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.

1 comment:

  1. Anonymous6:24 AM

    The "Unsubscribe Factor" is huge these days and you shed some great light on the effects this should have on our campaign by campaign analysis.

    With such a large amount of people either unsubscribing & changing or deleting their email addresses, in all cases making them undeliverable or unread. I say this less from an analytics side & more from a marketers point of view; What does that say about the email channel itself? What does it say about OUR emails?

    Most marketer's love emails because they are an inexpensive way to reach a lot of people, yet I recently met with a client who can't grow their email database because the drop-off is almost identical to the pace of new sign ups!

    I personally think email has become a bit over-used for the reasons I mentioned above, and understandably so! That leaves us with this problem; We can send the snazziest emails with the best offers but still they drop off.

    What's the solution, that could be a heated debate... One is to provide alternate forms of communications options to our customers and do things "business as usual" with our email channel (my blog talks about New Media CRM options). Another is to seriously consider our mailing frequency, not everyone else's, but our own...


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