You Decide: The E-Mail Marketing Budget

This might represent the marketing budget for a multichannel cataloger:

Marketing Budget (Dollars in 000s)
Profit = Variable Profit, Before Fixed Costs
	Annual	Total	Total
	Budget	Demand	Profit	ROI
Catalog Marketing	$10,000	$37,500	$3,125	31.3%
E-Mail Marketing	$1,000	$10,400	$2,640	264.0%
Search Marketing	$3,500	$14,000	$1,400	40.0%
Online Marketing	$2,000	$6,500	$275	13.8%
Total Marketing	$16,500	$68,400	$7,440	45.1%

Let's assume that the e-mail marketing program is reasonably basic in nature. In other words, the customer can opt-in on the website, or if the customer purchases online, the customer is automatically opted-in to the e-mail program, and can elect to opt-out at any time.

The e-mail marketing program has 1,000,000 addresses. The company does not execute targeted campaigns (i..e. unique creative to different customers with different interests), executes a weekly campaign to all 1,000,000 addresses, and generates on average $0.20 per e-mail. The program typically offers free shipping as a purchase incentive.

The company has tested targeted versions of e-mail campaigns, observing a 35% increase in productivity.

Here's the question, folks. So many e-mail marketers feel that e-mail does not get its fair share of marketing dollars. In this case, what should the e-mail marketing investment be, what are the tactics this company should employ, and what is the expected increase in demand and profit (profit = 0.35 * demand - marketing cost)? Please let my readers know what you would do, how much you would spend, and what the financial benefit would be to this company.