Is Email Marketing’s ROI Sky-High or Irrelevant?

For the better part of the past two decades, email marketing’s return on investment has hovered around 40:1, according to a variety of sources. For instance, a recent Litmus survey of more than 2,000 marketers found that email marketing’s ROI is 36:1. That means the average brand can expect to earn $36 for every $1 they spend on their email marketing efforts.

Compared with other channels, email marketing’s ROI is typically near the top of the spectrum, up there with brands’ investments in their website and organic SEO. Email marketing outperforms SMS and push marketing, as well as search, social, and other digital advertising. And it blows away the returns seen with traditional media channels like direct mail, TV, and radio.

This ROI hierarchy has been in place for a long time. Given that, you might expect for brands to be perpetually eager to invest more in their email marketing programs, especially as they gain more AI capabilities. However, that doesn’t appear to be the case.

Instead, brands are deprioritizing marketing and shifting budget from higher-ROI owned channels to lower-ROI paid channels, according to Gartner’s 2024 CMO Spend Survey. That seems like a poor strategy, both short-term and long-term, so why are brands doing this?

Let’s explore possible reasons why brands aren’t more drawn to email marketing’s high ROI.

How High Is Too High?

Periodically, a brand will brag about achieving an email marketing ROI of 80:1 or even more than 100:1. And a few years ago, an ESP bragged that their customers were getting a 90:1 ROI. These kinds of huge pronouncements are damaging for a couple of reasons.

First, they’re unbelievable. They immediately invite accusations of creative calculations. Indeed, that ESP was using some funny math to get their 90:1 figure.

And second, having an ROI that high is a sign of a poor email marketing program. Don’t get me wrong, having healthy margins is great. But most businesses really want bigger profits. So, a super-high ROI is a sign that your program is ignoring investment opportunities in tactics, strategies, and improvements that produce much lower, but still high ROIs of, say, 40:1 or 25:1. That’s still a much higher return than you’ll get investing your marketing dollars in lots of other places.

In other words, why quickly pick just the low-hanging fruit, when you could spend more time and pick way more fruit?

Is It Out of Sight?

Even without exaggeration, email marketing’s ROI is high enough that the majority of brands are confident enough in their email marketing spending that they don’t expend the time and energy to calculate their ROI. According to Litmus’ 2024 State of Email Innovations report, 72% of marketers don’t know the ROI of their email marketing program.

Christopher S. Penn points out that “ROI is best suited for low-resource environments, for when you have very limited resources and you need to make every dollar count. You use it to judge whether or not something is worth investing in.”

Even done poorly, email marketing tends to generate a healthy ROI, so the go-or-no-go calculation of an ROI is unnecessary for most brands. Given that, it’s not much of a surprise that many organizations focus on downstream metrics, like engagement, leads, and retention that are key metrics to their particular business model.

The ROI of Email Marketing Activities?

Expanding on the idea of using ROI to decide whether or not doing something is worthwhile, it makes sense to use ROI calculations for individual email marketing initiatives.

For example, Oracle Digital Experience Agency research found that the following are among the most impactful email marketing tactics and tools:

• Email personalization
• Automation or triggered emails
• Email segmentation
• Responsive email design
• Omnichannel orchestration

That makes those areas very safe investments. However, ROI calculations for AMP for email, schema, and other email tactics that were rated the least impactful would be prudent.

The Cost of Being Complicated?

Since I got into the email marketing industry nearly 20 years ago, there’s been a pervasive feeling that the channel is underfunded and therefore under-respected. The perpetual cost pressures on one of the highest ROI channels seems unlikely to change anytime soon.

I can’t help but wonder if the biggest contributor to the ongoing lack of commitment to the channel is the result of the channel’s ever growing complexity. At the same time that AI is opening up new opportunities, inbox providers have never been more active—whether it’s schema being forced on senders, the BIMI standard fracturing, carefully crafted preview text being replaced by AI summaries, or the ongoing challenges caused by Mail Privacy Protection. All of that is making email marketers’ jobs extra difficult.

And you can see a bit of a backlash. There’s a longing for simpler times, whether it’s a return to plain-text emails or a desire to fully outsource the creation of emails to generative AI.

The growing trend of in-housing marketing work to internal agencies is perhaps also part of this backlash. But rather than finding more cost-effective ways to conquer email marketing’s complexity, brands that in-house seem poised to ignore it. After all, the internal agencies that are picking up these marketing responsibilities have traditionally handled advertising.

This explains why Gartner found CMOs shifting budgets decisively toward paid media. It’s what these teams know best. It’s also much, much easier to buy more ad space than it is to increase the accessibility of your emails or to improve engagement through segmentation or to measure the impact of journeys on the customer relationship and lifetime value.

The return on investment for email marketing is as high as it’s ever been. However, with the current focus on simplifying everything and cutting costs over investing in growth and relationships, email marketing seems to be losing out.

Photo by Irina Ermakova on Unsplash