Is Your Email Marketing Improving Your Sales Cycle
Marketing Metrics and Analytics, Online Marketing Tips
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Is Your Email Marketing Improving Your Sales Cycle?

Five Underutilized Metrics That Truly Gauge Success or Failure

While many outside the industry claim that email marketing is dead, those of us inside the industry know that email is alive and well. But how do you prove to the nay-sayers within your organization that email is improving the sales cycle? And even though for those who know that email is working, how do you quantify the value of the channel for your organization? 

When most people talk email metrics they focus on opens and clicks. Not me. I’m a bottom line girl. When I talk email I am looking at other metrics; metrics that relate to the bottom line. Here are a few of the numbers I look at.

But first… let’s talk about how to go about showing that the email channel is boosting sales over what would be generated if it weren’t in the mix. 

If email is the only channel you use for marketing, then this isolation exercise is moot. But if you’re using other channels in addition to email, you will need to segment your audience into ‘treated’ and ‘untreated’ segments in order to test and prove your hypothesis that email is boosting response above what it would be without email. 

The ‘treated’ group will receive email; the ‘untreated’ group will not. The groups should be separate but equal – the only difference between the groups should be the fact that one group receives your email marketing initiatives and the other does not. These groups need to remain consistent throughout the course of the test – you can’t move people back and forth between the ‘treated’ and ‘untreated’ group (that would jeopardize the validity of your results). 

Once you have the treated vs. untreated protocol in place, here are the five metrics you need to calculate and look at over time to show that email improved the sales cycle:

1.    Conversion Rate
2.    Return on Investment
3.    Value of a Lead
4.    Average Order Value
5.    Length of Sales Cycle

Let’s discuss them in detail one at a time. 

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1.    Conversion Rate

According to the Nielsen Norman Group ”the conversion rate is the percentage of users who take a desired action.” It’s simple to calculate – just divide the number of people who took the desired action by the total audience you are addressing. Here’s an example: 

Email Marketing Conversion Rate
In this instance, the “treated (email)” group has the highest conversion rate. Including email in the marketing mix provides a 64% lift (2.3% divided by 1.4%) in conversions. 

2.    Return on Investment (ROI)

According to Marketing Mo “Return on Investment (ROI) is a measure of the profit earned from each investment… the ROI formula is (Return – Investment) divided by Investment. It’s typically expressed as a percentage.” ROI is a little more complicated than Conversion Rate to calculate, but that doesn’t mean you should shy away from using this metric.

In a perfect world, you’ll have all costs incurred included in the ‘Investment’ number; that includes the cost of goods sold, postage, etc. For some organizations, this is a challenge. If this is true for your organization, you can modify the formula to include just marketing costs in the ‘investment’ figure. While calculating the metric in this way removes its direct correlation the bottom line, it’s better than not calculating it at all. Let’s look at some sample calculations: 

Email Marketing ROI

Once again, the treated (email) group is showing better performance than the untreated (no email) group. The group receiving email is returning nearly $2 for each $1 spent; the untreated (no email) group is returning just over $1 for each $1 spent. It’s a huge difference in the bottom line – nearly 2:1. 

Tweet: Is Email Marketing Improving Your Sales Cycle? http://ctt.ec/bKsar+ #emailmarketing #sales @pinpointe


3.    Average Order Value (AOV)

According to BigCommerce, “Average Order Value (AOV) is an eCommerce metric that measures the average total of every order placed with a merchant over a defined period of time.” It’s easy to calculate – just divide the total revenue by the total number of orders. 

While average order value doesn’t go directly to the bottom line, it has a tremendous impact on the bottom line. If you can make $XX,XXX with 10 sales or the same $XX,XXX with 100 sales, most organizations would rather make the same money with fewer sales. 

Let’s look at an example of a treated (email) vs. untreated (no email) AOV analysis: 

Email Marketing Average Order Value

Here you can see that the email (treated) group is generating a higher AOV than the untreated (no email) group. The difference is significant – the former’s AOV is 50% higher than the latters.  

4.    Value of a Lead

Lead value is a somewhat sophisticated calculation – I wrote an entire blog post for Pinpointe about it earlier this year. Lead value is calculated by dividing the total revenue generated by the number of leads. Calculating the value of a lead will typically show that including email in the mix increases the revenue generated and, in turn, increase the value of each email address (aka lead).

Here’s an example: 

Email Marketing Value of a Lead

As you can see, in this example, the treated group who are receiving email are much more valuable than the untreated group that aren’t receiving email. 

5.    Length of Sales Cycle

It’s clear that more revenue is better, but there’s another way to ‘win’ even when revenue is equal: it has to do with time.

There is a time value of money concept which states that “money available at the present time is worth more than the same amount in the future due to the potential earning capacity.” So even if the revenue generated is the same over the course of a long period of time, whichever group brings in the money earlier is the winner in terms of value.

By shortening the sales cycle, email can boost the value of the transactions. Here’s an example: 

Email Marketing Time and Value of Money

Here you can see that the treated (email) group is not only bringing in more money – they are bringing it in more quickly than the untreated (no email) group. There’s a value in that – getting the money earlier gives you the chance to reinvest it in the business sooner. 

In Closing

The next time you are looking to prove the value of email, use some or all of these metrics. Opens and clicks are nice, but these five metrics tell you a lot more about your campaign: 

1.    Conversion Rate
2.    Return on Investment
3.    Value of a Lead
4.    Average Order Value
5.    Length of Sales Cycle

Whether you’re trying to prove the value of email or just quantify how much benefit the email channel provides, these five metrics should form the basis of your case. Give it a try at your office and let me know how it goes! 

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Jeanne Jennings Visit Website
Jeanne Jennings is an independent consultant who helps medium- to enterprise-sized organizations make their email and other online marketing efforts more effective and more profitable. Her direct response approach to online marketing strategy, tactics and creative direction has helped numerous organizations including Hasbro, Scholastic, Verizon and Vocus (now Cision). Visit her blog and learn more at www.JeanneJennings.com.
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