I believe the reason more budget isn’t allocated to email is that industry members struggle to sell it effectively to their organizations.
Have you ever been sold a car? Dealerships use a four-square selling method. They help you find the car and establish a Sales Price. They negotiate your Trade-In (if applicable). They discuss Cash Down and Payment. And finally, they discuss the Monthly Payment.
While car salesmen are trying to put you in a car and maximize their commissions, your primary goal in email marketing is to extract the largest budget allocation you can to fund your program and advancements. While some email departments are allocated to an annual budget based on historical spend, other companies actually do very math-oriented exercise to figure out the cross-allocations. Some email folks can show direct revenue, some can’t, while some must justify attribution.
To sell email’s value, you need a strategy. Here’s the four-square approach for email marketers:
Consumer Reach (Database Size). The first core to any negotiation is to size your direct universe of customers/prospects. This is critical because all the other numbers below are affected by on this sizing. And the only way to sway budget from expensive ad programs or search budgets, based on anonymous audiences, is to show the scale of whom you’ve engaged with. This is critical to establish email marketing’s importance with the senior C-suite.
Revenue Attribution. This can be a bit tricky, since attribution is so poorly defined for email. Direct-click or last-click attribution shows you a portion of the impact, but email does more than this. You must have a direct attribution and then an implied attribution that shows some portion of the revenue that would “go away” in other channels if email did not exist. This is the hardest to research and the most risky to test (since no one wants to suppress revenue opportunities by holding out a control group to see if they would still convert in store, without email). Once you get this universe of total revenue that email drives, you can begin to show factors that accelerate revenue -- or things the can potentially cause decay.
Cost of Sale (COS) – This is an important square, as it begins to show how expenses have multiple effects. The COS proxy is typically a campaign-specific proxy, but can also be looked at as a variable expense line to show “episodic” expenses where you outsourced or tried something new and you saw a spike in sales associated with an increased expense, or vice versa. Be careful with this. If you have a cyclical business, be sure to trend it YOY by the season, or you can get false views.
Lifetime Value (Channel proxy) – While I’m not a big fan of LTV as an operational measurement proxy, it certainly resonates for senior-level folk. LTV is important if you can create a channel proxy tied to this for email. Speak to the efficiency of email and impact. As you become more automated/relevant and sophisticated, you can show the pay-offs. If you can help minimize discounting, you increase LTV. If you increase purchase frequency, you increase LTV. This number should be the same as negotiating your monthly car payment. Up or down, it’s the last thing to negotiate. While LTV is specific to customers, it can still be managed and manipulated by the email channel. If you don’t have some calculations on this factor, this is the time to begin preparing them.
While not many of you need to be a hardcore car salesman, I know that marketers who use a structured process to sell the value of their program, explaining their vision and how email investments pay off, will be the ones driving budget shifts. The budget battle is a never-ending war to justify your existence, so be prepared and aggressive.