This ecommerce strategy article is an excerpt from our new book, The Ultimate Ecommerce Email & SMS Playbook. We’re diving into our ecommerce strategy chapter focused on the 7 Reasons Why Ecommerce Customers Leave Your Brand.
What gets measured gets improved. In the e-commerce world, we use key performance indicators (KPIs) to measure the results of a campaign, trend, customer migration, conversion, and more results-oriented data.
Key performance indicators always go in step with business activities. Only by measuring the effectiveness of your actions can you figure out which of them is best to implement and what has to be discontinued.
To complete our summary of the email, SMS and CRM essentials, I’m outlining the most important email metrics that have to be measured when implementing our strategy. We’ll also be looking at how to measure and improve them because every email marketing metric here has a purpose, and each metric must be improved.
In addition, I’ll highlight some of the additional CRM KPIs, which measure customer lifecycles and migrations. Not every brand is ready to start measuring these, but it’s helpful to know how to track and capitalize on customer lifetime value.
For every KPI, there’s an industry-wide benchmark you can use to show where you are and where you want to be. I’ll list the latest benchmarks in each relevant KPI below.
This is the most important KPI in email marketing. Quite obviously, all your marketing activities are aimed at increasing sales. Conversion rate (CVR) generally measures how many of your contacts ended up completing checkout. This is the number of sales made from a particular campaign, divided by the number of emails sent and multiplied by 100.
For example, if a campaign is sent to 10,000 subscribers and generates 300 orders, then CVR would be 300/10,000 * 100 = 3% (this is your conversion rate).
Now, this example is a great CVR; the average CVR for email is about 2%, and that’s only if you’re achieving great segmentation and personalization. Workflows and automations can yield a higher CVR in the range of 3% to 5% because they’re timely and relevant.
In order to optimize for conversion rate, run your flows for 30 days to get a baseline. Then make a few adjustments to your recommendations, banners, or postcards, and A/B test it. That will help you see how well you can increase CVR. Of course, the website plays the most important role in converting, so conversion rate optimization should be explored once you’ve hit your ceiling on CVR (different book for a different time!)
Email Opt-In Rate (Conversion Rate)
But in some cases, conversion rate refers to another action. For example, if you’re trying to measure email signups, the “conversion” rate would be more related to lightbox displays vs. lightbox signups. The average newsletter signup rate is around 2%. This means that only 2% of all website visitors enter their addresses to get on your mailing list.
The top 10% of e-commerce stores get an average 4.77% signup rate, so there’s always room for improvement if you have a low opt-in rate.
By calculating the return on investment or ROI in email marketing, we can evaluate the effectiveness of your email marketing investment. Basically, retailers determine what they gained from the investment in email marketing and how much they spent on it.
The return on email marketing investment formula is as follows:
In this formula, what you earn is the sum of all sales made through email campaigns, automated workflows, etc., over a certain period of time. It doesn’t really focus on the number of emails you’ve sent.
Expenses include the email service fee plus the salaries of email marketers, designers, and other people who helped to implement your email marketing plan over the same period of time.
However, it can sometimes be difficult to come up with a definite price for the time spent on designing emails, writing copy, picking the right products, etc. If you don’t have specific numbers, your ROI can become inaccurate.
For that reason, many e-commerce marketers measure more tangible things, such as the ROI for their email marketing tool.
To do so, you simply add up your revenue over the month, subtract the monthly email service fee and divide this number by the amount of money spent on the monthly email service fee.
Let’s say from email marketing campaigns and automated workflows, you earned $20,500 last month, and your monthly fee for Klaviyo was $228.
(20,500 – 228)/228 = 88.9
So, for every $1 spent on Klaviyo, you earned $88.90. If you do most of the email marketing work on your own, this measure is more accurate than measuring ROI.
The click-through rate refers to how many email recipients clicked on at least one link within the email campaign. This metric is also one of the top email marketing metrics that email service providers indicate in their reports. As you’ll see later in this book, I believe an email click is the most important area to track because every relationship starts with a click. If subscribers don’t click with you, there’s no relationship.
In most ESPs, all the clicks can be seen in the click map in your campaign report. A click map helps a lot when you try to understand what parts of the email are effective and what should be improved. These click maps count the unique (unique clicks on the different links) as well as total clicks (all the clicks, including multiple clicks from the same recipient).
Your click rate indicates how compelling your email content is to its recipients. This includes copy, creatives, content, and how clear and actionable the CTA (call to action) buttons were.
When it comes to maximizing your click rate, we employ our unique C-4 Design Playbook. You may recognize C-4 as the plastic explosive from major action movies. It’s a fitting tongue-in-cheek analogy that shows how our four pillars of design “explode” your clicks and conversions.
I’ll deep dive into the C-4 Design Playbook in chapter nine but, considering we’re talking about KPIs, here’s a quick glance:
- Pillar 1: Context – I’m a big fan of great copy because the best writers are experts at persuasion. You can only use sale, last chance, extended and limited stock so many times before your emails get stale. And who wants to always be on discount all the time? But copy alone is not enough; you need to have the right context that shows what your product, offer, or service does for the subscriber. You need to accentuate WHY the product is great for your customer and helps benefit their life. Add in an offer to the mix, and you’ve got context covered.
- Pillar 2: Creatives – like any restaurant will tell you, diners eat with their eyes first. The same goes for email and SMS creatives; they need to be designed to capture the essence of your context. Every creative has one goal: to visually illustrate your context, message, and offer… and achieve the next critical element in the C-4 Design Playbook.
- Pillar 3: Click – every relationship starts with a click. Think about how Google and Facebook rose to become advertising behemoths: pay-per-click. When a user clicks, showing high intent, a huge amount of data, intent, and personalization are unlocked. Your creatives can be gorgeous, your copy could be expertly written, and your context could be really dialed in; if your creatives, though, aren’t designed to be clicked, you’ve wasted a lot of energy. Make your email scannable and actionable with a click. The click is all that matters when it comes to email & SMS.
- Conversion – finding the right destination URL is just as important as getting the click. Have a great linking strategy in place and use your website’s full potential. Linking a New Arrivals email to a category listing page (CLP) won’t convert as well as linking a product-listing page (PLP) that has one-click add to cart functionality. Another example of a great linking strategy is utilizing your product filters, sorting, and refinements to help users get to a super-specific set of products or a certain SKU, like a red camera instead of a black camera. Sending the right message to the right person at the right time -and to the RIGHT PLACE – will help you convert more sales each time. The link plays a hugely important role in converting.
In email marketing metrics, bounce rate refers to the percentage of your emails that failed to reach their destination. Unlike a website bounce which measures how many people came to your site and made the decision to walk right out, an email bounce indicates that something prevented an email from reaching a recipient’s inbox.
There are two different types of bounces, soft bounce and hard bounce, and the differences are here:
- a recipient has a full inbox (soft bounce)
- a recipient has an out-of-office message (soft bounce)
- the email address no longer exists (hard bounce)
- the domain (email ending after @) does not exist (hard bounce)
- the server is not accepting emails (hard bounce)
- the address is mistyped (firstname.lastname@example.org instead of email@example.com, etc.) (hard bounce)
A soft bounce isn’t too concerning as these are usually temporary issues; most ESPs will flag a soft bounce and try up to three emails before marking the recipient as a hard bounce.
With hard bounces, most ESPs will simply remove hard bounces automatically. No ESP wants a hard bounce to affect their deliverability, especially on a shared IP.
On average, a .5% bounce rate for e-commerce brands is normal, while a bounce rate greater than 4% can damage your sender’s reputation. If you see your bounce rate creeping out, start cleaning your list to ensure your IP address remains reputable.
The dreaded spam rate is one of the most important KPIs to monitor closely. Your spam rate refers to how many people find your emails annoying or irrelevant. Essentially, individuals are flagging your emails as spam. Not cool.
People will hit the spam button, though, so 0.1% is a reasonable spam rate. Anything more than that needs to act as a red flag, causing you to rethink and clean your email list. A big complaint rate might spoil your sender’s reputation, which means that your future emails will not be delivered to recipients.
The solution for dropping the spam rate is segmentation and personalization. Send fewer emails to the unengaged and better emails to the engaged. Using the strategy I’ll show you in the next chapter, I’ve been able to send 40% fewer emails while increasing revenue by 50% simply due to segmentation and personalization; an added bonus was dropping our spam rate and unsubscribe rate as well.
Fact: people will unsubscribe, and that’s not always a bad thing. It’s heartbreaking, but that’s okay. It happens to all e-commerce brands and retailers.
The average unsubscribe rate for e-commerce is about 0.25%. So, you shouldn’t worry about unsubscribes unless you get a significantly higher rate of declines. Most brands should feel totally fine if their unsubscribe rate is lower than 0.90%, but anything over 1% is a red flag.
Unsubscribes occur for numerous reasons, including:
- Your emails are too frequent
- Your emails aren’t personalized
- The email list is stale itself.
- Your emails aren’t informative, helpful, or educational
Similar to the spam rate, our strategy will help you bring down the unsubscribe rate as well.
To me, open rates were always kind of irrelevant. One of our agency’s core values is that “every relationship starts with a click.” It doesn’t start with an open, and we’re not in the business of “head-faking” someone to open our emails (except for re-engagement, perhaps) without achieving a click.
For this reason, the open rate is a dying metric to measure, and it certainly took a hit with iOS 15 rolled out. Even our subject line testing measured results on click rate or click-to-open rate because the ROI of opens were hard to measure.
On a macro level, however, open rates can teach us some things about our email strategy, such as:
- Which subject lines work best for your subscribers or customers?
- Which emotions invoke a higher open rate?
- Which days are the best in terms of open rates?
- Which segments open but don’t click?
I love using Persado, an artificial intelligence subject line tool that uses machine learning to create emotional subject lines for every campaign.
Our team tested gratitude-based subject lines on post-purchase flows and achievement subject lines for loyalty and rewards campaigns. As you can see below, I did a case study with Persado because it was a really interesting and effective use of AI in our email & SMS program.
Subject lines offer a great way to mix copy with your creatives and reward the open with a click. For e-commerce businesses, the average open rate of a promotional email campaign is 18.3%, but once again, segmentation and personalization will increase that number significantly.
In this chapter, we’ve created a checklist of sorts containing the essential elements of a successful email, SMS and CRM strategy. With a cutting-edge ESP, ongoing flow of clean, actionable data, and measurable KPIs, you should now be fully prepared to implement a truly customer-centric email, SMS and CRM strategy.
The moment has finally arrived. Let’s dive into the only strategy you’ll ever need to create a more profitable, predictable, and sustainable revenue stream from email and SMS.
|Email & SMS Foundation Checklist |
Trust me. You don’t want to miss a step when building your email & SMS foundation. When I onboarded new ESPs, technologies and vendors, a checklist helped keep all the moving parts organized and manageable. Now, I’m gifting this checklist to you! Our one-page Email & SMS Foundational Checklist will ensure you never miss a step and launch an email & SMS program as fast as possible. You can download this checklist by visiting HiFlyerDigital.com/foundation-checklist
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