Marketing to Third-Party E-mail Lists, Part 2

Third-party e-mail marketing is becoming more popular. In my last column, I discussed how list rental costs are decreasing as response rates rise. I also covered how to read a data card, which is what you’d use to evaluate lists for rent. Today, I’ll provide some basic strategies to maximize your chances for success using third-party lists in the e-mail marketing world.

Choosing third-party lists is both an art and a science. You’re looking to identify lists that have the people you want to reach, also known as your target audience. But you can never really know how a list will perform until you send to it. Here are my five tried-and-true rules for getting started with third-party lists.

If You’re Just Starting Out, Three Is Key

One of the biggest risks people new to third-party marketing take is choosing just one list. Don’t do it. Mailing a list for the first time is a gamble, no matter how well you believe it will perform. To mitigate that risk, hedge your bets by choosing three lists.

Why three? I’ve found that if I mail to three lists, at least one will perform well enough to roll out with later on. Instead of sending to 30,000 names from a single list, mail to 10,000 names, each from a different list. You have a better chance of finding a list that performs really well this way, rather than sending 30,000 e-mail messages to a single list and risking the chance that it bombs.

One more tip: when you’re evaluating lists, focus on lists with a large quantity of qualified names. If I have two lists that appear equally qualified, I’ll use list size to decide which to test; a list of 100,000 potentially qualified names is more appealing to me than a list of 20,000 potentially qualified names.

When You’re Testing Lists, Project Accordingly

When you send e-mail, you always looking for a return, typically a sale or lead. You may be looking for these when you test third-party e-mail, but you also have another goal: to find a list that works well enough to warrant rolling out.

You should send to three lists, but don’t assume all will perform at or above your goals. I tend toward a conservative approach. Assume:

  • One list will perform to your goals.

  • One will perform about half as well as you want.
  • One won’t perform at all.

If you do this, you can usually reach the projections you set for the mailing. Often, you can exceed them.

Leverage Proven Creative, If You Have It

What you send is as important as whom you sent to. Using creative that’s a proven performer with your house list will increase your likelihood of success with third-party lists. When I’m doing projections, I assume that creative that works when it’s sent to a house list will perform half as well when it’s sent to a third-party list. So if you’re getting a 30 percent open rate, 5 percent CTR (define), and 1.2 percent conversion rate on your house list, I would project third-party performance at half that: a 15 percent open rate, 2.5 percent CTR and 0.6 percent conversion rate.

I’m a big fan of numbers. I want to run the numbers before every send to get an estimate of the response rate and ROI (define). When you’re testing lists, you may need to take a loss on the three lists’ initial send to identify a list that will work for you in the long run — and provide enough revenue to make up for the initial shortfall. This is what makes using third-party lists for e-mail marketing difficult and what causes some companies to shy away from the game entirely.

If You Don’t Have Proven Creative, Take Two

If you don’t have proven creative that works with your house list, you’re at a disadvantage. But don’t count yourself out. Here I recommend that clients develop two different creatives and test each with each list they’re testing. This results in a grid with three lists and two creatives, for a total of six cells, as shown here:

Creative List A List B List C
Creative 1 Cell A1 Cell B1 Cell C1
Creative 2 Cell A2 Cell B2 Cell C2

Be sure you have a quantity of 10,000 names for each cell (20,000 total per list, 60,000 total names). This will help ensure your testing yields the result you need: a creative/list combination that performs well enough to roll out with.

You’re Never Done Testing

Thinking you’re done testing after sending to the lists is a common mistake made by e-mail marketers new to third-party e-mail lists. Even if you find that all three lists work, you aren’t done testing. It’s an ongoing process; you never know when your need for list quantities will exceed the number of proven names available to you. You also never know when a list that has performed well for you in the past will go south, leaving you high and dry with no conversions. To mitigate these risks, build new-list testing into your ongoing e-mail marketing program.

It’s not unusual for companies to budget 10 percent to 20 percent of their marketing dollars each quarter to testing. This should include testing offers, copy, design, format, lists, and anything else you think might raise your conversion rate or lower your cost per conversion.

If you’re new to third-party e-mail marketing, try this — and let me know how it goes.

Until next time,

Jeanne

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

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