Putting a Price on E-Mail

As we race to complete 2007 planning, the analysts remind us only 3 percent of budgets are set aside for e-mail marketing. “Well, e-mail marketing is cheap,” you might say. “And if our marketing budget is $2 million, $60,000 should be just fine. After all, e-mail is close to free, and we already have templates in place. Besides, only about 30 percent of our marketing database even have e-mail addresses.”

Yet this channel touts a $57 return for every $1 spent. A $60,000 spend will drive an estimated $3.4 million in sales. And that’s not even considering the revenue driven from service and transactional e-mail.

Why would you want to be cautious with your e-mail budget?

The truth is expanding the e-mail budget isn’t an easy task for most companies. Most e-mail programs begin as campaign-driven, focused on one goal: driving sales for a specific product or service. As people become more advanced, they branch out into e-newsletters and multiple messages. At this point, e-mail marketers often realize they’re hitting some barriers relating to the opt-in process, forms, and other database-related elements.

For about 60 percent of us, our companies won’t yet support the budget or staff needed to design an appropriate e-mail foundation, even though the e-mail channel has proven itself to be profitable and viable. Yet that same 60 percent knows we can never push our programs to the next level without the budget.

Ask anyone who has lived through her e-mail program’s maturation process, and she’ll tell you it’s not easy but it’s worth it. I asked a number of marketers who’ve driven their programs to the next level how they put a price on e-mail’s value. Here are the top three lessons I learned:

• Put a monetary value on each e-mail address. Though you care very much about open and click-through rates, company executives probably only care about sales driven from the total campaign (which may or may not be broken out by channel). If you can’t estimate how much revenue is being supplemented or driven by e-mail, and therefore determine an e-mail address’s value, you won’t be able to justify more money for support.
• Begin a messaging strategy before you add e-mail addresses to your database. Sure, your job may be the retention e-mail person, but the way in which your data is collected (Web site, telephone rep, direct mail, etc.) is just as much your concern as the acquisition team’s. If your forms and opt-in processes aren’t optimized, you can kiss data quality goodbye. Optimizing forms and the opt-in process take money and expertise. Don’t try to do it alone. But do count on seeing your results triple (at the very least) once you have a good opt-in and prospect building process in place. It’s money well spent.
• Don’t waste your money on a segmentation strategy if you don’t have a speedy data team. Once you have the permission and are ready to send, you can spend hours of your or your agency’s time designing the most amazing targeting strategies. If your data team requires a week between collecting results and sending the follow-up message or you can’t track through to the Web site and conversion, don’t spend your money on segmentation. That’s right, spend it somewhere else, such as establishing a tracking program or optimizing the opt-in process.

These are great lessons that can apply to everyone sending e-mail messages. Although your situation may be a bit different, I hope these three lessons will come in handy as you dive into 2007 e-mail planning.

Want more e-mail marketing information? ClickZ E-Mail Reference is an archive of all our e-mail columns, organized by topic.