- Average = 5 Campaigns Per Week.
- Average Demand per Email Delivered = $0.08.
On an annual basis, you multiply the $0.08 by 5 Campaigns Per Week by 52 Weeks to get $20.80 of annual value.
Well, that's not too bad, is it? Let's pretend that the metrics above are for a 12-month buyer. Now we'll look at the 12-month buyer in total ... a 40% annual repurchase rate and 2 annual purchases and an AOV of $100 ... yielding $80 of future demand per 12 month buyer.
All of a sudden, email marketing is responsible for more than 25% of future value. Not too shabby.
Unfortunately, email marketing is measured via opens/clicks/conversions. There are two better methods for measuring email marketing performance.
- Holdout Tests. Don't mail a random sample of email subscribers for "x" weeks. You'll learn, immediately, if email marketing has true incremental value, or if email marketing is just cannibalizing the rest of the business.
- Modeling. I frequently create logistic regression models for annual email response, and regression models for spend. Here, you see all sorts of interesting trends. If you find that email subscribers are worth $10 and your opens/clicks/conversions suggest the email subscriber is worth $20, then you know that about 50% of email marketing is incremental, while 50% is cannibalized from online orders that would have happened anyway. If you learn that email subscribers are worth $30 and your opens/clicks/conversions suggest the email subscriber is worth $20, then you know that you are under-estimating the importance of email marketing!
Either way, it's pretty darn important to measure the incremental value of email marketing. Go do it!!