March 20, 2007

The Unsubscribe Factor

When evaluating e-mail campaign performance, we frequently fail to account for the lost downstream revenue associated with those who unsubscribe from our campaign.

Here's an example.

Assume your e-mail campaign has the following metrics:
  • Open Rate = 25.0%
  • Click-Through Rate = 35.0%
  • Website Conversion Rate = 3.0%
  • Average Order Size = $200
  • Dollars Per E-Mail = 0.25 * 0.35 * 0.03 * 200 = $0.525. Each e-mail generated nearly fifty-three cents of revenue.
Overall, the marketer might feel happy about the results. The marketer may even report that there was a 0.3% unsubscribe rate.

An important next step is to discount performance by the long-term revenue lost due to those who unsubscribe from your list.

In our example, assume that the marketer sends 75 e-mail campaigns per year. Over the next twelve months, the marketer will lose 0.003 * 75 * $0.525 = $0.118, because these e-mail addresses no longer exist on the marketing file.

In other words, the incremental value of the campaign is $0.525 - $0.118 = $0.407.

Marketers will find that the "Unsubscribe Factor" can be between ten and thirty percent ... in other words, results need to be discounted by between ten and thirty percent, in order to properly evaluate the results.