How to Halve Your Email Costs: 10 Tips for Signing with a new Service Provider

I’m just about to sign a new contract with an email service provider. The difference between the highest quote we were given and the final price we’ve agreed is staggering (we’re paying well under half).

This is for the same level of service, the same monthly volume and really similar (if anything, slightly better) functionality. This is not a one-off – the same thing happened last time, and I’ve now been through this several times with web analytics providers, list brokers, online ad suppliers, etc.

Based on all of that, here’s a quick guide to getting what you need from an email service provider, without paying more than you have to. Here we go, 10 tips:

1. Decide What You Want First

The standard way to decide on a platform is to speak to a bunch of providers & let them tell you why you should use them. Then compare what they all offer and go with the best you can afford.

The cheaper, better way to do it will take about an hour of your time up front: Write down a checklist of exactly what you need before you speak to any service providers.

Put your requirements down in Excel. Speak to a few companies & note down how they match up to your list. Fill in costs for each, and you have an easy comparison of your essential needs vs the costs. It’s a subtle difference: “This is what it costs to get what we need” vs “This is what it costs to get what they offer”.

2. Costs: Know what you're buying & how the pricing works.

The basic costs of Email Service Providers are:

• Initial Setup & Training.
• CPM rate. This is your "cost-per-thousand emails sent". 'M' stands for 'Mille', which is Latin for 'Thousand'. Usually you'll make a minimum commitment (eg "I'm going to send 1.5 million emails a month") and they'll give you a rate for that.
• Monthly service charges & support costs.
• Standard services. EG, hourly rate for extra development on your behalf.
• Strategic services. (consulting)
• Hidden extras. Ask to see *all* potential costs. Get it in writing if possible.

Get all of these costs before you think about negotiating rates down. If you push down on CPM before they've told you monthly service costs, they may bump those up to compensate.

3. More on Costs: Ask early & always negotiate down

Ask about costs early on (never say “we’ve got a budget of $100k for year 1). You’ll probably be given 2 costs: A ‘rate card’ (the costs they publish to the world) and ‘your price’ (the cost they’re willing to offer you).

In my experience, these 'your price' quotes can still be negotiated down much further. The prices they’re most likely to budge are CPM and Initial Setup costs. You can often negotiate down further right up to the day you sign.

4. Get your Volume Commitment Right

The more emails you'll commit to send each month, the lower your ESP will go on price. EG, commit to 2-million emails a month and they may offer you $1.50CPM. Commit to 10-million and they may offer you $0.75CPM.

It's important to get this right: If you commit to 2-million and you only send 100,000, they'll charge you for 2-million anyway. If you commit to 2-million and you send 20-million, you probably could have gotten a better rate in the beginning.

The easy way to figure it out is to look at: How big are your email lists? How often do you send email? How much do you want to grow/shrink your lists? How much do you want to increase/decrease frequency?

5. Ditch the Consultancy Services

An in-house consultant will naturally be biased by the limitations of their own tool & their own company. For example, they're never going to say "hey, you're coming up to the end of your contract. I think you've outgrown the functionality our tool offers. You should take your business elsewhere".

My personal opinion is you’re always better off saving the money & using an independent consultant (Tamara, for example).

6. Ditch the Training Too

Most ESPs insist you have some sort of training at the very beginning. My advice is to take the absolute minimum to get you going at first. There are 3 reasons for this:

1. You just won’t know how much training you need until you’ve used the application for a few weeks.
2. If you get all the training on day 1, you’ll have forgotten any advanced stuff by the time you’re comfortable enough to use it.
3. If you do need extra training later on, you can always get it for the same price (or cheaper) than on day 1.

7. Ask for a longer contract

This sounds like a bad idea: The longer you're tied in, the bigger the risk. If things go wrong 3 months into a 3-year contract, you’re stuck! But, the longer your contract, the more commission your sales rep will get. Because of that, they’ll often offer you a cheaper deal to sign for longer.

There is a win-win: A longer, cheaper contract with break clauses. EG, sign up for 24 months, but agree that at each 3-month point you can give 3 months notice to cancel the contract.

8. Ask "if we sign by the end of the month..."

Your sales rep will have monthly targets. They'll get commission and bonuses if they hit their target, and even more if they over-achieve it. You can often commit to sign up by the end of the month in return for a better deal.

It's also worth remembering that it's really tough for them to go back on a deal. If they're willing to charge you $X to sign before Monday & you don't sign, 9 times out of 10 the deal will still be there on Wednesday.

9. Ask "who do you usually pitch against?"

Ask the question "Who do you usually come up against in pitches?". This achieves 2 things:

1. You can then speak to their closest competitors & find out if they’re better/cheaper/both.
2. Companies will often offer special pricing when pitching against their closest rivals.

Sales people are also naturally competitive. If they pitch against ACME corp 7 times and lose, they're more willing to be flexible with price if they can win the 8th.

10. Speak To Other Clients

If a company's system isn't suited to you, their sales people may not tell you. Their clients will give you a far less biased picture. Ask the company to provide references. Ask around your network to see if anyone else is using them. Ask the Email Marketers Club.

If another client says "we're doing the same volume as you and paying half the price," your ESP should either be able to give you a better cost or a really good reason why they can't.

11. Be nice!

Here’s my bonus tip: Be nice! Life’s much more pleasant & it can benefit your budget too. The person on the other end of the phone is far more likely to help you out if they like you. If you make their life really difficult, on the other hand, there is no emotional reason for them to do anything for you.

Any other tips? Experiences? Disagree? Work for an email service provider? Let us know in the comments!

Comments

[Derek Edwards]

This post assumes that the prospective client has more than a beginner level understanding of Email Marketing and the appropriate resources to implement that knowledge...

We find that there are many companies that can benefit greatly from consultative assistance. Ultimately it should come down to looking at it as an investment, not a cost and should include the appropriate ROI analysis to justify whatever level of service is selected.

- Derek

[Fred Testard]

Dear Dan,

Thanks for this very usefull and complete article.
I would just like to had a little something that we could call "the voice of the ESP" :
Although I understand that a marketer wants to pay the lower prices, I believe that the marketer should instead be willing to pay for the right price.
On the one hand, ESP market is very competitive and CPM rates can't stop getting lower and lower. On the other hand, email marketing requires more resources to monitor, analyse and understand campaign results as to provide marketers with relevant consulting.
An ESP provides much more than just a powerfull MTA with a delivrability monitoring... and it has a cost.
This being said, how much is the rught price... well just think of how many hours your ESP (sales, account direction, delivrability monitoring,...) spend to provide you with the best possible service and multiply by what you considere being an acceptable man working day rate... and there is not even any cost for broadcasting and using the tool provided.
Try this exercise and let me know if you pay above or beyond the calculated price.

Regards,

F. Testard

[Tamara Gielen]

Great article, Dan! I LOVE the posts you've written on this blog so far and look forward to more!
Thanks also for the plugs :-)