a customer contributes to your company over their entire lifetime as a result of your email marketing campaign.
The longer a customer continues to buy from your company, the higher their lifetime value becomes. So instead of analyzing the total purchases made by customers, you shift your focus to individual buyers and their overall contributors to your revenue.
To calculate CLV, take the number of orders a customer (referred via email) has placed in a year. Multiply this by their AOV, and then multiply by the number of years they remain your customer. For example, if a customer buys 3 things in a year averaging $100, and they do this for 5 years, their CLV would be $1,500.
How to Increase Customer Lifetime Value
- Offer exclusives: You can set up an email campaign with exclusive offers just for customers with a higher CLV. There are many ways to appreciate these customers, such as offering VIP experiences, insider access, and special discounts.
- Consider bundles and subscriptions: Do you offer a product that has a lot of complements? Think about creating relevant bundles to generate higher order values. Search for your product on Amazon and browse the “Frequently bought together” section to get ideas. For example, a PlayStation 4 console can be bundled with a matching wireless controller.
Gross Profit Margin
Your gross profit margin tells you how much profit you’re making outside of the cost of your goods sold. This is an especially relevant KPI for email marketing because a lot of tactics include discounts of some kind.
Unfortunately, many merchants make losses because the discounts they offer regularly exceed their gross profit margin. This is why it’s key to understand what your gross profit margin is and how your discount strategy relates to that.
Your gross profit is your total sales revenue, minus your cost of goods sold. But this cost should also include any ad spend that directly relates to a purchase.
Let’s look at an example. Say you’re selling a product for $100 and the cost of goods is $70. You ran a Facebook ads campaign, and it ended up costing $20 to get a customer. This means your profit is $10. If you were given a 10% (or $10) discount, you’d make $0 profit. If you discounted more than 10%, you’d actually lose money.
To calculate your gross profit margin, divide your gross profit by your sales revenue. Multiply this number by 100 to get a percentage.
How to Increase Gross Profit Margin
- Go easy on the discounts: Make sure you understand what you’re bringing in before you offer discounts and deals to your customers. Keep in mind that you can incentivize customers without offering big discounts, like rewards programs, bundles, or freebies on low-cost items.
- Build a value-based brand: If your customers start depending on you to heavily discount your items, you’re in trouble. Try building value into the core of your brand through quality products, stellar customer service, and an easy and enjoyable shopping process. One study shows that 8 in 10 consumers will pay more for good experiences.
Return on Investment (ROI)
This is one of the most important email marketing KPIs to measure because it tells you how cost-effective your emails are. Simply put, ROI is a measurement of the overall revenue generated by an email marketing campaign, measured against the cost of managing that campaign.
This should also include the cost and salary of the individual doing the email marketing. Positive email marketing ROI means you’re earning more from your campaigns in comparison to how much you’re spending to run them.
How to calculate email ROI? Just take the amount of sales generated by a campaign. Subtract the total cost of setting up and running that campaign. Then divide the result by that same cost number. Finally, multiply the answer by a hundred to make it a percentage.
How to Increase ROI
- Segment your email list: Segmenting your email list allows you to send personalized messages to each subscriber. It categorizes each subscriber into distinct groups based on similar interests such as on-page behavior, personas, pain points, etc. By sending targeted messages to each separate group, you can increase your chances of making a sale and subsequently increase ROI. We’ll give some segmentation-based email marketing examples and tips in Chapter 3.
- Schedule emails for optimal days and times: Ideally, you want your emails to go out on the days when your subscribers are most likely to click and read them. To find the best time and day to send your email, try tracking your open and click-through rates to compare and measure the results. While Tuesday mornings may be a good time to send informational emails, Friday afternoons may work best for special offers.
2.2. How to Do A/B Testing
We’ve learned that the best way to see how your campaigns are performing is to look at the cold, hard data. The numbers don’t lie.
While looking at your email marketing performance metrics will give you good insight into how you’re doing, figuring out how to improve these KPIs is a whole different story.
For example, studies show that in some scenarios, a detail as small as the color of your buttons can impact how many people click it.
But how can you know what changes you should be making on your own efforts?
This is where A/B testing shines.
In email marketing, A/B testing (also called split testing) is the process of taking one element of an email, making 2 different versions of it, and comparing which version gets the best results.
These elements and results can be anything you want to accomplish, like comparing two different:
- Subject lines to see which gets the best email open rate
- CTA button colors to see which gets the most sales revenue
- Email layouts to see which gets the highest click-through rate
- Email send times to see which one gets the most engagement
How A/B Testing Works
A/B testing is done by randomly sending the first version to 50% of your audience, and sending the second version to the other 50%. Then, you can see which of the two versions has the best email marketing metrics.
You can choose to only send to a portion of your email list or segment, then send the best-performing version to the rest of them. Or you can include your entire list or segment in the test, and then use the results to build future emails.
But whatever you choose, it’s important to keep in mind that the bigger your audience, the more reliable your results will be.
You can look at A/B testing as a 5-step process:
- Determine which email marketing campaign metrics you want to improve. Do you want to increase your email marketing open rates? Try testing subject lines. Do you want to boost click-through rates? Try testing your calls-to-action (CTAs) to see if you can use more effective wording.
- Hypothesize the impact your test will have as you build your second version. What do you think the results will be and why? Do you think that your second subject line will get more opens because you were more descriptive about what’s inside the email?
- Identify exactly what you want your second version to look like, then build it. If you’re using a special tool, you can build it right inside the platform.
- Run your test. Your A/B testing tool will figure out all the details of who to send each version to (it will be as random as possible). It will also track all the results, so you can sit back and relax.
- Measure your results. How did the second version perform? Did it match up to your hypothesis from step 2? Are the results statistically significant? (Keep reading for more info on statistical significance, which is an important part of A/B testing).
What’s the Deal with Statistical Significance?
Of course, there’s no 100% certain way to tell why one version performed better than another version (because we can’t read people’s minds… yet). It could be because people genuinely reacted to your change, or it could be a total fluke.
This is why A/B testing relies on a concept called statistical significance. If one of your A/B tests is statistically significant, it means that your results were likely to be caused directly by your changes instead of by chance.
This number is represented as a percentage. For example, if your test has a 95% statistical significance, it means that there’s a 95% chance that the results are reliable.
There’s a lot of complex math involved with statistical significance, which is why I strongly recommend using a specialized platform for A/B testing.
These platforms will give you advice and guidance on how to read your test results and ensure that they’re statistically significant. This way, you’re not wasting time and effort on making changes that aren’t even effective.
Running an A/B Test
First, decide what to test. Here are some ideas and examples of what they might look like:
- Subject line: “Special Sale for Our VIP Customers” vs. “Thanks for Being a VIP – Take an Extra 10% Off”
- CTA: “Shop Now” vs. “See Sale Items”
- The content, length, and language in your headline, main body copy, and closing copy
- Content of special offers: “Buy 1, Get 1” vs. “Free shipping”
- Message layout: single column vs. 2-column, image on left vs. right, etc.
- Visuals: different images, fonts, colors, etc.
- Testimonials: which ones to include, or if you want them at all
Setting Up the Test
As for setting up the campaign, your A/B testing software should be straightforward and helpful.
Let’s run through a quick example from Campaign Monitor.
First, choose which element you want to test.
Then build your two versions.
Then, select other details, like how many people you want to send your test versions to, which email marketing success metric you want to choose the winner based on, and how long you want to measure the results.
Campaign Monitor offers a cool feature where you can choose a small portion of your list to test on, then it will automatically send the winning email version to the rest of your list based on the other details. (Keep in mind that if your list is small, this might not be a good idea, as a small group will decrease your statistical significance).
When the test is over, it will show you a simple email marketing metrics report for how they both performed.
Keep in mind that every tool will have different features and benefits, and this was just an example to give you an idea of how the process works.
If you do it right, A/B testing can be a great way to make sure you’re performing on all of your email marketing campaign KPIs. So don’t skip out on this helpful addition.Chapter 4 will be all about email marketing tools, which will include some top A/B testing tools.
At this point, you’ve got the hang of what you should be looking for in your email marketing – and overall business – performance. You’ve also got an idea of some tips, advice, and testing you can perform to make sure you’re doing your best.
Now, let’s dig into what it takes to build an awesome email marketing strategy, including all the latest tips, examples, and best practices.