Is Email Marketing Cheap -- Or Does It Have A High ROI?

How you -- and, more importantly, your boss -- answer that question easily predicts the future success of your email program.

Here’s Why…

On the spectrum of email marketing investment levels, there are two upward curves where incremental returns increase. Toward the low end of the spectrum, there’s a small curve where brands can increase their email marketing ROI by minimizing their investments by:

--       Negotiating for the lowest possible CPM, largely by minimizing ESP functionality.

--      Focusing on broadcasting unsophisticated emails to the largest possible audience, often emphasizing list size over list quality.

--      Hiring inexperienced email marketing staff -- and then minimizing educational costs such as conferences.

Whether these tactics are used unconsciously or consciously, because of ever-present resource constraints or other structural reasons, they are the hallmark of an “email marketing is cheap” mentality.

Toward the high end of the email marketing investment spectrum, there’s a much, much larger curve, where brands can increase their email marketing ROI by investing in tools and tactics like these:

--     Seeking sophisticated ESP functionality that delivers greater returns.

--      Focusing on subscriber journeys, segmentation, and personalization to deliver highly tailored experiences that generate high returns, minimize list churn, and maximize subscriber lifetime value.

--      Hiring experienced email marketers and investing in their continued education, and bringing in outside experts to assist when needed.

These tactics are indicative of an “email marketing’s ROI is high” line of thinking.

Almost three years ago to the day, I wrote about the “Widening Email Performance Gap Between Haves and Have-Nots.” Since then, there’s every indication that this gap is firmly in place and that the Haves, who correctly believe that email marketing has a high return on investment, are increasing their competitive advantage over their peers who chronically under-invest in their email programs.

For example, one in eight major retailers still don’t send welcome emails, while more than a quarter now send a welcome series. Outside of welcome emails, use of triggered emails is low and slow-growing, giving early adopters a huge competitive advantage. While many brands still struggle with permission and engagement, others are analyzing performance by acquisition source, perfecting engagement-based segmentation, and optimizing their re-engagement strategies to maximize lifetime value. And while roughly half of major B2C brands still use largely desktop-centric email design, 38% are using responsive design.

The Point…

There’s a disconnect between what brands say are important and what they actually do in their email programs. On the one hand, CMOs and other marketing leaders rate ROI as their No. 2 marketing success metric behind revenue growth, according to our State of Marketing Leadership survey. And on the other hand, adoption of mobile-friendly email optimization, triggered emails, and other sophisticated tactics is low and slow-growing, despite the fact that email marketing is either the highest-ROI channel or the second highest behind organic search, depending on whose research you look at.

The Direct Marketing Association says email marketing returns $43 for every dollar invested in it. While that’s incredibly impressive, it’s even more impressive when you realize that figure averages in a lot of low-performing programs. I know brands that are generating email marketing ROIs of $80, which they’re achieving with aggressive, smart spending on technology and services.

I fully understand quarter-to-quarter performance pressures, the inertia of internal politics, and the challenge of making ROI-based budget decisions when you’ve also under-invested in ROI-measurement capabilities. However, it’s time to more definitively shift budget away from lower-performing channels to higher-performing ones like email marketing. It’s time to move beyond the day-to-day email marketing grind and spend much more time on strategic expansion.

It’s time to acknowledge that email marketing is no longer cheap. The performance gap between basic, entry-level tools and advanced, integrated email marketing platforms has grown too large. The ecosystem in which email operates has become too vast and interconnected. And, most importantly, subscriber expectations have risen too much, driven by the rich, satisfying experiences delivered by brands that have embraced email marketing as an investment vehicle to drive sales.

Cheap email marketing is dead. Long live high-ROI email marketing.

(I encourage you to share this column with your colleagues, your boss, and perhaps your boss’s boss. Their reaction will tell you a lot about the future of email marketing at your company.)

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2 comments about "Is Email Marketing Cheap -- Or Does It Have A High ROI?".
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  1. Pete Austin from Fresh Relevance, March 26, 2015 at 5:35 a.m.

    Actually, you mean "Long live LOW-ROI email marketing", because extremely high-ROI email marketing is a serious mistake.

    If you are getting a ROI of "$43 for every dollar invested" or "ROIs of $80", in any channel you are massively under-spending and leaving a huge amount of income on the table.

    Increase your budget, and hence your sales, and keep on doing this until the ROI falls to something sane.

    Some suggestions to add, which will pay for themselves many times over, are: cart and browse abandonment recovery, onboarding sequences, real-time content such as a shipping-time countdown in all your emails.

  2. Chad White from Litmus, March 26, 2015 at 9:18 a.m.

    Pete, you're totally right. When you've reached the far side of the sophistication curve, your returns will start to diminish because you're fully optimized. But pretty much no one is in that situation yet. Most brands have lots of opportunities to increase incremental returns through smart investments in sophistication, like doing the things you suggested. But, yes, I'd love to see brands drive their ROI back down to $40...after driving it to over $80 first.