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Your Email Program May Be Costing You More Than You Think

by Justin Foster, WhatCounts' VP of Professional Services

We all know there are costs associated with doing business. Yet, have you considered the costs associated with doing business ineffectively? If you think email marketing is inexpensive, take a look at the following five costs and consider the potential impact on the bottom line when you fail to communicate effectively with your subscribers.

Opportunity Cost - Opportunity cost is the loss of potential revenue by NOT sending the RIGHT email to the RIGHT person at the RIGHT time. If a well-timed message sent to your subscriber accelerates them to the next conversion, the marketer has succeeded in improving that customer's RFM score. Many of our customers have seen an increase in conversion rates by measuring campaigns in terms of recency and frequency instead of open and click-through rates alone.

Customer Defection - A lost customer is a customer with a potential value of zero. In other words, even if the customer's "current" value (i.e. the sum total of all profit generated by the customer up to this point) is high, per the RFM paradigm, the longer the period of time between the last purchase and the current time, the greater the probability the customer will defect and cease to generate value. Marketers that are able to identify "customer lifecycles" for different customer segments are at a competitive advantage because they know when to launch targeted "win back" campaigns at subscribers who are at risk of defection.

List Attrition - Marketers seeking revenue growth through their existing subscriber list can select one of two approaches - optimizing the use of their existing file, or adding additional subscribers to offset subscribers who may have opted-out. Of course, adding new subscribers can be expensive. Media buys, co-registration programs, and other 3rd party acquisition programs have measurable costs and low conversion rates. Email marketers that send irrelevant and unsolicited offers increase customer frustration and indifference. The eventual result of irrelevance is attrition, and a potential negative revenue implication extends beyond the opt-out through negative viral communication. However customer frustration and indifference is measurable. It is called "friction", and it is not just the opt-out rate that the marketer should be concerned with; it is the measurable increase in friction that provides the clues a marketer needs to maximize the li kelihood of retaining revenue-generating customers.

Deliverability Blocks - Is it any surprise that marketers who launch irrelevant campaigns are often the ones that experience the greatest deliverability problems? Marketers can discover through behavioral segmentation that their least active subscribers (in terms of opens, clicks, conversions, etc.) are also the ones that are most likely to complain. Subscriber complaints increase the probability of blocks, which ultimately has a negative impact on revenue generation.

Subsidization Cost - This cost is measured by calculating the margin lost by sending a discounted offer to a customer that would have converted at a higher margin regardless of the offer. Email marketers that send "free shipping" and "X% off" offers to their entire subscriber list are not using their budget wisely. Their best customers will require fewer incentives while their less loyal customers will require greater incentives. Discount strategies should be applied accordingly.

Source: WhatCounts' e-Communicator

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