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