Calculating the Cost of Increased E-Mail Frequency, Part 2
Jul 15, 2006
by Kirill Popov and Stefan Pollard
Is more better? E-mailing your subscriber base more frequently can help boost sales, revenue, customer loyalty, and word-of-mouth exposure. Or, it could cost money and customers, as we outlined in part one, as well as damage e-mail deliverability. The outcome depends on how well you manage increased frequency and both its positive and negative consequences.
Four key drivers can turn your e-mail financials from black to red if you increase frequency without adequately planning for:
- Additional lost subscribers
- Cost to reacquire these customers
- Potential lost revenue
- Higher spam complaint rate that triggers ISP blocks
In this column, we'll provide a basic formula for your own frequency calculations, delve deeper into the impact on deliverability, and explore alternatives to simply sending to your entire list more often.
Marketers, Start Your Calculators
If you've already accelerated your e-mail program's sending frequency, use this set of equations to determine whether the increase helps or harms your bottom line:
- Determine the "before" and "after" frequency (how many individual messages or campaigns you send per month to your entire list, excluding any targeted or transactional messages, and the number you increase to or plan to send on the new schedule).
- Calculate the following costs and figures for a month of messages:
- Lost subscribers (average, using results from a month of messages): Hard bounces + addresses associated with spam complaints + unsubscribes = lost subscribers
- Message distribution costs: (CPM x number of subscribers x number of messages) + accreditation fees + deliverability monitoring + labor/agency/ESP fees = message distribution costs
- reative costs: Labor/agency fees + image purchase = creative costs
- Reacquisition costs: Your cost to acquire a prospective customer's e-mail address
- Potential lost revenue: Use average annual revenue per subscriber/customer. If you don't know this figure, divide your e-mail program's annualized revenues by the average number of subscribers for the year. Because the people who unsubscribe or file a spam complaint were likely your least valuable customers, you should probably reduce the annual revenue lost by some factor, such as 50 percent.
- Plug those numbers into this equation: Annual distribution costs + annual creative costs + (annual lost subscribers x reacquisition costs) + (annual lost subscribers x potential lost revenue) = annual lost/gained revenues
Perhaps You Should Send More Often
So far, we've assumed increasing e-mail frequency could be a negative if you send more often than subscribers expect or want. But if you mail only a few times per month, you could be leaving money on the table. In that case, sending a few more e-mail messages could actually do more good than harm.
Use these factors to forecast the impact of sending more frequently:
- Bounces. Increased frequency should have only a modest impact on bounces. It's driven most by timing: when e-mail is sent during the month. So assume an increase in monthly bounces of perhaps 10 to 20 percent.
- Unsubscribes. Our analysis shows mailing more often doesn't necessarily increase the percentage of unsubscribes resulting from each mailing. Instead, you'd see the impact in the cumulative effect over several mailings. For example, doubling mailings would double the number of unsubscribes per month.
- Spam complaints. Increased mailings drive a growth in spam complaints per message or campaign. We don't have an exact ratio, but it's reasonable to expect your spam complaint rate will double if you double frequency.
The Deliverability Effect
In addition to the obvious effect on the bottom line, overmailing can slap down an e-mail deliverability rate.
One of the biggest complaints e-mail recipients had during the holiday 2005 shopping season was receiving much more e-mail than they expected when they opted in.
What do people do with all that unwanted e-mail? They either deleted it (68 percent) or unsubscribed (30 percent), according to a Return Path survey. A full third of respondents said in addition to other steps, they reported the excess as spam. This is where real deliverability danger lies.
As noted above, you can expect more spam complaints when you increase frequency. This higher volume could be the tipping point that triggers ISP blocks on your sending IP and kicks you off ISP whitelists or third-party accreditation or reputation lists.
Further, you're more likely to be reported as a spammer on collaborative peer-to-peer antispam lists, such as Cloudmark. That can get you on blacklists, which further reduces deliverability.
Finally, unhappy respondents who don't actually report you to their ISPs will set blocks or filters within their own e-mail programs to make you go away.
Relevance Is Key
The mistake most marketers make when they beef up their frequency is they just mail more offers to all the same people on their list.
Instead, start at the beginning of the relationship with your customer or subscriber and use a set of best practices, such as these:
- Optimize the opt-in page to collect relevant data in addition to name and address: product interests, gender, how often they want to receive e-mail, and so forth. To avoid overwhelming new customer with data demands right at opt-in, add an option to fill out a customer profile in an e-mailed confirmation message or in a follow-up to a product purchase.
- Segment mailing lists into relevant categories.
- Improve creative to make the content more attractive and visible, both in the preview pane and in the open view with images blocked.
- Combine lifecycle messaging, which triggers messages at appropriate points in the customer's relationship with you, with dynamic content that reflects a recipient's previous purchases, contents, or interests.
- Identify segments according to responsiveness. Your most responsive segment will probably respond favorably to increased frequency, while the fatigued segment will most likely generate more complaints.
- Step up monitoring of spam complaints, blocks, and blacklisting. Address any issues immediately.
These best practices can help you move your e-mail program to the next level, making you more valuable to your subscribers and improving your ROI without damaging your list integrity or customer relationships.