December 10, 2013

Attribution: Why Retailers Send A LOT Of Emails To Us

From time to time, I'm asked questions like "why do retailers insist on spamming us with daily email campaigns?"

There's two key reasons.

First, there is essentially no cost to email marketing. Oh, I know, you're going to howl at me about how you have staff and how you pay your vendor a fortune (and you do).

But once you bury those fixed costs, the cost to send one incremental campaign is as close to zero as anything in marketing not called social media.

Pretend you are CEO of the company featured above. Your business is forecast to drop, year after year after year. Your job is to fix this problem. Fixing the merchandise assortment might take 1-3 years. You don't have that kind of time.

So you hire Kevin, and Kevin runs an attribution simulation for you, forecasting what happens over the next five years if you choose to double your email contact frequency - from two per week to four per week. Here's the outcome:

Interesting, don't you think? The drop in business volume isn't so severe, anymore. Profit improves marginally. Heck, retail sales increase by 2% a year, and you barely had to do a thing make it happen ... do you know how hard it is to grow retail comp store sales by 2%? Hint - it's really, really hard!

When you have a low variable cost channel like email marketing, and you have to drive customers into retail stores, you're going to need to send an awful lot of email campaigns to customers.

When I run attribution simulations, I make sure I thoroughly understand how the business could grow with minimal expense and effort. Email is one of the channels that gains priority.

Tomorrow, I'll show you what happens to this business when email marketing is discontinued.

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