January 04, 2007

Best E-Mail Contact Strategy? You Decide

You are the marketer at a multichannel retailer. You decide to survey your customers about your e-mail practices, because pundits suggest that customers are now in control over your marketing activities.

Your customers surprise you. Instead of the one e-mail campaign you send them each week, customers overwhelmingly tell you they want a monthly e-mail, and maybe three additional campaigns for major sales events.

You eagerly set up a three month test, to understand the financial impact of the strategy your customers advocate. The results below are extrapolated to represent an entire year of campaigns.

E-Mail Test Results, Annualized To Total Housefile




52 E-Mails 15 E-Mails

Per Year Per Year



Average List Size = 100,000


Average Open Rate 20.00% 25.00%
Average Click-Through 30.00% 33.00%
Average Conversion Rate 3.50% 3.80%
Purchase Rate 0.21% 0.31%
Average Order Size $230 $235
Sales per E-Mail $0.48 $0.74



Total Net Sales $2,511,600 $1,105,088
Gross Margin $1,255,800 $552,544
Less Marketing Cost $15,600 $4,500
Less Pick/Pack/Ship $376,740 $165,763
Variable Operating Profit $863,460 $382,281

Pundits want you to let customers take charge of your marketing activities. In this case, you survey your customers, and they tell you they want fifteen e-mail campaigns a year. You test the strategy, and find out it will cost you nearly a half-million dollars of profit.

Let's assume that your CFO demands that you generate profit increases, not decreases. Let's assume you do not have the capabilities to tailor the e-mail strategy to the individual e-mail address.

What do you do? Do you listen to your customer, and convince your CFO that the customer is right, and the shareholders/owners are wrong? Or, do you ignore the feedback of your customers? I'm going to guess that you aim to please your CFO.

4 comments:

  1. Anonymous12:20 PM

    I don't follow the calculations: if the table show annualized values and with the 15 emails you sell more at a higher AOV, how come the total revenue is lower than with 52 emails?

    ReplyDelete
  2. Anonymous12:37 PM

    Good question, let me clarify!

    When sending only 15 e-mails per year, each e-mail is more productive, yielding $0.74 each. When sending 52 e-mails per year, each e-mail is less productive, yielding only $0.48 each.

    52 e-mails a year to 100,000 customers gives us 52 * 100,000 * $0.48 = $2.5 million (there are some rounding errors occuring).

    15 e-mails a year to 100,000 customers gives us 15 * 100,000 * $0.74 $1.1 million.

    And that's where the problem lies. Doing what the customer wants you to do results in less sales, and less profit for the company. The customer likes you better (as is evidenced by the $0.74 sales per e-mail) --- but the company is worse off as a result.

    ReplyDelete
  3. Anonymous6:24 AM

    "Do you ignore the feedback of your customers?"

    No -- but you don't take what they say verbatim and institutionalize them like their comments are gospel.

    Did consumers ask to pump their own gas? No. But after thirty years of doing it, we've learned its faster and easier -- and with the ability to wave a little tag in the face of the pump, getting even faster.

    The lesson of your analysis to marketers is that consumer feedback needs to be analyzed -- not simply tabulated.

    ReplyDelete
  4. Hi Ron, welcome to our discussion.

    Your point about analyzing customer feedback makes sense to me. We are being told by so many folks to give control of marketing to our customers.

    Database Marketers, like you say, have to analyze customer feedback. On one side of the spectrum is the customer, on the other side, the shareholder ... these sides occasionally have conflicting objectives.

    That's what makes this stuff fun for me!

    ReplyDelete

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