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Valuing Email Addresses and Scoring a List

  |  February 25, 2013   |  Comments

It's imperative to discover the value of your email addresses, as that is your currency to win more budget dollars and perhaps even respect within your organization.

Email addresses have a shelf life. Nearly a third of them go bad every year. Some email addresses are gold, others are duds, and some only behave the way you want them to at particular times of the year. What's a marketer to do?

First, you must understand the customers and prospects these addresses represent. Analyze customer spending, behavior, and the acquisition source. Though most marketers associate an email address with an individual, far fewer associate a value with that email address. A survey by my firm finds that just 32 percent of marketers know the value of their email addresses. With so few adhering to this practice, email marketers can make decisions about their lists and email practices somewhat blindly. Tactics for high-value subscribers may not work or make financial sense when applied to lower-value subscribers. List churn management can be misinterpreted. You can't fully analyze the merits of email address reactivation tactics, such as sending a postcard or making an outbound call, if you don't know whether the tactics' cost are higher than the value of the addresses you're trying to reactivate.

Determine Email Address Value

  • Customer lifetime value. One of the more accurate but complicated ways to determine your address' value is to link it to your customers' lifetime value. Multiply a customer's average spend on a given transaction by the number of transactions in a year. Apply to this number a factor that represents the number of years the customer remains active and if transaction frequency increases or declines over time. Subtract servicing costs and apply other assumptions, such as crediting customers who act as advocates to recognize this goodwill. Though this approach is useful for transaction-oriented marketers such as retailers, it's harder to apply to a publishing model or lists largely comprising new clients or prospects.
  • Acquisition source. Another approach is to use email acquisition costs as an aggregate proxy for an address' value. Depending on your acquisition sources, you may want to apply a higher value to addresses acquired through partner co-registration agreements and a lower value to addresses acquired on your website.
  • Fuzzy math. Use a combination of sources. Publishers could assign aggregate sponsorship ad revenues across the active portion (openers and clickers) of their lists. Further, refine with the response and delivery differences of the domains that make up the list's active portion. Associate a lower value to domains that are more expensive to deliver to.
  • Calculate value based on your metrics. In my book "Email Marketing An Hour A Day," I wrote about both creating an engagement index to understand the overall performance of your list, but also offer up a formula to measure the value of the email address. This email valuation calculator was developed with members of the Email Experience Council and is available to download from my website for free.

Apply the Valuations

Once you have values for your email addresses, apply them to your segmentation scheme and targeting and testing tactics, such as message frequency. More important, use these values to determine which targeting tactics are necessary.

FreshAddress recently introduced a new solution called eSpend Score. This tool allows marketers to send the right offer to the right person at the right address. FreshAddress leverages its own data sources and applies them to a marketer's list to return a score from 0 to 100 that indicates which addresses are most likely to engage and to spend. FreshAddress' eSpend Score combines purchase data with email engagement metrics, allowing marketers to use this scored list for their targeting efforts. For example, a prominent nationwide catalogue/online retailer obtained the eSpend Score for email addresses that were targeted in a recent campaign. When they compared the click and purchase data, they found those with scores of 75 and above had significantly more click and purchase activity than the rest of the list. This segment was 28 percent more likely than the rest of the list to have at least one purchase and 112 percent more likely than the rest of the list to have one click. This type of service is an excellent tool for marketers to understand the value and potential of the addresses that comprise their email marketing database.

Computing email address value is a necessary function for every email marketer. The methodology you use can be simple or incredibly complex. When in doubt, start with the simple, back-of-the-envelope acquisition cost approach. If you're a retailer, leverage your existing recency, frequency, and monetary (RFM) scores.

Regardless of your approach, it's imperative to discover the value of your email addresses, as that is your currency to win more budget dollars and perhaps even respect within your organization.

This exercise can help you make more efficient marketing decisions and will highlight to the rest of your organization just how valuable your email programs are.

Until next time,
David

Email image on home page via Shutterstock.

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ABOUT THE AUTHOR

David Daniels

For more than 20 years, David has been an industry proponent. Direct Magazine said David is "one of the most influential experts in email marketing, if not the most influential." Co-author of "Email Marketing An Hour A Day," David has held senior level positions at Forrester and JupiterResearch, Apple, Anthropologie, MacWarehouse, Proteam, and retailers that dotted the early days of CompuServe. David advises many industry organizations including the OTA, DMA, eec, and has been a contributor to the Weekend Today Show on NBC. Learn more about connected marketing and download free research with registration here. Follow David on Twitter @emaildaniels and learn more at www.relevancygroup.com.

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