Email Marketing: Measuring Response

We've all seen the numbers: According to a recent Aberdeen Group report, email marketing grew by more than 270 percent over the past two years. Spending on email marketing is expected to rise from $2 billion this year to over $4 billion in 2003.

Experience with this new direct-response vehicle is yielding a variety of tips for successful implementation, including: Don't spam, Target wisely, Personalize your message, Be innovative and compelling, Keep it short and simple, Be timely, Provide value, Include links, Manage responses, Follow through, Track and analyze results.

Below is the first of five stories in this issue's Email Marketing special report. Each of the writers is an executive with a firm involved in email marketing. And each brings a different perspective to the question of how to use this rapidly proliferating medium to achieve business objectives--whether online or off.

MEASURING RESPONSE

by Debbie Weil

President, WordBiz.com

Click-through rates (CTRs) for opt-in email marketing campaigns ranged last year from a low of 0.9 percent to a high of 8.5 percent. But what are you really measuring? A useful discussion of response rates requires two things: 1) a clarification of terms and 2) a more nuanced definition of email marketing that distinguishes email address acquisition from a retention email program.

Calculating the CTR is easy enough: If you send a promotional message to a list of 5,000 addresses and 137 people click through to your website or landing page, the CTR is 2.74 percent.

But then what? Until your recipients convert to whatever action you’ve set as the goal of your campaign (in B2C, it may be a purchase; in B2B, it could be the download of a white paper), you don’t have a result that impacts the bottom line. You do, however, have a way to measure certain elements of your direct-response marketing efforts. If you’ve segmented your list, you can use relative CTRs to test one subject line against another, text vs. HTML, etc.

If your mandate as media buyer or marketer is a meaningful ROI, then cost of conversion is your key response metric. How many leads did your campaign generate—and how much did that cost you? Over a period of months, you can use cost per lead to calculate cost per customer acquisition. Eventually, you can compute lifetime customer value.

Just as important, however: How many valid email addresses did you capture, along with permission to communicate with these prospects in the future? That’s a roundabout way of asking: Were you successful in building your house list?

Which brings us to the dirty secret of email marketing: Yes, with careful research you can find B2C and (with difficulty) B2B opt-in lists that target your audience and yes, you can come up with a great offer and craft a benefits-laden message. But if you want your response rates to correlate with measurable business results, you’ve got to redefine email marketing.

Successful email marketing is not a one-off acquisition campaign to collect email addresses. It’s a strategically planned retention program of mailing e-newsletters, special promotions, and product updates to your opt-in house list with the goal, over several quarters or even a year, of converting your prospects into customers.

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