January 16, 2008

E-Mail And Multichannel Forensics

Our industry spends a lot of time talking about the mechanics of e-mail marketing. We don't spend enough time talking about the long-term behavior of e-mail customers.

Within the Multichannel Forensics framework (book, white paper), we can simplify our view of customer behavior along two dimensions --- those with e-mail addresses, and those who do not subscribe to our e-mail marketing program.

Many multichannel catalogers and retailers observe advantageous behavior among the audience participating in an e-mail marketing program.
  • Customers who participate in e-mail marketing programs are usually more valuable than customers who choose not to participate.
  • After controlling for the fact that e-mail marketing participants are more valuable than those who choose to not participate, the actual e-mail marketing program generates incremental revenue.
    • Example: 100 campaigns per year * $0.25 per campaign = $25.00 of incremental sales that are not generated by those not in the e-mail marketing program.
  • Subtle changes in customer behavior (increased or decreased opt-out rates or opt-in rates) have long-term consequences for your brand.
    • Example: In the attached simulation, I present a "base case" where a multichannel marketer grows the online business from $40 million to $50 million over five years. If this business fails to offer a compelling e-mail marketing program, maybe 10,000 fewer new customers sign up for the program each year. If this happens, the business does not achieve $50 million in year five --- instead, the business hits $48 million in year five. For businesses at/around 6% EBIT, this trend can gobble up 20% of your long-term EBIT --- all because of the effectiveness of an e-mail marketing program.
Multichannel marketers continue to manage a unique dynamic --- marketing channels are proliferating, but the sales potential of each channel continues to decrease, with the sum of all marketing activities representing tepid overall growth.

In the short-term, we've calibrated our measurement systems to understand what happens (in some cases, in real time) when we execute a campaign.

In the long-term, we will use tools like Multichannel Forensics to understand the impact each marketing channel has on the growth of the brands we manage. We will understand how our short-term behaviors impact long-term growth, adjusting strategies accordingly.

No comments:

Post a Comment