Email Advertising Cost Effectiveness and CPM Rates

Email advertising is an effective marketing strategy. Passendo outlines how to ensure you are getting the best value for money by comparing email ad CPM rates.
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Like with any marketing effort you dive into, it’s important to measure your results to ensure you are getting the most out of your budget and reducing as much ad spend waste as possible. For email advertising campaigns, cost-effectiveness can be measured by comparing email advertising cost per mille (CPM) rates. Other pricing structures advertisers can look at include cost per click (CPC) and cost per acquisition (CPA) which are explained in more detail below. 

How Much Does Email Advertising Cost?

How much you end up spending on email advertising depends on several factors: your target audience (B2B or B2C), the size of your email list (short email lists require more work attracting recipients), your goal for the campaign, plan to execute it (in-house or with agency help), and any other resources you need including software, graphic designers and freelance copywriters.

With that being said, a mid-size company can expect to spend about $9 to $1,000 per month on email marketing if they’re doing the campaigns in-house but can expect a range from $300 to $500 per month with an agency. As for how much of your marketing budget you should spend on email, research has shown that companies that spend about 16% of their budget acquire as much as an 80% ROI.

Are Email Ads Effective?

Email ads, in their various forms, are certainly an effective marketing strategy. In fact, email ads have been shown by recent research to earn brands an ROI of 4200% ($42 back for every $1 spent), contribute to as much as 40% better converting than social media, and has made its way into most (87%) marketers’ content marketing campaigns (using email to distribute their content to recipients). 

Other than ROI, other ways you can measure your campaign’s effectiveness include:

  • Click-through rates (CTR) — average between 2.5% and 2.9%.
  • Open rates — should be around 15 to 20% and average around 18% worldwide.
  • Lead generation — reported by almost half (42%) of companies to be their most important lead generation tool.
  • Engagement — research shows that 78% of marketers have seen an increase in email engagement over the last 12 months, and 90% of content marketers say email engagement is the top metric they track to measure content performance.

With these metrics, in addition to CPM, CPC, and CPA, you can decipher just how cost-effective email advertising is for your business.

What is Cost Per Mille (CPM) in Email Marketing?

Cost per mille (CPM) is a metric widely used for online advertising. In the context of email advertising, it refers to the cost of sending your promotional email messages per thousand recipients. 

The formula to calculate CPM is:
CPM = 1000 X Cost / Impressions

Likewise, you’ll follow this formula to calculate the cost:
Cost = CPM X Impressions / 1000

To calculate impressions, you’ll calculate this way:
Impressions = 1000 X Cost / CPM

For instance, if you are paying $200 for your email marketing campaign, sending your message to a list of 10,000 subscribers — you will be looking at a CPM of $20. This isn’t a realistic expectation (just an example), but advertisers strive for less than $30 CPM. However, if you expect to spend $30 CPM, you’ll want to make sure your email list is highly targeted and engaged because you’ll need exemplary open and click rates to make it worth it.

Benefits of CPM Email Campaigns

Among the major benefits of CPM email campaigns, what advertisers like most are:

  • Building a strong audience — email lists only grow through recipients who opt-in to receiving them. Meaning, only a strong audience interested in your brand and offers (and, therefore, more likely to click and open emails) are in your lists. 
  • Raising brand awareness — since emails are shareable among consumers, raising brand awareness through referrals and shares on social sites can make a huge impact on your goals.
  • Aligning with other campaigns — CPM allows advertisers to evaluate the effectiveness of email in helping them reach other campaign goals. For instance, email can play a significant role in the success of content marketing campaigns. 

It’s also important to note that CPM is a good indicator of the cost-effectiveness of a mass email campaign, enabling advertisers to easily compare the cost of working with different publishers. This is especially important for marketers under a tight budget, looking for the best options available. 

What is a Good Email CPM?

As you may already know from other online CPM campaigns, the higher your CPM — the weaker your campaign. This is because the lower your CPM, the higher your return on ad spend (ROAS). The same goes for email CPM — the lower, the better. Just how low you can go depends on certain factors that often affect pricing and performance of campaigns, like: 

  • Targeted lists — highly-targeted lists are set up for much more success than those that are struggling. This is because your email list is only filled with interested recipients who are likely open to your email offers, reducing ad spend waste. 
  • Open and click-through rates (CTR) — the better your open and click-through rates are, the better your CPM results will be. After all, the whole point of your email campaign is to reach your audience, and this shows that you did. 
  • Negotiations — negotiating CPM pricing with publishers is always a viable option to remember, as well. More time than not, they will be willing to work with a cost-per-email that suits your company the best.

It’s also important to note that companies often offer deals on larger amounts of email lists. This means that you may only pay $0.0015 per email for 1 to 10,000 emails but could be looking at only $0.0010 per email for anywhere from 50,000 to 250,000 emails. Most advertisers stay in a good CPM range of $15 to $30. However, if you find an extremely targeted audience, you could see rates go to 100 or higher.

CPM vs. eCPM

Effective cost per mile (eCPM) measures the ad revenue generated per thousand ad impressions. Unlike CPM — which focuses on how much it costs the advertiser per thousand ads sent — eCPM focuses more on the ad revenue the publisher has generated from those thousands impressions. 

The formula for calculating eCPM is as follows:
eCPM = (Estimated Earnings / Number of total impressions) X 1000

This metric is most useful when looking to optimize your revenue, compare performance averages, and is especially good for publishers running a direct response campaign. In email marketing, the metric is used to evaluate the ‘worth’ or ‘effectiveness’ of your email marketing campaign.

Cost Per Click and Cost Per Acquisition in Email Advertising

Cost per click (CPC) and cost per acquisition (CPA) should also be considered when looking at the cost-effectiveness of your campaign. This is because they can be used together to give you a more holistic view of your email advertising effectiveness.

CPC measures your email advertising costs per recipient click. This average cost is calculated by dividing your total cost of clicks by the total number of clicks. Studies show the average cost to be between $1 and $2, with CPC’s going as low as $0.10 with Gmail ads. CPA, on the other hand, measures your cost per new subscriber acquisition. This metric is calculated by dividing your paid ad/marketing costs by the number of new subscribers you’ve acquired. 

Email Ad Cost Effectiveness

The truth is, the best way to ensure you are getting the best value for your money from any email marketing campaign is by measuring your email ad cost-effectiveness. This means paying close attention to what most advertisers usually spend on their email campaigns and comparing your CPM, CPC, and CPA against industry benchmarks. Better yet, combine those email tips with an Email Advertising software like Passendo’s!

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