The Business Case for Email Marketing

Jan. 29, 2010 - PRLog -- The Business Case for Email Marketing
By Tim Pacileo President
TheBoardRoomAdvisors

There comes a time when a new solution or business process begins to become mainstream and needs to be incorporated into everyday business processes in order for the business to stay competitive and survive.  This can be accomplished by the introduction of new products or services that provide a competitive edge or new processes that reduce costs.

Throughout history, we have seen this process repeat itself time and again in various industries as well as in much broader applications. A couple of examples that come to mind are as follows:

In banking, the traditional from of conducting a transaction was to go up to the teller and present your deposit or withdrawal slip and he or she processed the transaction.  Following the face-to-face interaction came the telephone,  and  the introduction of the ATM machine and most recently the Internet and online banking. In this example, a new technology drove the introduction of a new service and if the bank didn’t implement it, it lost market share or could have gone out of business.

While the previous example was industry specific the next one has much broader implications due to its speed and limitless boundaries and that is in the area of marketing. Back in the early days, goods and services were marketed exclusively by word of mouth and then by print, initially newspapers that contained advertisements. Following newspapers came direct mail and billboards and other forms of print media before we the next technology changes. radio and TV.  Today, we also have the Internet with social networks such as Facebook, MySpace and Twitter, web sites and blogs, and email marketing.

In both of these examples not one of the previous marketing/sales solutions was removed. We can still go to the local bank branch and conduct business with a teller and we still receive direct mail advertisements and newspaper with ads. What we did was add new channels to our marketing mix and that’s exactly what email marketing is today, a new channel that we need to incorporate into our marketing.

As new technology and new solutions come on the radar screen we need to adopt them to stay competitive, however we also have to retain the older solutions. We cannot abandon these older solutions so we either have to increase budgets or reallocate them in order to add in these new solutions. This is the challenge faced by most organizations today and lets also not forget how quickly change is taking place and why speed of adoption is critical:
•   To reach 50 Million viewers it took
o   38 years for Radio
o   13 years for Television
o     4 years for the Internet
o     3 years for the iPod
o     9 months for Facebook to add 100 Million users
•   ABC, CBS and NBC collectively get 10 Million unique visitors per month
•   FaceBook, MySpace and YouTube get 250 Million unique visitors per month.

While you are thinking about how quickly some of these new technologies are changing the way you reach out to your customer base, consider also that many traditional local organizations are expanding their geographic reach. A healthcare provider in the south is now marketing its services to potential customers on the west coast and upper midwest, sighting its lower prices and warmer climate as an incentive for patients to make the trip.  Small retail businesses are now expanding nationally and internationally by leveraging some of these new solutions to reach customers they never could conceive of reaching, just a few years ago.

The key driver behind all of this is extremely cost effective and personalized email marketing. The new and improved email solutions of today provide insight and analytics into sales and marketing that was not been possible even a few years ago. Not only is email marketing very cost effective, it also tracks what transpired with the email such as:
•   Was it opened?
•   How many people opened theirs?
•   Who were they?
•   How long did they read it
•   Did they click on a link for more information or to get a discount coupon?
•   Did they forward it to a friend?
•   Did they share it on-line on Facebook, or Twitter, etc?

Options can also be added on such as auto responder that schedule a whole series of emails based on how the initial emails was received. For example if the email was not opened after a number of days then a few more emails are sent out and if those are not opened an automated phone call can be sent asking if the individual received the emails.  If the email was opened, then a different series of emails is sent.

The best part is the results are available almost immediately, so you can see if the campaign was successful or if you need to rethink it before you move forward.

Hopefully now that I have gotten your interest, lets talk numbers and compare the rate of return on some key marketing solutions:

•   $43.62 for every dollar spent on commercial email*
•   $21.85 for every dollar spent on Internet search advertising*
•   $15.22 for every dollar spent on direct mail returned*
•   $7.32 for every dollar spent on catalogs*
*Direct Marketing Association 2009

We can clearly see commercial email has approximately 3 times the rate of return of direct mail and approximately 6 times that of catalogs. If we took a cost per thousand approach, we can see how easily it is to reallocate a portion of the budgeting dollars from direct mail and catalogs to email. In this example we moved 15% of the budget to email, however if we allocated 45% to email we would achieve twice the ROI or $27, 210.00 with the same budget.

                  Current Budget            ROI        Proposed Budget         ROI
Total                               $1,000                               $1,000    
                       80/20/0 split                            75/10/15 split   
Direct Mail                   $800    $12,176                        750     $11,415
Catalogs                           $200      $1,464                      $100          $732
Email                                $0             $0                      $150       $6,543
            
Total ROI                                      $13,640                                $18,690

With this type of return, I am still amazed that more marketing is not conducted with email campaigns.

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TheBoardRoomAdvisors, LLC is focused on advising executives and business leaders on improving the performance and cost effectiveness of their business and IT operations. Our team is composed of former CIOs and Sr Leaders from Fortune 500 companies.