At MH Digital, we’re big fans of Klaviyo. It’s very friendly to smaller e-commerce and services business from a pricing standpoint, is relatively easy to integrate, and has the capability and horsepower to scale rapidly. It’s attribution models are some of the best in it’s class for evaluating how your emails contribute to the revenue generated, traffic on your website, or whatever other key events are important in your customers’ journeys.
Most companies looking to hire an email marketing agency are using the percentage of Revenue from Klaviyo as their email KPI and feel they need to dramatically improve that number to grow. When you look around the internet you get wildly different answers for what a “good” percentage of revenue from email is, and most of the time there’s very little context to it.
Email marketing agencies use this percentage of revenue from email number in case studies and portfolios to drive interest from marketers. Heck, we share those in our case studies too. But it’s important to understand what a good and healthy percentage of revenue is for your business. Without understanding what goes into it (and how it can be manipulated), you can set yourself up with bad expectations, hire the wrong email agency, or hurt your email marketing program in the long run.
To Klaviyo’s credit, they keep the dashboard easy to digest. But they don’t tell enough of the story to fully grasp if you’re doing poor, adequately, or exceptional. Here are a few things to think about when it comes to evaluating these numbers.
Questions to ask yourself when thinking about revenue generated from Klaviyo
How are you defining attribution in Klaviyo?
Out of the box, Klaviyo using an ’email opened’ event to start the clock on a 5 day attribution window – meaning, if someone simply opens one of your emails and they go make a purchase within that timeframe, Klaviyo will claim attribution for that purchase. I think most would agree that simply opening an email does not mean 100% of the revenue was attributed, but that definitely doesn’t mean the open didn’t contribute to the purchase. We will spare the attribution vs contribution discussion as it’s well documented when looking at overall data from platforms like Google Analytics. But, if you are using say a 7 day ‘clicked email’ attribution window to claim a purchase vs a 5 day ‘opened email’ attribution, your numbers are going to look very different. Both can work, but that context is important.
What type of business are you running?
Scenario 1: Consider a business that sells E-bikes for $1000, and a handful of E-bike accessories around $100. If someone makes it into your email list after buying the E-bike for $1000, the most revenue you’re like to generate from that customer from email is $100. Maybe one of these subscribers ends up buying another for their spouse or child, but realistically, that math says you are going to generate somewhere around 10% of your overall store revenue from email per customer. This would be a great outcome for email!
In Scenario 2: Consider a skincare and makeup brand that sells a wide ranging catalog of products. They make it into your email list when they buy their first product, and now you’re able to send them automated reminders to re-up on the products they’re using and tell them about all the new products, colors, and other new releases you have when they come out. The lifetime value of a potential customer far exceeds what they likely spent on their initial purchase, and much of that revenue can come from email. Even 50% of revenue contributed to email per customer wouldn’t be out of the question for your most loyal subscribers.
Is your lead magnet biased to drive revenue from email?
Scenario A: You land on a fashion brand’s website and get a ‘15% off your first order when you sign up for email’. You enter your email and now you get the promo code of “WELCOME15”. Great! Now you can buy that shirt you wanted in your same shopping session. You’re subscribed to email, but Klaviyo has not at all contributed to your purchase.
Scenario B. What if instead the pop up told you to look in your email for your promo code? Now you open it up, click through with your “WELCOME15” code, and purchase. Klaviyo claims your purchase as revenue attributed to email.
As you can imagine, this has huge ramifications on the percentage of revenue from Klaviyo number -especially so in our $1000 E-bike scenario. There are merits to both approaches. On one hand, giving people the welcome promo right on the website keeps them on the site and the shopping experience seamless. On the other, getting people used to being rewarded for engaging with emails can go a long way in driving customer engagement and LTV from email.
How many first time customers (and subscribers) are you generating on a monthly basis?
If you are the skincare brand from Scenario 2 and have developed a large list over time, but your lead flow has slowed down, you’re going to see your percentage of revenue from Klaviyo skyrocket because nearly all of your sales are coming from hitting your email list. Conversely, if you’re still growing and your list is still tiny, that percentage of revenue might be quite small compared to the growth you’re seeing in channels that don’t touch email. Percentage of revenue is a factor of how well your overall business is at driving revenue from it’s website and other lead gen channels.
How it can go wrong
Even though we’ve only outlined a few of the questions here that you need to ask yourself when evaluating the Revenue from Klaviyo metric, you can imagine what happens if you were to get bad expectations of what that percentage of revenue should be for your business.
Let’s now consider the E-bike brand in Scenario 1 who has implemented the lead magnet setup in Scenario A. If the E-bike brand sees 10% of their revenue from Klaviyo but wants to bump that number dramatically, they might look at their email list and push lots and lots of people to try to buy another E-bike. When we look at companies that sell one flagship product, we need to shift our expectations on email and consider how to email market a one-trick pony. If this brand gets too aggressive in sending out emails to past customers who have already bought an E-bike, they may end up getting tuned out before the time is right for them to actually buy another, or before they can generate reviews, referrals, or other benefits from their customer base.
If you’re the skincare brand and you have slowed down your lead generation efforts because you’re seeing so much revenue from email, it’s very easy to become dependent on email for your overall e-commerce store’s revenue. Even the brands with the most loyal customer bases have attrition. When we see this, in many cases, these brands resort to sending more email, driving down their margin with promotions to keep the revenue number high, and put their email channel at deliverability risk.
There isn’t always a right answer in the percentage of revenue generated from Klaviyo. And while most of the time, generating more revenue from email is a good goal to have, it’s important to understand and set expectations of what success looks like. In many cases, it’s simply fortifying your revenue stream, not constantly growing it at all costs. It’s understanding that email should contribute to revenue, not always be the driving force. It’s also understanding that 20% of revenue could be just ok, or it could be incredible.
When we chat with our prospective and long term clients, we’re working with them to set real expectations. You’ll notice we always speak in terms of contribution, in fortifying, and on our website you’ll see that we say it’s not uncommon to see percentage of revenue at 20-30%+ coming from email. But as an email marketing agency, we want to make sure we’re putting all of that in a context that makes sense for your business, not just what makes for a flashy case study. When we talk about our case studies with clients, we’re very up front about the factors that go into those metrics.
Need some help figuring out what success looks like when evaluating the percentage of revenue generated from Klaviyo?