OPINION How financial institutions can measure email marketing engagement

Alex Sword


The Financial Services Forum

Sam Holding, Head of International at SparkPost

In marketing, being able to measure, analyse and act on data is crucial. If marketers can’t highlight how particular channels are delivering ROI they may find the budget they allocated for certain activities is soon siphoned off elsewhere.

One field in which data is not always clearly understood is email marketing. Email can deliver all kinds of sophisticated and nuanced insights into customer behaviour. Financial institutions just need to know which stats to look for and what that data says about the state of a campaign, or more broadly a business, in order to benefit from it.

Three key email metrics

Email metrics fall into three key areas: Audience Metrics, Inbox and Deliverability Metrics, and Program and Campaign Metrics. Each set of metrics will be of specific interest to different employees or stakeholders in a business.

1. Audience Metrics – This is the basic data about subscribers and includes their email addresses, along with some behavioural data. This information is mainly of concern to marketing or email management teams.

2. Inbox and Delivery Metrics – This refers to the deliverability rate: how many emails actually made it to an inbox. This information is useful to marketing personnel, deliverability specialists and those in more operational roles.

3. Programme and Campaign Metrics – This is the data that is arguably of most interest to more senior members of the team. It includes basic information such as open and click rates, but also focuses on where the recipient goes next and encompasses conversion rates, and ultimately campaign ROI calculations.


Audience Metrics

The most basic ‘Audience Metric’ stat is the number of opted-in subscribers. Not all of these may be accessible, so there is a further split between mailable and non-mailable subscribers.

Each time an email list is examined there are likely to be opt-in and opt-outs, namely people who have chosen to subscribe in a given period and those who have actively pressed an unsubscribe button.

Subscriber lists are also re-calibrated via a ‘purged email address process’. Addresses might be taken off the list through dormancy, the length of subscriber inactivity, or addresses having been classified as a hard bounce. There may also be some recipients having marked an associated email as spam.

The second element of Audience Metrics concerns the activity of those who receive the email. For example:

1. Recency: number of days since the customer’s last purchase

2. Frequency: how many purchases has the customer made in the analysis time frame

3. Monetary: how much has the customer spent in that timeframe

Using this data, it is then possible for marketers to calculate the lifetime value (LTV) of an email address.

Net Revenue x Gross Margin = Gross Email Margin

Gross Email Margin = Email Related Expense = Net Margin Email Dollars

Net Margin Email Dollars ÷ # in Average Mailable Base = Value of an Email Address (12 months)

The LTV is simply the above formula calculated over a specific period – for example, the average number of years that an email subscriber is likely to remain active on the sender’s file.


Index and Delivery Measurements

Index and Delivery Measurements tally how robust an email list is and how well it performs.

The key criterion here is the bounce rate. In other words, how many of the emails are rejected. There are two types of bounces: hard and soft. A hard bounce is when the email is rejected from the subscriber’s mailbox completely. A soft bounce is when an email is not permanently rejected. For example, if a person’s inbox is full. If after several attempts the email can’t reach its target it then becomes a hard bounce.

The other key Index and Delivery Measurements look at where in the inbox the email actually lands. An Inbox Placement measures the email that made it to the sender’s subscriber inboxes instead of the spam or bulk folder.

Conversely, Spam Placement measures the percentage of email that was sent to the subscribers’ spam/bulk folder instead of the inbox.


Program and campaign metrics

This set of statistics tells the key story that both marketers and their management colleagues need to know – how successful has email marketing been in not only reaching customers but also ultimately delivering sales?

Reaching a person’s inbox is one thing, but the next key stat is the crucial one – open rates. Opens are tracked on two levels:  Total Opens, the number of times a campaign’s audience has opened that email, and Unique Opens.

The better metric is arguably Unique Opens. This is the total number of individual recipients who have opened a campaign’s email. Having said that, due to the recent iOS15 update, specifically the Mail Privacy Protection feature, around 40-50% of email opens are now expected to be unreliable due to changes in consumer privacy settings causing increased privacy around customer email behaviour.

Once an email has been opened, how the person then responds is also recorded. It might be a click rate that calculates the total number of clicks on a specific campaign as a percentage of the total number of opens. Or at the other end of the spectrum, it could be the number of post-open unsubscribes.

Finally, the most crucial stats of all, conversion rates. Invariably ‘conversion’ means a buying event usually in which a call to action from an email has led to a click to a website and ultimately a purchase.

So how then does a marketer work out whether or not an email campaign has been successful? The key metric for this is calculated via the campaign’s profitability formula which works in the following way:

Revenue Attributed to Campaign x Applicable Gross Margin Rate = Campaign Margin

Campaign Margin – Campaign Expenses = Campaign Profit Attribution

Campaign Profit Attribution ÷ Campaign Expenses = Campaign ROI

Whichever metrics you and your teams spend the most time reviewing, those listed above are those that matter most when it comes to direct measurement.

Learning what the metrics are, how to calculate them, how to use them, and how they can impact your program will arm you with the necessary tools to make better business decisions around campaign implementation and optimisation.

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