Choosing a Broadcast E-Mail Vendor, Part 2: Pricing

In part one of this series, I talked about the initial process of finding a broadcast email vendor. Today, I’ll cover evaluating different vendors’ pricing.

I admit it. I usually do the price analysis first. Why? I think it’s because I’m a bit of a spreadsheet geek. Also, I want to get a feel for where vendors are, pricewise, before I review the rest of their proposals. If one vendor is twice the price of its competitors, I’ll expect more from the qualitative portion of its proposal.

Here’s another reason: It can be especially challenging to come up with an apples-to-apples pricing comparison. I try to tackle this before the (somewhat) easier evaluation of qualitative stuff.

Below, an overview of pricing structures I’ve seen lately along with recommendations for evaluating them.

Lower-End Solutions

Lower-end, self-serve solutions tend to have very straight-forward pricing. Typically, there’s no set-up fee, no long-term commitment, just a flat monthly fee. I’ve come across two pricing models among lower-tier providers: cost by email messages sent and cost by list size.

The former is by far the more common model. You estimate your monthly send quantity and pay based on that. Instead of a CPM figure (which the higher-end services use), lower-end solutions usually have flat monthly fees based on ranges of send quantities. If your send frequency is low (once or maybe twice a month), chances are this will be a good pricing model for you.

The latter model can be a good structure for those who mail more frequently than twice a month (the more you mail, the lower the effective cost per email sent). In this instance, ranges concern your list size. You pay a flat fee (not a CPM) based on the number of subscribers you have.

Higher-End Solutions

When you move to higher-end solutions, pricing becomes exponentially more complicated.

One reason: Clear lines used to exist between self- and full-service solutions. In many cases, the lines have blurred. Vendors now often offer “blended” services, in which the client pays for a self-service model, then adds à la carte services at an hourly or project-based rate. Although great in practice, it can make budgeting more difficult. Some additional services:

• Set-up and training fees. Some vendors charge for set-up (I’ve seen costs up to $10,000). Others don’t. Typically, training is either included in the set-up cost or, if there’s no set-up fee, is optional and available for an additional cost. Don’t be too taken by these figures.Recommendation: Factor all the vendors’ costs into your analysis. A vendor with no set-up fee could be more expensive over the long run than a vendor that charges a large set-up fee.
• The CPM. The foundation of higher-end email deployment pricing has always been the CPM figure (in some cases, vendors quote a cost per email, but it’s the same idea). Recently I’ve seen CPMs ranging from $6.50 to $20.00; in many cases, vendors offer a lower CPM for clients with higher monthly send volumes.Here’s the rub: In most cases, the CPM figure alone isn’t an effective way to evaluate price. As the market has become more competitive, vendors have lowered their CPM figures and added on fees, such as campaign fees, fees for multiple cells/versions, and service bureau fees. Many also have monthly minimums. When I’ve factored these in, I’ve found effective CPMs as high as $32.

  Recommendation: Ask vendors to outline all their various fees, so you can calculate your own effective CPM, in addition to having the sales reps provide estimates. You’ll better understand the pricing structure and confirm the cost estimate covers all your needs. You’ll also have a better chance of heading off problems, such as finding out the cost estimate was for one campaign to 500,000 people, not the five campaigns to 100,000 people each you intend to send (the latter could cost more).

• Ancillary fees. In addition to the fees mentioned above, vendors often charge for ancillary services: registration page development, surveys, Web-based viral marketing, online coupons, and so on. They may also have fees for data hosting, any items they’ve developed, even hosting for images that appear in your email.Recommendation: Factor the ancillaries into your cost analysis to avoid being blindsided later on. I’ve found registration pages to be an especially dicey area. Development costs range from free to nearly $7,000, and hosting costs from nothing to $500 per month. When you have multiple brands and want a unique registration page for each, as some of my clients do, these costs add up quickly. That’s why it’s important to include these in your analysis.
• The art of the deal. Buying email services is like buying a car. Always negotiate. Vendors will come down in price.Recommendation: Once you find a vendor you want to work with based on its qualitative abilities, negotiate. Although it’s unlikely you’ll get a vendor to come down by 50 percent or more, it’s quite likely it’ll be willing to negotiate. A lower CPM is almost always doable; decreasing or cutting out other fees is somewhat less likely but still worth a try.

Qualitative Evaluation

Though this column’s focus is pricing, it’s important to consider the qualitative portions of vendor proposals. Differences in capabilities are less dramatic than they used to be, but they’re still there.

Recommendation: Don’t choose a vendor on price alone.

One key area of differentiation is deliverability. Some vendors have better records than others. Often, those with the highest deliverability ratios charge more for their services — because they can.

I work with my clients to define needs and set priorities before we speak to vendors. This helps us target our efforts and determine which bells and whistles are worth paying for, and which aren’t.

Recommendation: Remember, no vendor is perfect for everyone.

There are good email vendors at every price point, you just need to find them. A vendor that’s a perfect fit for one isn’t such a good match for another. Doing a thorough evaluation of a few vendors takes time (and money, if you bring in an independent outside consultant like myself to do it for you), but it pays off in the long run. You’ll have fewer surprises on the cost side and get a vendor that’s just right for you.

Next month we’ll cover qualitative evaluation. E-mail me with questions or thoughts.

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