How Much Revenue Should You Be Generating Through Email?
Automations and campaigns are the two main ingredients of email marketing. If you can whip these up nicely together, your email marketing can bring you the satisfying ROI you’re looking for.
Email marketing should be a critical component for any business. It will likely be your most profitable marketing channel, but you may be asking yourself. How much money should email really be driving? We get this question, and others like it all the time.
“How does email marketing increase sales?”
“What is a good revenue goal for my eCommerce business?”
“How much should I be making from email campaigns and from email flows/automations?”
“Why does email have such a strong ROI?”
If you’ve asked yourself the same things, you have come to the right place! In this article, I will walk you through the two main pillars of email marketing automations and campaigns, and how they optimize your email marketing experience and assure drive revenue.
- How much revenue should be generated through email?
- Growth Multiplier – 3 Ways to Geometrically Grow a Business
- Revenue from Automations/Flows – Email and SMS
- Revenue from Campaigns – Email and SMS
- How do these overlap?
- Ideal Percentage of Revenue from the Emails
So let’s dig in!
How much revenue should be generated through email?
While it might be challenging to pin down the exact amount, however, it’s becoming a lot easier to narrow in on exactly where your business should be in terms of how much revenue your business should be generating through email marketing.
At a high level, most eCommerce brands should be generating at least 25 to 35% of their total revenue from email. But to be in a good spot and feel confident, we want to be in the 35 to 45% range.
Being in the 35 to 45% range assures you use automation effectively in addition to your email campaigns. Automations (or flows for all the Klaviyo crowd) will provide a baseline foundation of revenue that you can expect to see month after month, plus the revenue you are driving through your campaign emails. Using content in campaigns and automations also gives you a way of adding value beyond a simple transaction.
This also enables you to get users back to your site without discounting and sacrificing your margins. This consistent process of bringing people back is how you create repeat customers and top-of-mind preferences with your audience.
We recommend doing this by building a drumbeat of consistent email campaigns and introducing new/optimizing and testing existing email flows/automations over time.
As you get into a rhythm you learn more and more about your audeince and you refine what works and what doesn’t. Every brand/audience is different and understanding what is going to drive the behavior you want to see is crucial for any brand.
The better you understand your customer lifecycle the better you will understand how to drive the actions you want to see at every stage to maximize the value driven through email.
Once you have one or both up and running, you should start to quickly see growth in your eCommerce revenue.
If you want to know your potential revenue and see your baseline income level, we have an incredible calculator that might help you in many ways.
Growth Multiplier – 3 Ways to Geometrically Grow a Business
There are different ways we can grow a business. I always like to think about things in terms of these three growth multipliers:
- Increasing the number of customers.
- Increasing your average order value.
- Increasing the number of purchases or lifetime value.
If were to double any one of these three, we would double the value of the business.
Numbers two and three is where email marketing really shines, and the best part is…
Wait for it…
Numbers two and three don’t come with an acquisition cost and they typically move with each other.
If the number of purchases increases, the average order value typically follows. So each time they are purchasing from you, they are buying more and more.
Email does impact the number of customers, too but is more helpful in welcoming the customers and getting them onboard with your brand. It is to try to persuade them to make the first purchase. And once you can do that, it can lead you to the other two of your goals. The intelligent way to impact your customers, AOV, and purchases (LTV) is through your automation and campaigns.
Most businesses underestimate the impact that customer lifetime value has on the company’s growth. Too many eCommerce businesses focus too much on ROAS (return on ad spend) only and on getting more and more customers. They believe this is the most effective way of measuring your business growth; however, this is not entirely true.
AOV (average order value) and LTV (customer lifetime value) are misunderstood because many businesses don’t pay enough attention to retention as a way of driving growth. If you want a deeper dive into retention, we have an article that unpacks retention marketing for eCommerce businesses and why it is so important.
Suppose you’re good at driving effective acquisition and bringing in new customers every season but not great at driving retention and keeping your customers coming back. You are basically running a glorified eCommerce vending machine, not a business.
Revenue from Automations/Flows – Email and SMS
We like to see clients earning between 10-20% of their ecommerce revenue through automations. This is an ideal range as you’re driving this amount by getting people onboard and driving repeat customers back in the door.
By using automations effectively, you’re not only driving customers back but also driving consistent incremental revenue monthly and yearly. And that revenue is an excellent foundation for a lot of the work you’re already doing.
Automated emails are highly contextual and typically drive a high level of high engagement on the customer’s part. The more relevant and to the point you are, the more valuable of an experience it’s going to be for them.
Things take time to build up
But it would help if you kept an open mind that these things and this rhythm build up over time. It’s not like you’ll set up 20 automations in a day, these take time to build and introduce. It’s like your 401k plan, it takes time to build up but the value compounds over time.
It is a slow process that’ll take time to give you the return you want.
You should know that it will only give you the desired results if you keep working to improve your automation. For example, you may have 25 automation running at any given time based on different stages of their customer journey and other use cases. But when it is time to introduce them, you would want to prioritize the ones that drive the most revenue and have the best impact on the business.
Experimenting with automated emails
You’ll want to always be evolving your automations by tweaking them and running experiments. I always say that automations are like your digital Petri dish, on which you can experiment with all kinds of ideas. Sometimes single automation could run in three different ways to see which works best.
You might experiment with the headings, the content, the openings of the content, etc. So this experimentation and testing help you to line up the most profitable and value-added automations, meaning you can level up your incremental revenue month over month.
Also, one of your primary concerns as an e-commerce business is how much revenue your automations drives monthly. And more specifically, concerns like how much revenue each of those individual automation drives every month.
Once you get these numbers and figures, it may become easy for you to identify problems.
For example, if you see a giant and a steep drop in the numbers, you can easily find out what automation is not working up to the mark. Any time something doesn’t seem right, you can deal with it more efficiently and optimize your automation accordingly.
The business type
Lastly, the revenue you drive from this automation can also vary depending on your business type and the business stage you are in. For instance, dealing in multiple product categories may bring you a much more significant percentage of revenue because you may be drawing people back in at different rates through different means.
These are all the vital areas to think about when working with automation, so you can build a significant asset for your business that compounds over time and fulfills your goal of generating revenue that has a stable foundation and is predictable and recurring.
Revenue from Campaigns – Email and SMS
Campaigns are what most people think about when they think about email marketing. SMS messaging is beginning to be used alongside campaigns to update the audience more efficiently.
For revenue generated through campaigns, we like to see a range of between 20-30% of your total eCommerce revenue coming through campaign emails.
Of course, it varies from month to month, even more drastically than in automations. Campaigns are more likely to have frequent changes in their revenue around specific seasons and months, for example, in November…
As a good marketer, I bet you can guess why!
The pipeline of content during peak times
Things start to get a bit dramatic around November due to the holiday season, precisely due to Black Friday and Cyber Monday. This is the time when businesses send the most consistent level of emails to the customers so that they have higher chances of being seen more frequently. So it encourages the audience to engage more. A content pipeline helps you stay top of mind and relevant without falling off.
This consistent sending helps ensure less volatility in the swings we usually see during the holiday season. It gives a little more predictability regarding the revenue and provides that these months are the most profitable throughout the year.
Understanding how to incorporate different sales peaks at other times of the year is also essential.
For example, Amazon prime has prime day, so they can incorporate a sales peak in the middle of the summer, which gives them a lot of opportunities because they drive a higher volume and make more revenue over time.
So again, building sales peaks in the year, continually capturing a bit more top-line revenue total and driving more during different windows of the year
This is where having a content pipeline helps you stay top of mind and relevant without falling off. It adds value to the customer’s experience and keeps them hooked on your business.
Maintaining attention and high-value segments
As I always said, earning attention is only trumped by maintaining attention.
If you manage to keep the audience’s attention without making offers that compromise your margin and commodity, you should consider yourself a successful business.
Also, focusing on your high-value segments is a significant factor in maximizing your revenue. These are the segments that drive the most value for your business.
For example, some of your customers are either gift-givers or are buying for themselves, and both drive the most revenue for you at different times. The gift-givers are most likely to drive revenue at one time a year, i.e., the holiday season, whereas people buying for themselves drive revenue consistently.
It would be best if you focused on each segment according to the time of the year. You may want to focus on enhancing their experience specifically. People that may be driving the repeat purchase during that specific time should be sent more campaigns, so they remain involved.
Segmenting and prioritizing your best audiences, i.e., the most revenue-generating audience, is one of the most important keys to a high revenue generating business, hence a successful business.
How do these overlap?
Automations and campaigns work so well together; both are considered BFFs in email marketing and serve as two different pillars of your three-pillar email marketing ecosystem.
Where campaigns might bring people back to your site, the automation will make them take action a second time, and third time, and so on.
Let’s say you send a campaign to your audience; they open the product page, browse a little, and may visit different product categories, and leave after a while. This is where automation comes into play. They may get an SMS or an email a half hour or an hour later regarding products they viewed. This would bring them back to the page.
This works well in cart abandonment cases too. If someone leaves a cart full of items on your webpage, you might want to remind them about it. These automated messages are just a way of pulling people back to your site so they can complete an action.
So as we can see, these two work so well together; they create opportunities for you where you may have multiple levers to pull so you can get people to behave the way you want them to.
They complement and supplement each other well and provide you with different ways of bringing people back in and fit this into the whole entirety of the customer experience.
Ideal Percentage of Revenue from the Emails
So as we said at the beginning of this article, the ideal revenue from the emails would be up to 45%, and if you make use of all the stuff we talked about related to campaigns and automation, you might be able to reach 45%
Moreover, there is a good chance that you might even exceed that percentage. So it’s important to know what you should do in that case.
Acquisition/ top of the funnel
Once you get above that percentage, you need to start thinking about what you’re doing on the acquisition side. You’ll need to focus on your acquisition efforts before you can get much more optimized on the retention side
The top of the funnel must fill fast enough, so you might want to invest in the bottom part of the funnel.
Then comes our marketing stool consisting of three legs; the emails, the paid, and the organic.
Having generated revenue above 45% might be a good thing as long as you’re being smart about your investments. With this much revenue, you might be thinking about investing more in paid marketing which is well and good. However, you would not want to ignore the organic side completely.
Typically most businesses go crazy about paid marketing all the time. Still, they need to realize that getting your organic up and running is very important because all of these work together and complement each other.
For example, if your Google ads stop working for whatever reason, or you get trouble in Facebook ads, you would still have your organic and email driving revenue. That will help you through that rough patch and give you a stable foundation and a more anti-fragile ecosystem that you will not be as worried about.
So, if you’re driving too much revenue through email, you should know what’s going to be profitable and valuable for the business and may reinvest some of that revenue in those areas of marketing. This way, you can have a more stable infrastructure for growth and a more stable system for expanding your business.
So to conclude everything, you now know that emails are probably your most robust retention channel in terms of how much revenue the business will drive.
You would be doing that through the three ways of growing a business. And those three ways were: increasing the number of customers, increasing the average order value, and increasing the lifetime value.
If you can optimize number two and number three, it would be a big win for your business because most businesses don’t always focus on these.
So, this would be a significant advantage for your businesses if you focus on AOV and LTV. It will bring you highly profitable revenue, and your email marketing will become your most profitable channel.
However, there are other things to look at too. Some younger businesses may have many more customers coming in through a welcome sequence, giving off an overinflated new customer acquisition process.
But if you’re a little bit more established business and have an excellent recurring customer base, you should be in a place where you can drive a high percentage without being too overly dependent on emails.
Also, suppose you have multiple products category. In that case, you’d probably be able to drive a higher percentage. Still, if your business only offers one product, you may not be able to go a high percentage because you will have to work to acquire as you may not have a natural repurchase rate.
So this was all regarding email and revenue for today. I hope this was helpful and answered most of your concerns. If you still have any questions or if I may have missed out on something, I would love to know in the comments below!