July 25, 2011

In Defense of E-Mail Marketing

If you look at a marketing department, you'll frequently find an understaffed e-mail marketing team.  That's too bad, because e-mail marketing is one of the few disciplines where customers clearly ask you to push messages to them!

Sometimes, our view of opens/clicks/conversions blinds us to the actual value the program generates.

For instance, consider this business ... one with an e-mail marketing list of 500,000 customers, sending one campaign per week to all customers who subscribe.
  • Open Rate = 20%.
  • Click-Through Rate (of those who open) = 30%.
  • Conversion Rate (of those who click-through) = 5%.
  • Average Order Value = $100.
  • Total Program Sales = 10% of Company Sales.
When measured this way, it's hard to see the impact the program has on the total business.

Let's look at the results, on an annual basis:
  • Annual Sales = 500,000 * 0.20 * 0.30 * 0.05 * 100 = $7,800,000.
  • Annual Variable Profit = $7,800,000 * 0.40 (profit factor) - $500,000 (program cost) = $2,620,000.
  • Total Company Sales = $78,000,000.
  • Total Company Variable Profit (before fixed costs) = $11,500,000.
When viewed this way, e-mail marketing is responsible for 10% of company sales, and 22.8% of company variable profit.  That's a good deal!

Then you look at the resources committed to e-mail marketing in your marketing department, and you probably observe that fewer than 1 in 5 of marketing person-hours are spent on e-mail marketing, right?!

In other words, this is probably a marketing channel that warrants increased investment.