Whether you're looking at house or third-party lists, conversion rates and cost-per-conversion are more important than opens and clicks.
Most of my work with clients involves house lists, but every once in a while I end up helping out with marketing to third-party email lists.
I have a new client that is doing extensive email marketing to third-party lists (this is in addition to the email marketing they do to their house list). In the first five months of this year, their third-party email marketing program involved:
As third-party email marketing programs go, it's fairly successful. Conversion rate by list varies from a low of 0.01 percent to a high of 0.45 percent; the total conversion rate for all lists and sends through the first five months of the year is 0.11 percent. This is actually pretty good. The Response Rate 2012 Report from the Direct Marketing Association (with Bizo and Epsilon) showed average conversion rate for house email lists at 0.12 percent and prospect (third-party) lists like these at 0.03 percent.
But when you're working with third-party lists, the conversion rate alone doesn't provide you a measure of success or failure. You need to factor in the cost of the list.
The list costs here are lower than I had expected. According to the Worldata Summer 2013 List Price Index, consumer email lists are renting at an average of $68 per thousand addresses (CPM). This is for one-time use and includes deployment costs.
In this case, the client's list costs vary from just under $2 to just over $12 per thousand - a significant discount off the industry average. There could be a couple of reasons for this. Looking at the data I'm wondering if they aren't renting lists on a cost-per-click or other response-related metric. Another element working in their favor is their well-known brand name combined with their large volumes, which could allow them to negotiate very favorable rates with the list owners and brokers.
However they are able to get these favorable rates, it helps them significantly when you look at cost-per-conversion. On average, they're paying just over $7 for a conversion. While not every company could afford to pay $7 for a conversion, this company can. In their business model, each conversion equates to an ongoing monthly fee paid by the customer; it doesn't take long for them to break even on the $7 acquisition cost and begin making a profit.
When you break out the data by list, it ranges from just under $2 to over $100 per conversion. We can likely all agree that it probably makes sense to keep mailing the list that generates conversion for just $2 each and that it was likely wise not to resend to the list that generated conversions at a cost of over $100 each. As I work more with this team I'm sure I will come to understand how they determine which lists to continue using and which to stop.
Notice what's missing from this analysis - traditional email marketing metrics like open and click rates. This data would be helpful if we were looking to go deeper in the performance of each list and look at ways to boost conversion rate. But for a quick snapshot of how the third-party email marketing program is contributing to the organization's goals, the data provided here is sufficient.
This type of analysis can be done on your own third-party email marketing efforts or as a way to look at segments within your house list. In the grand scheme, whether you're looking at house or third-party lists, conversion rates and cost-per-conversion are more important than opens and clicks.
Until next time,
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Jeanne Jennings is a 20 year veteran of the online/email marketing industry, having started her career with CompuServe in the late 1980s. As Vice President of Global Strategic Services for Alchemy Worx, Jennings helps organizations become more effective and more profitable online. Previously Jennings ran her own email marketing consultancy with a focus on strategy; clients included AARP, Hasbro, Scholastic, Verizon and Weight Watchers International. Want to learn more? Check out her blog.
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