Understanding Email Marketing ROI

by Jetlore

Quantifying the effectiveness of an email marketing campaign and its return on investment (ROI) is fundamental to e-commerce. Every retail company has their own way to measure effectiveness of email campaigns and email marketing solutions. Having worked with many different retailers and having seen different approaches, we’d like to describe the approach and methodology we’ve found to be the most effective. It’s fairly simple and straight-forward but is able to assign an exact dollar amount to each email, provide a framework for decision making when deciding between email campaigns and software vendors, and quantify return on investment for any email marketing software.

The Basics

Let’s start from the basics and explain the key components of the email conversion funnel with associated metrics at each stage.


Deliverability is right at the top of the email funnel. It goes without saying that if your campaigns don’t reach your prospective customers, your marketing is dead in the water. E-commerce email campaigns should achieve 99% deliverability with less than 1% of hard bounces. An abnormally high number of bounces is usually a sign of an old, stale list or a problem with spam filters.

Open Rate

An email landing in an inbox won’t make any sales if it isn’t opened. The open rate is the first real step in the purchasing process and is one the key metrics of subscriber engagement. Open rates in e-commerce range between 10% and 25% with an average being 17.35%. There are a number of factors that can affect open rates including subject lines, the time the email is sent, the frequency of your emails, and the content of emails (the user does not see the content until the email is opened, but if the content is not engaging, the user will be less likely to open emails in the future).

Click Through Rate / Click-to-open Rate

Click through is how your customers get from email to your retail website and is the next step in the email purchasing funnel after the open. The content of the email is the primary driver for click throughs. Customers will hopefully find one or more of the items featured in the email interesting and click on a picture or link to consider a purchase. Although the industry frequently quotes click through rate (CTR), which is clicks divided by the number of delivered emails, click-to-open rate, measured by clicks divided by the number of opened emails, is more telling of the engagement level of the email content. It allows you to focus on the efficacy of email content removing the bias of the opens heavily influenced by subject lines and time of day. The average open-to-click rate for e-commerce hovers around 15–17%.

Conversion Rate

Given a proper attribution mechanism (Jetlore has a built-in attribution mechanism), you can track and measure how many purchases are made after users click on email content. Conversion rate is simply the number of purchases divided by the number of email clicks. It’s at the very bottom of the sales funnel and ranges between 1% and 4%.


Given proper attribution, you should be able to track and measure not only conversions but also the actual sales made, i.e., the sum of all purchases made after users click on the email content. If you can’t measure the purchase value, then you can always multiply the number of conversions by the average order value to get an approximate value.

Calculating Email Marketing Performance

When working with retailers, we’ve seen a whole spectrum of different approaches to evaluating the effectiveness of an email campaign. What we propose here is the simplest and most intuitive metric that could be measured in the context of an A/B test or in isolation to measure effectiveness of an individual campaign.

To measure performance of the whole email campaign top to bottom, we use:

Revenue per email sent = Total sales attributed to campaign ÷ Number of delivered emails

To measure performance of email content, we use:

Revenue per email opened = Total sales attributed to campaign ÷ Number of opened emails

You could calculate these metrics to decide the effectiveness of an individual email campaign or effectiveness of a specific email marketing solution. For example, if you want to introduce a new weekly email newsletter, you measure its revenue per email sent and compare it to the existing weekly email promotions. Alternatively, if you wanted to see the effectiveness of email merchandising solution like Jetlore, you compare revenue per email opened for non-merchandised campaigns and campaigns merchandised by Jetlore. Most importantly, these metrics can be measured in the context of an A/B test: you measure revenue per email sent/opened for the control group and the test group and calculate the incremental revenue per email.

Calculating Email Marketing ROI

The metrics we propose are especially good when calculating and estimating ROI of email marketing tools.

Earnings before Email Costs = Revenue per email sent × Average margin per sale.

Email Costs will include your email service provider costs plus fees for any software that optimizes content in your email. Jetlore is an example of software that optimizes email content by algorithmically selecting and optimizing merchandise featured in each customer’s email.

Total Email Marketing ROI = Earning before Email Costs ÷ Email Costs

Now, how do you calculate ROI of a solution like Jetlore? You first calculate revenue per email opened with Jetlore and without Jetlore to figure out incremental revenue (these metrics could be obtained via an A/B test):

Incremental Revenue per Email = Revenue per Email with the Solution - Revenue per Email without the Solution

Then you divide the result by the cost of the solution per each opened/sent email to get the ROI:

ROI of Solution = Incremental Revenue per email ÷ Cost of Solution per email

A good solution should bring you at least 1.5x ROI (Jetlore on average generates 3-10x ROI).

Putting it Together

You may wonder why we talked about deliverability, open, click through, and conversion rates in the beginning if we’re focusing on the revenue per email as the single most important metric. The devil is in the details and these metrics provide critical insights into the email performance numbers. Specifically, say, the solution lifts email performance by $0.02 per email sent. The question is how? The solution can increase revenue per email by lifting any of these metrics: open rate, click-to-open rate, conversion rate, or average order value. Granted that the other metrics stay constant, a lift in any of these metrics will produce a lift in the revenue per email sent. Understanding and measuring changes in each of these individual metrics provide us insights into how and through what means efficiency in revenue are achieved.

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