• by Karlene Lukovitz  @KLmarketdaily, December 11, 2007

The immediacy of email marketing may make it tempting for companies to look at initial costs and conversion rates versus other channels and pretty much stop there.

But the dangers of this were driven home by two panelists in a session on determining the right metrics for your business, moderated by Loren McDonald of Lyris, Inc.

Arend Hendersen, VP, analytics, Q Interactive related results from moving to a lifetime value-driven marketing model that starts with the consumer: targeting engines use individual consumers' demographics and other data to determine, on an ongoing basis, which email campaigns they receive.

Hendersen admitted sweating quite a bit during the first two months of tracking response to this approach. "During this period, a lifetime value strategy is actually less productive"--in fact, customer value was 20% lower than with the existing strategy, he reported.

But at 120 days, the two strategies broke even, and a year and half out, customer value was 30% higher. "A significant number of consumers don't respond to a campaign until the third or fourth impression," points out Hendersen, and instead of not emailing at all to less responsive prospects, Q is now able to tap consumers who may not be the most valuable customers, but still represent real opportunities.

Michael Atwell, Director, The Hartford, stressed that the insurance company analyzes customers generated by email (and other channels) several years out. It analyzes not just the initial ROI for generating conversions from insurance quotes (quote conversions coming in through email are up 20% since 2005), but how much the insurer ends up paying out to the customers generated by various channels over five or six years.

There's a point of diminishing returns with email--a point at which pushing more volume out will undermine productivity and ultimately, ROI, Atwell noted. (At which point, The Hartford starts shifting to direct mail.)

But watching those long-term ROI's is obviously proving email's value to the company: Its '07 investment in email was 50% higher than in '05, and it will jump another 22% in 2006, Atwell reported. Further, the conversions from policy quotes generated via email are projected to jump by another 25% next year.