How do email & SMS automations generate revenue in eCommerce? Plus, how much money they should make.

One of the most common questions we get is “how email automations generate revenue? “

Automations seem more complex than they really are, and email automations/flows should make up a large portion of your eCommerce revenue. Once you have a foundation built they become some of your most consistent and predictable revenue-driving channels for your eCommerce store.

They should generate between 10-20% of your total eCommerce revenue.

But creating a strong foundation for email and SMS automations can take a while.

So we decided to walk through how to think about where to start, what kind of ROI to expect, how to prioritize, and how to continue to drive more and more revenue over time.

But before that, how about we look at what email automation is and understand how it works.

What are email automations?

Email automations, also referred to as email flows for the Klaviyo faithful, are emails triggered/sent based on specific behaviors of your customers/audience. Basically, if they perform a particular action; they get a particular email. These emails containing different messages and notifications are placed strategically at various stages of your customer journey/customer lifecycle.

Strategically, your goal should be building a system of email automations/flows that onboard and convert more new customers, maximizes average order values, and maximizes customer lifetime value.

They essentially help you orchestrate your customer journey and nudge your audiences towards the direction or behavior you want to see from them at various stages. Your goal should be on improving and optimizing the experience for them so you get a profitable and happy customer. Think proactively working to make your good customers your great customers by walking them down the ideal path for them.

If their experience is good, they will want to return to your company, which will increase revenue in the long run.

So when you understand how you can align your automations to create a customer journey that is beneficial for them, you can again drive the behaviors you want to see in them, which can be extremely valuable for your business.

Klayvio is one of the most effective marketing automation platforms for ecommerce stores to automate SMS and email marketing to help businesses acquire, retain and grow their customers. 

Email flow includes automated emails that can be sent during different stages in a customer journey, and those stages could include: 

• Nurturing during a welcome to get them to make the first purchase.
• Answering questions during a browse abandonment sequence.
• Onboarding smoothly during a post-purchase to make sure they use and like the product.

This ensures that you get the behavior you want to see in them. From their journey of making the first purchase to returning again and again to your business, you should try to use these automations to the customer’s maximum benefit. 

You must automate your emails according to different customer requirements and contexts by first figuring out the stage they are on and then streamlining your emails to fit them directly. This provides them with exactly what they need. 

Appropriate use of automations also enhances your customer’s experience, and they benefit from your product, use it, and come back to purchase it again.

So if you see consistency and an increase in these behaviors as a result of these automations, you should know that you are on the right track!

To scale this up to your business, these automations must be highly contextual. They are exactly what the customers need. And for that, you need segmentation. 

Segmentation of the audience is very important as it helps you categorize your audience according to their features and helps you figure out what information is suitable for whom? 

It helps you group one kind of audience together. So if a single customer from a segment behaves in a certain way, you know what information would they need, and then you are there for them! 

Sending relevant emails to the appropriate audience adds value to their customer journey and makes your goal of seeing desirable behaviors easier.

For instance, if you sell shoes, and your customer has purchased running shoes from your company, you should now make sure that your company keeps a follow-up with that customer by sending relevant information now and then. 

It would help if you tried to inform and educate them through various but relevant messages and keep them engaged. 

You can go about it by saying something like,

“Hey, three months in, this may be time for a new pair of running shoes.”

 Or something like,

“Do you know you need a new pair of running shoes every six months?”

Or maybe five months in and saying like,

“Hey, you’ve had these shoes for about five months. If you’ve been using them well, it might be the time to buy new ones now!”

Notice how this keeps your goal of trying to nudge them in the direction you need them to go in alive and helps educate and inform them during the process. 

This would add value to your customer’s experience as they benefit from your expertise, ultimately benefitting you by making more purchases. So this creates a win-win situation. 

You could also use automations just for customer service purposes like passing on information or addressing certain issues, such as sending shipment notifications, solving a delay problem, etc.

In these cases, the goal is not to bring high revenue but to inform the audience in an efficient way using automations

So, all in all, this phenomenon has many components, all with different ways and angles to approach the marketing techniques. 

How do email automations Increase Revenue?

So now, let’s move on to our focus point for this article. 

The ultimate goal of using and introducing new automations is to increase your business’s revenue. Therefore, it is important to understand how they work to raise the bar for your revenue at different stages.

We’re going to make this easy for you to understand with the help of the graph below.

Suppose, in the beginning; we have a baseline revenue of $150,000 with existing automations only. And now, we start by adding new automation in the first month, which brings us an extra $10,000 in that month. This increases our baseline revenue from $150,000 to $160,000 in a month.

In the next month, we introduce new automations, and they drive an extra $21,000, increasing the revenue to $171,000, which is again a lot more than $150,000, and then the next month, the revenue increases to $184,000, which is $34,000 more than baseline revenue. 

So basically, the graph shows that adding new automations to our email marketing allows us to increase our business’s revenue to a great extent.  

One thing about using these is that all of this goes on in the background for us. We do not have to put extra attention or focus on handling it. 

You introduce new automation once, and they work at the back end for you. At first, the process might seem slow, but you get the results gradually, and you end up thanking yourself for introducing this into your business. 

Over time, you see that introducing new automations consistently helps you communicate effectively with your audience during different customer journey stages, drive desirable customer behaviors, and generate good revenue for your company.

You have to work on these automations in a very organized and consistent way, either by introducing new ones or polishing and optimizing the existing ones, depending on what that customer group is like. 

You use these to improve over time and go through a systematic introduction, iteration, and improvement process. This helps you to, again, raise that baseline level to a place where it’s really strong and helps you in experimenting, testing, and exploring what you can do.

This gives you a way to explore your audience and understand customer behavior to figure out which segment is more profitable and more active in which stage of the journey. What do they need, and how can you maximize your revenue from each segment. 

And how do you do this in a little bit more strategic way where you can let your best customers move up the audience hierarchy? 

(If you’re interested in audience hierarchies, we have a pretty good blog post about that) 

So what we get from this is that initially, new automations don’t always work in the background but need to be built according to different needs as they are triggered based on behavior; they need to be super contextual and super impactful. However, once you’ve created all this, they work in the background making everything easier and money generating for you! 

How much should your automations make?

Now, this may sound a bit crazy or too much initially, but considering a typical e-commerce store, depending on the business model, typically 10-20% of e-commerce revenue could be generated from these automations.

These automations are behavior-based activities. If you do everything right, i.e., study and understand your audience, every segment of it, and all the specific customer behaviors, you would know how to communicate with them effectively enough that they are convinced to purchase from you not only the first time but again and again after that. Giving them what they need and when they need it is the key component of this automation business. 

Giving recommendations based on customers’ buying behavior and your business model can also enhance the experience for you and your customer. 

For example, if your business deals in replenishable goods, you need to communicate and pass on information very contextually. You inform them every time the product is replaced. This creates a new segment in your audience, and you communicate with them accordingly, giving them the information they would need. 

Expecting a high revenue shouldn’t seem like a crazy business if you do all these things. You need to incorporate your customer knowledge into the baseline of automations and wait for it to work its magic and bring you the returns you never imagined. 

How do we track the revenue of these?

When thinking of tracking the revenue from automations, you look at the engagement-based metrics that will help you understand if you’re winning or losing. What are your performance-based metrics? Meaning, how is the overall email strategy working? Is it all going in the direction you wanted it to? And then what the organizational level is helping us understand

So typically, we’re looking at the number of repeat customers or revenue from repeat customers.

And from that, we can draw that the number of repeat revenue from repeat customers is directly correlated to our revenue from automations and revenue from campaigns.

So it is understood that these two figures will be really important numbers that you’re looking at. So during monthly reports, your main goal and the main point of concern would be the revenue from campaigns or revenue from automations. 

In engagement-based metrics, you typically look at the click rates that define whether the message you sent was convincing enough for the audience or not. And these metrics are going to contribute to the revenue from automations and campaigns. 

So now, these are not only marketing-level goals as they bring a great deal of revenue to the business but an organizational-level goals. So you typically track these revenues every month, specifically by following the monthly payment from each of those individual flows or automation.

This also helps make sure that they’re performing at a consistently high level, and if there is a need to tweak something and adjust something or improve it, it can be done so. This also helps make sure that the systems are working and the automations are working so that you can improve and iterate.

But how do you prioritize which to focus on?

This part has a process where you look at various aspects of automation and decide which one to focus on first. 

You look at three different things regarding automation:

• How much revenue is it going to drive? 
• How much control do you have? 
• How much effort is it going to take?

You start by scoring the automations using these three features. You score all these out of nine and prioritize which ones to introduce first.

So the ones that are going to be driving the most revenue, you’re going to have the most control over and also going to take the least amount of effort are probably going to be the ones with the highest scores out of nine and are going to be the ones you would want to start with.

Top revenue-generating flows

The four most common and top revenue-driving flows for automations are: 

·      Welcome

Your welcome message is the one that is going to impact that first purchase and going to build a new customer for you. In this stage of your customer’s journey, you might want to walk them through that onboarding process, introduce them to the brand, introduce them to the product category, help them make a decision, and help them feel confident making a decision.

·      Abandon cart

This is basically an abandoned checkout, meaning the customer is at a checkout process with goods in the cart but does not complete the checkout process. This is where you’re following up with them to make sure they complete the process and make the purchase.  

·      Browse abandon

This is where the customer leaves your website after a full survey without adding anything to their cart so you can follow up with them and make sure that they have everything they need to make a decision.

We typically like to do the abandoned checkout first because that one is more profitable and a little bit faster to revenue than the other because the customer is more than half ready to purchase the former. In contrast, typically, more effort is required in the latter.   

·      Thank you/ Post-purchase

This is where you think about whether the customer is actually going to use the product, and so basically, you do a follow-up with them after they purchased, say thank you, and, in many cases, get a review of your product.

Conclusion 

So, there are many different kinds of nuts and bolts to this, but basically, this is how we look at email automations, generating revenue, and how do we raise our baseline revenue all the time? As we’re gradually expanding that base, that will work and compound for us over time.

That extra gain that we make using new automations is not a one-time thing only; if we are consistent and keep introducing new automations, it could mean millions and millions of dollars for those additional automations that could drive revenue, which scales up with your business over time. 

So we can conclude by saying that automations may not seem like the sexiest area of like email or your marketing, in general, to focus on. Still, it’s a great tool for building a powerful system in raising the baseline revenue of your business, creating the behaviors you want to see from your customer base, and doing that in a way that’s automated completely based on contextual information and what they do and what they don’t do.

It’s something because it offers predictable recurring revenue that scales up with your business. 

Hope this article was helpful and answered all your questions as I tried to cover as much as I could using our angle to view automations and revenue.