February 28, 2009

E-Mail Marketing Influences Long-Term Customer Value

In a classic Multichannel Forensics analysis, we look at how customers interact with various products, brands, and channels.

When marketing is executed properly, cannibalization is minimized.

When marketing is executed like we execute it, cannibalization is a daily reality. So if we're going to have one advertising channel cannibalize another, we may as well put ourselves in a position where long-term customer value increases as a result of the cannibalization.

Take e-mail marketing. Of all the marketing disciplines I study, e-mail marketing is the least well understood. E-mail practitioners focus almost exclusively on short-term metrics (open rate, click-through rate, conversion rate) that give a highly incomplete picture of the value of the advertising channel. This isn't the fault of most e-mail practitioners --- they simply haven't been given the tools necessary to analyze the medium properly.

In a recent Multichannel Forensics project, I was able to illustrate the following:
  • E-Mail customers were the most likely to shop other advertising channels.
  • E-Mail customers had an average annual spend, at a customer level, but spent more than the average online shopper. Migrating a customer from an online shopper to an e-mail shopper caused an incremental increase spend in the short term, even if the sale cannibalized an existing online purchase.
  • Because e-mail customers were the most likely to shop other advertising channels, there was a gain in long-term customer value associated with e-mail marketing. Each dollar a customer spent because of e-mail marketing generated $0.33 of incremental long-term spend across all other channels (catalog, search, affiliates, television, radio, newspaper), over the course of the next five years.
It is the last point that is most important. The e-mail marketing community has been abnormally slow to embrace the concept of a "customer file". Catalog marketers, however, embrace the "customer file" as their most valued asset. Catalog marketers actively map out the evolution of their customer file, playing extensive what-if games to understand how today's activities influence the long-term health of the business.

Can your e-mail vendor community provide this type of information for you? Or your Business Intelligence team? Or your Web Analytics team? Or your existing E-Mail Marketing team? It is important to accurately measure how e-mail marketing interacts with your existing customers, advertising, products, brands, and channels.

1 comment:

  1. Kevin -

    You really make some great points in this blog. We have been using internet marketing and email marketing for years. Email marketing really has it's advantages and does help bring back our long time, loyal customer base.


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