Most Australian business owners look at their email marketing report, see a '30x ROI' figure, and assume they are winning. However, traditional ROI formulas often ignore the hidden 'leakage' caused by poor deliverability, list hygiene costs, and technical overheads.
Calculating your True Email ROI allows you to see exactly how much profit every dollar spent on email is generating after accounting for the infrastructure required to actually land in the inbox. This guide will help you move beyond vanity metrics and understand the real financial impact of your email campaigns.
Why True ROI Matters
In the Australian market, where customer acquisition costs (CAC) are rising, email remains your most cost-effective channel. But if 20% of your emails are landing in the 'Promotions' tab or junk folder, you aren't just losing views—you are paying for 'dead' subscribers. By factoring in deliverability costs, you can make better decisions about whether to invest in list cleaning, dedicated IPs, or better copywriting.---
Prerequisites: What You’ll Need
Before you start your calculations, gather the following data from the last 30 or 90 days:- Total Email Revenue: Tracked via Google Analytics 4 (GA4) or your eCommerce platform (e.g., Shopify, WooCommerce).
- Platform Costs: Your monthly subscription to Klaviyo, Mailchimp, or ActiveCampaign.
- Labour Costs: The hourly rate or flat fee for the staff/agency managing the campaigns.
- Deliverability Tools: Costs for tools like ZeroBounce, Kickbox, or GlockApps.
- Total Sent vs. Total Delivered: From your email service provider (ESP) dashboard.
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Step 1: Calculate Total Campaign Investment
Start by tallying every cent spent on the channel. Most businesses only look at the software subscription, but we need to go deeper.- Software Fees: Monthly ESP cost.
- Content Creation: Cost of graphic design and copywriting.
- Technical Setup: Any fees paid for DMARC/SPF/DKIM setup or maintenance.
- List Hygiene: Costs for monthly or quarterly email verification services.
Screenshot Description: You should be looking at your monthly bank statement or accounting software (like Xero) filtered by 'Marketing' or 'Software' categories.
Step 2: Determine your 'Cost Per Delivered Email'
Standard ROI uses 'Total Sent', but you shouldn't pay for emails that never reached a server.Divide your total investment by the number of emails actually delivered (Total Sent minus Bounces). This gives you a baseline for what it costs to actually get into an inbox.
Step 3: Quantify Deliverability 'Leakage'
This is where we calculate the 'Opportunity Cost'. If your deliverability rate is 95%, you are losing 5% of your potential revenue before the customer even sees the subject line.- Take your Total Revenue from email.
- Divide it by your Deliverability Rate (e.g., $10,000 / 0.95 = $10,526).
- The difference ($526) is your Deliverability Leakage. This is the 'lost' profit you could have captured if your technical setup was perfect.
Step 4: Include the Cost of List Cleaning
In Australia, the Spam Act 2003 requires clear consent. Keeping a 'clean' list isn't just a legal requirement; it's a financial one. If you pay for 10,000 subscribers but 2,000 are inactive, you are overpaying your ESP by roughly 20%.Add the cost of your verification tool (e.g., ZeroBounce) to your total investment. If you don't use one, calculate the 'Waste Cost' by multiplying your monthly ESP fee by the percentage of your list that hasn't opened an email in 6 months.
Step 5: Account for Labour and Management
Whether you do it yourself or hire an agency like Local Marketing Group, time is money. Estimate the hours spent on:- Strategy and planning.
- Building the templates.
- Testing (A/B testing subject lines).
- Reporting.
Multiply these hours by your hourly business rate (or use the invoice amount if outsourced).
Step 6: Identify Revenue Attribution
Ensure you are using 'Last Click' attribution in GA4 to avoid over-counting. Sometimes, a customer receives an email but eventually buys through a Google Search. To find the True ROI, look for revenue where the 'Source/Medium' is specificallyemail / newsletter or email / flow.
Screenshot Description: In Google Analytics 4, go to Reports > Acquisition > Traffic Acquisition. Look for the 'Session source/medium' column and filter for 'email'.
Step 7: Apply the True ROI Formula
Now, let's put it all together. Use this formula: True ROI = [(Total Email Revenue - Total Investment) / Total Investment] x 100 Total Investment = (Software + Labour + Deliverability Tools + List Hygiene Costs)Step 8: Analyse the 'Cost Per Acquisition' (CPA)
To compare email to other channels like Meta Ads or Google Ads, calculate your CPA.Divide your Total Investment by the number of orders generated from email. For most Australian SMEs, an email CPA should be significantly lower than a paid search CPA. If it isn't, your deliverability or content strategy needs an urgent audit.
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Pro Tips for Australian Businesses
- The 'Sunset' Rule: Automatically unsubscribe anyone who hasn't engaged in 90 days. It feels painful to see your list size drop, but your deliverability (and therefore ROI) will skyrocket because your 'Engagement Rate' improves.
- Segment by Domain: Check if your ROI is lower for BigPond or Optusnet addresses. These Australian ISPs have notoriously aggressive spam filters. If your ROI is low there, you may have a technical reputation issue.
- ABN and Branding: Ensure your physical business address (including your Australian office location) is in the footer. This is a requirement of the Spam Act and helps with filter trust.
Common Mistakes to Avoid
- Ignoring the 'Promotions' Tab: If your emails land in Promotions, your ROI will be lower than Inbox placement. Use tools like GlockApps to test this.
- Over-counting Revenue: Don't count 'View-through' conversions (where someone saw the email but didn't click) as direct ROI unless you have very sophisticated tracking.
- Forgetting the 'Unsubscribe' Cost: High unsubscribe rates are a signal to ISPs that your content is irrelevant. This damages your long-term ROI by forcing you into the junk folder.
Troubleshooting
- My ROI is negative: Check your labour costs. Often, businesses spend too many hours 'perfecting' a design that doesn't actually drive more clicks than a simple text-based email.
- My Deliverability is dropping: Check your DMARC records. As of 2024, Google and Yahoo have strict requirements for bulk senders. If you haven't authenticated your domain, your ROI will plummet as you hit the spam folder.
- Revenue isn't showing in GA4: Ensure you are using UTM parameters on every link in your email. Use
utm_source=email,utm_medium=email, andutm_campaign=campaign_name.
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Next Steps
- Audit your list: Run your database through a verification tool this week.
- Check your Tags: Ensure your UTM tracking is working correctly for your next send.
- Review your ESP Plan: If you've recently cleaned your list, you might be able to move to a lower-cost tier.
If you're struggling to get your emails into the inbox or your ROI isn't where it needs to be, the team at Local Marketing Group can help. We specialise in technical deliverability and high-conversion email strategy for Brisbane businesses. Contact us today for a comprehensive email audit.