How to measure ROI for email campaigns

ROI isn’t just about measuring. In times like these, to be brutally honest, it’s about winning. 

ROI (Return on [Marketing] Investment) really needs to be measured in financial terms to make the sort of sense your Financial Director wants to hear, although if you look at ‘value’ as the output, value can be defined in a number of ways. You could for example define value by how likely a customer is to speak highly of you, though it’s almost impossible to establish a financial value to this. Some of the wilder social media agencies will tell you a Facebook “Like” equals £10, which is every bit as useful as a Tweet being the same as a gumboot!

For simple - monetary - ROI, there are two approaches. You can either track your customer all the way to a completed online sale, or track changes in behaviour against a benchmarked control.

You can add a time dimension to this too by looking at the long-term value of a customer - the Customer Lifetime Value (CLTV) - which may be very different to their short-term value. If you’ve ever subscribed to TM Lewin or Richer Sounds emails, where there’s a constant barrage of sales until you capitulate, you’ll know all about balancing an increase in short-term spend against burn-out. In other words, milking the customer too hard usually increases churn... I may buy three times in quick succession but then you’ll lose me forever.

A customer must, by law, have opted in to your email communications, so you know who they are and, provided your email service provider has half-decent tracking and you can tie their purchases to emailed call to action, then you can see the ROI immediately - you spent X on the campaign, which drove Y sales. Presuming you spent less than the extra profit you generated, it’s probably worth doing again. Over time you can then see curves of drop-off in response and optimise your communications accordingly.

Tracking against a control (or baseline) requires a scientific approach and segmentation (perhaps low, medium and high spenders, defined by behaviour, demographics and motivation). This kind of approach will give you the means to track changes in purchase behaviour and attitude towards your brand over time – powerful stuff, In practical terms, if you have a benchmark (for example Tesco data) then you can compare your audience with Tesco’s and factor out TV campaigns and see the actual effect your email campaign is having.

You’ll probably be able to ascribe certain characteristics to a set of customer segments, for example average purchase frequency, average transaction value and CLTV. (For what it’s worth, you’ll nail 80% of everything you need to achieve with segmentation in around six or seven key segments.) If there’s a clear difference between the reactions of two segments to your campaign, for instance if one segment responds by spending twice as much every month, then you can probably guess which segment to spend the most money on.

This approach also tells you where to spend your advertising budget, because obviously you want more people like them... and conversely you can stop spending money on acquiring more people into the lowest performing segments.

Taken only at its face value, ROI is about working out what you got in return for what you spent. But it’s so much more: it leads you from email marketing to eCRM, and that’s a transformational shift. ROI is about gaining an understanding so you can spend less on low profit customers and more on high profit customers. When you do that, you start winning.

Parlaying custom into advocacy – why brands should be more pushy with their social media

It’s very rare that I get excited about a brand I become a customer of. I’m one of those people who really doesn’t engage with marketing. I’m probably not alone. And yet this is my territory, my metier – I work very hard to create engagement strategies for clients that can be demonstrated to work. I am, as it were, my own worst enemy!

So how do you, as a brand, engage me, as a disengaged person with what I’d consider to be better things to do with my social time than talk about your brand? I’ve been thinking about this in the context of two recent occasions where I have actually felt like praising a brand in public. The first occasion: on the way to a meeting I spilled coffee on my shirt. I was in the city, and I spotted a TM Lewin. I went in, bought a shirt, explained my predicament, and the manager arranged for the shirt to be pressed, in the shop, there and then. I went for a walk for five minutes and hey presto, new, unwrinkled shirt.

I tweeted about it when I got back from my meeting. TM Lewin’s tweetie person followed me and retweeted (quite rightly) my happiness with their service. Fab. The second occasion, this morning, my wife asked me if these were the shoes I normally wear with my suits. I told her they were from Loake, and that I can wak for miles in them – the very first pair of truly comfortable work shoes I’ve had. It crossed my mind to tweet that I love my Loakes, then I remembered I’m not that kind of person (so I wrote this instead).

Both are brands I’d of course love to work with. Both are brands that have built solid reputations for service and product quality. Did Loake sell me these shoes? I think actually I got them from Next, so which of those companies should be the one to do the customer engagement? And why?

One of the striking things about the TM Lewin experience is that very clearly several people from TM Lewin now follow me on Twitter (no idea what they get out of it, but feel free – twitter.com/felixvelarde), but nobody’s ever been in touch. I am clearly, or at least I was once, a brand advocate. I spread the word, in a credible, completely unprompted way. But no-one has since asked me if I’d like to join a loyalty club, or corresponded with me on Twitter or otherwise to find out how to make sure I continue to be an advocate. It’s unpushy, which is nice, but it misses an opportunity. TM Lewin’s social media strategy needs a tweak or two.

And the fact the brand doesn’t have an eCRM programme is quite surprising – all of its customers are repeat customers, we have to buy similar products regularly, we have preferences... TM Lewin could take a leaf out of Pink’s book and keep our sizes on a database, offer us things they already know we want. And so on. The opportunity to create an engaging, relevant and pretty much self-managed eCRM programme should be too good to pass up. And by creating engagement they’ll be parlaying an initial positive first impression into serious loyalty and further opportunities for advocacy.

Someone like me, who doesn’t actively engage, who almost never spontaneously advocates a brand to his friends and acquaintances, might be driven to do so more often. Certainly, I could become a very loyal customer. Since my experience I’ve bought shirts from TM Lewin, though I also buy from Pink, Hackett and others. I could be engaged more, to their exclusion. The next time I think about shoes, I will probably be thinking about buying some Loakes, though because I’m not in their eCRM programme either I have no idea where to start. Perhaps I’ll start with Next. I really can’t remember if it was Next - if not then Loake might lose the sale while I’m wending my (possibly easily distracted) way to their brand – so again, here’s an opportunity.

Brands must – must! – engage with their customers. The best brands, the ones that provide fantastic service, or fantastic products, are the ones that must do so even more – they have an opoprtunity to cement their customers after the first great experience in a way that only becomes more dilute as time goes by. It’s an opportunity that must not be missed.

Follow me on Twitter: twitter.com/felixvelarde