How email deliverability impacts your ROI

What is the cost of sending email?

Sending an email is as easy as clicking a button – or is it?

When we talk about email in terms of how much it costs, there’s a lot more to factor in than you might think. The equation to calculate ROI is simple, total revenue from email - total email costs) / total email costs = ROI. To calculate your own email ROI, you’ll need to look at expenses first. After infrastructure, and any ESP or third-party service costs, you’ll also need to factor in human/team resources. How big is your marketing department? How many working hours are spent writing, designing, and coding campaigns?

Email service providers (ESPs) enable  infrastructure at scale to manage the sending and monitoring of your email program. Finding a good ESP is not only half the battle, but it’s a proven way to mitigate cost vs. setting up the backend architecture in-house.

Still, these costs are significantly lower than those of setting up and maintaining other communications channels, which is why email is considered the channel with the best ROI. Even when compared to organic social channels, the use may be free but the return is super low. On the other side, paid digital may have a great return, but it also has a high cost.

The actual return of your email program is going to be impacted by a number of factors, the most important one being whether your emails reach your recipients or not. That's where deliverability comes in.

How does email deliverability impact ROI?

It doesn’t matter how cost-effective email is, if your emails aren’t being read, your ROI is zero. So, how can you make the math work in your favor? The answer is email deliverability.

According to Jessica Best, on average, 17.7% of legitimate permission-based marketing emails never make it to the inbox. This isn't about obvious spam – these are legitimate senders trying to play by the rules. If you could get those emails to the inbox and they performed like your other messages, you'd see a 20% lift in your email ROI.  

The math behind email ROI 

Let’s break down the email ROI claims a bit more. Let’s say you are sending a marketing message to 100,000 subscribers. 

• Send to 100,000 subscribers 

• 3% averate click-through rate (3,000 clicks) 

• $1,000 in expenses 

• 10% conversaion rate on $50 purchases 

• A final ROI of $14 for every $1 invested 

If we assume the above is a standard breakdown, let’s take a look at what improving inbox placement could do to the same campaign: 

• Same 100,000 subscribers 

• 3.6% click-through rate (3,600 clicks due to better delivery) 

• Same expenses and conversion rates 

• Improved ROI: $17 for every $1 invested 

The way to accomplish this is through strong email deliverability practices.

What is email deliverability? 

What is deliverability? Deliverability is your ability to land messages in your recipient’s inbox. Inbox email clients and mailbox providers decide whether emails are accepted and placed in the inbox based on a number of different things, including sender reputation and how users interact with the emails once they get into their inbox. Your sender reputation and deliverability are linked. Your sender reputation is determined by domain and IP reputation, as well as your engagement and authentications, and is how ISPs determine how trustworthy you are. Send like a spammer and your reputation will decrease along with deliverability.

Keeping bad email addresses out of your email list helps prevent spam traps that could get you blocklisted.  Monitoring how recipients engage with your emails is also important to ensure your list is not sending ISPs signals that might negatively impact reputation.

Deliverability is truly a layered strategy. Here are some key elements of deliverability to give you a general idea, we’ll dive into them throughout this post:

• Maintaining a clean email list for a minimum bounce rate and maximum engagement rate

• Closely monitoring and reacting to metrics to adapt your strategy as protocols evolve

• Email authentications like DMARC, DKIM, and SPF and other technical email requirements

The impact of spam traps, blocklisting, and other negative factors on email reputation

When we talk about email deliverability, the first thought that comes to mind is blocklisting. Landing on an email blocklist could easily be a sender’s worst nightmare, and it’s not surprising. These lists are managed by organizations designed to spot spammers and malicious senders, and ISPs and mailbox providers use them to prevent those messages from getting into the inbox.

One of the most common ways to land on an email blocklist is by sending to a spam trap, which often happens when senders buy or rent email lists, or when they suddenly send to dormant or inactive email address which lowers engagement rates. But it’s not the only way – a high number of spam complaints or email bounces could also result in your email being blocklisted.

A low-quality list of invalid addresses is one of the biggest ways to negatively impact your sender reputation. A low-quality email list is a direct path to spam traps, high bounce rates, and landing on blocklists.

The effect of low-quality email lists on engagement and deliverability

Metrics matter. In email, your engagement metrics are crucial. While ISPs aren’t forthcoming with how exactly they determine inbox placement, we do know that engagement will always play a key role, and it goes beyond open rates. How much time your recipients spend reading your email, and how they interact with it (click-throughs, unsubscribes, etc.), influences how mailbox providers will handle your messages going forward.

The relationship between list hygiene and engagement metrics is extremely close. If contacts on your list start to drop off in terms of engagement, ISPs will pick up on the change and it will impact your deliverability – even if you followed best practices like double opt-ins and email verifications. Ensuring your list is free of disengaged contacts is key to improve your engagement metrics and send positive signals that will boost your sender reputation and overall email deliverability.

The importance of email authentication in email deliverability

If you’re serious about your email deliverability, there’s a step you should implement before you even send your first email: configuring your email authentication protocols.

Email authentication is key to email deliverability because it conveys one clear message to the ISPs: that you, the sender, are trustworthy and are who you say you are. Without authentication, there’s a strong chance you will be blocked from the inbox by ISPs and will also be vulnerable to bad actors who aim to impersonate your domain, tanking your sender reputation. Authentications provide security through verification and encryption, and there are a few you must have if you want strong deliverability.

• SPF: Prevents unauthorized entities from sending email under your domain by keeping track of source records for authorized senders.

• DKIM: Ensures that nobody has used your domain to impersonate your company by using encrypted keys.

• DMARC: A DMARC policy tells ISPs what to do with emails that fail DKIM and/or SPF authentication.

A message sent without DKIM and/or SPF can be considered suspicious by different email spam filtering solutions. Setting up appropriate authentication for your email program is one of the first steps senders should take when migrating platforms or sending from a new domain.

How can Mailgun help you increase your email ROI?

Let’s put this back in ROI terms and talk about the cost of deliverability and email infrastructure. When you break down all the components from backend infrastructure to authentication, email address verification, reporting on metrics, and managing your sender reputation, deliverability suddenly becomes an overwhelming concept.

While it’s possible to build infrastructure and manage your email program independently, the advantages of partnering with an ESP aren’t just about efficiency, but about relationships. Established ESPs have developed relationships with ISPs and Postmasters to build out tools that help improve deliverability by meeting the standards of inbox providers.

Supporting your email ROI is something we’ve studied and strategized to improve. But don’t just take our word for it. In a recent TEI study commissioned by Mailgun, Forrester found that, over the course of three years, Sinch Mailgun delivered a 264% return on investment (ROI) and a $454K net present value (NPV) for a composite organization by improving inbox placement, saving time in email deliverability issue mitigation, and reducing the cost of sending emails.

To better understand how these numbers were calculated and how enlisting the right email partner can help you drive higher ROI in your email program, download the 2023 Forrester Consulting study “The Total Economic Impact(TM) of Sinch Mailgun.”