September 29, 2007

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.

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