A Good E-mail Marketing Program Costs Money

How do e-mail marketers move beyond “fire and forget” marketing? While marketers agree that more targeted, timely, and relevant e-mail communications are better received and increase response, basic economics is a major barrier to progress. E-mail marketing is so cheap that every campaign delivers ROI (define) — even totally untargeted campaigns. Wonder why spammers still spam? They make money doing it.

Good E-mail Isn’t Free

Corporate e-mail marketing managers concerned about opt-outs, unsubscribes, and long-term engagement view e-mail as a tool to develop customer relationships. They work hard to employ tactics — multilayer targeting, segmentation, and event triggers — to improve the relevance of their communications.

Unfortunately, as they strive to improve e-mail communications, they run into challenges such as availability of timely, high-quality data; knowledge of how to turn data into actionable information; and operational know-how to automate data-driven processes.

Sound familiar? Today’s online marketers struggle with the same issues that drove big direct mail marketers of the 1990s to invest in skills, processes, and technologies around database marketing, relationship marketing, and CRM (define). Unfortunately for many online marketers, the similarities stop there. The perceived cost of e-mail is so low that online marketers struggle to justify investment in database development, analytic skills and tools, and campaign management technologies to help more effectively target and automate e-mail communications.

The time to invest in skills, processes, and technology to improve e-mail marketing communications has come. According to a February Forrester Research report, 77 percent of retailers say e-mail will be a more important marketing vehicle over the next year. In fact, the growing importance of e-mail blew away all other marketing tactics, including search and social computing tactics. Given this increasing top-down emphasis on e-mail paired with the well-publicized facts that consumers are weary of inbox overload, e-mail response rates are steadily declining, opt-out rates are increasing, and e-mail house files aren’t really growing, marketing organizations can no longer afford not to invest in efforts to improve the relevance of their e-mail programs.

The Cost of Good E-mail

Boosting e-mail programs’ relevance and sophistication comes at a cost. Here are the major cost components:

• Analytic data mart. This is a data sandbox to explore data, profile subscribers, analyze behavior, and identify key insights that can be leveraged to increase e-mail program response, engagement, and overall success.
• Analytics team. You have a sandbox, you need people able to play in it, develop and validate business hypotheses, predict results, and so on.
• Marketing database. This operational marketing database is a simplified data structure incorporating only that data required to define, execute, manage, and measure current e-mail programs.
• Campaign management and automation tools. They sit atop the marketing database. Marketing users leverage them to define, automate, and execute campaigns.

The items above can vary dramatically in cost and scope and can be achieved differently: in partnership with an e-mail service provider or a more broadly focused multichannel database marketing service provider; within your organization with support from IT, a systems integrator, or both; or a combination of all of these. Determining the best approach for building the required skills, processes, and infrastructure depends on various factors. But if you don’t do these things, you won’t be able to improve your e-mail program’s relevance and sophistication.

How to Best Proceed

The majority of the benefits from the investment proposed here typically derive from growing revenue rather than lowering costs. Direct mail is so expensive that mailers can often justify a marketing database and top-notch analytics team to help manage costs. Unfortunately, e-mail is so cheap that online marketers struggle to make the same argument. And executives, often skeptical of business cases that don’t show cost reduction, are hesitant to pony up funds for e-mail program improvement. This issue stymies many e-mail marketers when they make their best attempts to win support for investment. While there’s no silver bullet to these issues, e-mail marketers should approach the challenge by:

• Changing the internal e-mail mindset from campaign management to program management. Too many marketers continue to think about e-mail on the basis of individual marketing campaigns. This short view of e-mail directly contradicts the idea of e-mail as a tactic to develop customer relationships. E-mail marketing managers must start to measure, understand, and track metrics like program engagement or the lifetime value of an e-mail contact to illustrate the value of the e-mail program and shift mindsets from executing a campaign blast to boost short-term response and leveraging e-mail to drive long-term program profitability.
• Teaming up with the internal database marketing or relationship marketing experts. Chances are, particularly if your company enjoys direct customer relationships, that somewhere in your marketing organization there’s a group of individuals focused on issues very similar to those discussed here. Rather than treating e-mail as an island, online marketing organizations should seek out and partner with their fellow database marketers to leverage investments in skills and infrastructure that have likely been made. Most marketers would agree that a long-term goal is to manage multichannel customer communications so, inevitably, e-mail marketing groups will have to team up anyway. Best to start now.
• Carefully building the case for investment around revenue creation. Marketers often attempt to justify investment in broad terms. While the aggregate view is important, it’s equally important to make the meaning of investment real to decision makers. Start by identifying very specific things that are either very difficult (e.g., time consuming) or even unrealistic (impossible = opportunity) within the current environment, and illustrate the benefits that investment will yield. For example, perhaps customer win back and remarketing tactics are really hard for your organization because they require manual data pulls from your Web analytics tool, external data massaging, manual import to an e-mail marketing system or provider, and finally manual execution. Document the benefits of lights-out automation of those tactics. Identify several scenarios like these, lay out the timeline and the cost required to execute them currently, and calculate the cost of scaling them in the current environment. Then do the same assuming investment in skills, processes, and technology.

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