• by editor , David Baker , July 18, 2011

I figure if you have a database of customers that represent more than 30% of your entire database, you're more than likely to have thought about this topic.  You have an asset: an email address!  How do you account for this asset?  Is it a cost-saving proxy? Do you see it only as a channel proxy?  But what does each individual email address mean to the value of a customer record?   

 I expect many look at cost compression as the first way to solve their budget and growth challenges and defend the costs of their operation.  This is why we've seen such compression in the CPM space over the past three years.  

An email address can be a cost-saving proxy.  It can be accretive in revenue to all the other channels.  It can be a combined asset value, as it drives engagement while other channels convert (email and on-store or email and search). It can be a lifetime value indicator that helps illustrate increased purchase frequency and a lower cost of sale.  The value of an email address can be funnel-driven as well.  You can look at it from an early lifecycle approach and derive a proxy that shows a prospect to customer and the incremental value of the email address through this stage.  You can also use a late lifecycle proxy - like loyalty engagement.  

You may ask, why would I need to do this in the first place?  I already drive revenue through the channel, create brand engagement through the channel, and  have an active reader and responder base.   So, I challenge you to present this to your CEO and explain how this extends customer value to the business.  To pull this off, you need to think about things a bit differently. 

1.     Negotiate what the asset really means to your company. Meaning, if you tried to sell the asset tomorrow, what would it be worth in the open market?

2.     Be creative in your business model.   Be prepared to add in other "monetization" options that add value to the asset - for example, could you sell ads to this audience?

3.     Negotiate the math.   Your assets will have a present-day and a future value. You have to have variables that account for all the things we talk about every day (cost of acquisition, retention rate, deliverability rate, engagement rate, conversion rate, list tenure, churn, etc.)  They must be factored in to model this out accurately.  Churn models alone don't tell the business impact story.

4.     Add in scenario analysis.  What if mobile really does become predatory of the inbox?  What if the social inbox drives the value out of consumer inboxes?   What if there is another security scare?  You have to consider industry scenarios that that could create changes to impact your asset value.

5.     The inbox is the inbox -- whether it's mobile or social. Try to combine the proxies till these other experiences reach scale on your database.  We all know that mobile addresses represent a small subset of the customer database and are not yet persistent to all brand strategies. 

6.     Build a proxy that is manageable monthly, not annually.  The problem with lifetime value indicators is they are so hard to do anything directionally with on a persistent basis.  The problem with developing a channel proxy is, how do you influence, track and manage this over time?  It should be a meaningful proxy.  I've seen so many different meaningless proxies.  Your planning and strategy should represent this, not just campaign and seasonal marketing calendars.

This proxy can help you do the following:

·       Integrate email into a broader company asset story.

·       Drive C-Level discussions that can be translated into terms your execs can get behind.

·       Provide a proxy that is tied to asset building value, not channel proxy value.   You need to grow your database, derive assets, decide which assets drive the most predictable business outcome  -- and you must have a defensible position. Most don't!

I haven't seen many brands that can defend their asset.  When this is the case, the discussion usually migrates to "What do we do next?" or "What is the silver bullet?" or "What do we do with social?" The discussion should be centered on asset building strategies that drive these tactics. 

I will warn you, this isn't easy!    It takes a quant person.  It takes a business mind (get out your MBA hats).  It takes industry insight. And it takes a brave person to drive this through a company continually barraged with new channels and cool new toys.  But if you take it on, it will evolve your thinking and ambition!