January 27, 2014

Marginal Email Subscribers - Less Is More!

There's a secret to email marketing that most folks don't know.

I'm here to tell you this secret.

Step 1: Create a model that predicts how much a customer will spend, on an annual basis, on your email marketing campaigns.

Step 2: Using a law of diminishing returns equation, predict what happens when you go from no email contacts to one per week, to two per week, to three per week, all the way up to six per week. Now, granted, these aren't cart abandonment programs, these are your typical mass-blast-style campaigns. Still, run through the exercise.

Step 3: Calculate the incremental cost to deliver an email message to a customer, on a variable basis. For many folks, this averages to about $0.003 per contact. That sounds like nothing ... until you extrapolate it to an annual basis. If you send an email message per weekday, then you're spending $0.75 per customer per year to send email campaigns ... and at that point, email marketing becomes identical to catalog marketing ... all of a sudden, you are required to make smart circulation decisions ... something the vast majority of email marketers have not been trained to do.

Step 4: Create the profit table illustrated above. The customer above is predicted to spend $4.00, on an annual basis, via email marketing. The customer is currently forecasted to receive 250 campaigns per year, 5 per week. At that level of contact, the customer will generate $0.78 profit on an annual basis. However, the most profitable strategy is to mail the customer 100 campaigns per year, generating $0.92 profit on an annual basis.

Step 5: Run the table in Step 4 for each customer in your database. Calculate the optimal number of email contacts to send to the customer, annually.

Step 6: Repeat / Rescore the file weekly.

You will find that email prospects and those with recency > 12 months are typically over-contacted. You can be more profitable by not contacting these customers as often.

Contact me (kevinh@minethatdata.com) for your own, customized, contact strategy analysis.

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