Measuring Email ROI

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As marketers are held more accountable for their budget there is a greater need to provide CFO with return on investment (ROI) metrics for programs, campaigns and even individual executions. It seems that nowhere is this more relevant than with email marketing.
Part of the drive for email ROI is that email _is_ so measurable. You can get immediate feedback on your executions and accurately forecast the results of an email drop in just a few days. Furthermore, when you integrate your email metrics with your point-of-sale or e-commerce data and your web analytics platform (“WebTrends”:http://www.webtrends.com, “WebSideStory/HBX”:http://www.websidestory.com, “Omniture”:http://www.omniture.com, etc.) you can get even deeper ROI insights.
Here are a few things that can help you optimize your mail ROI:
*Clean Email Lists* – Keeping your lists clean (removing unsubscribes and bounces) is a best practice for avoiding spam blocks. It’s also a great way to reduce the number of messages sent, therefore reducing your total cost. Furthermore, if you have an old, underperforming list (maybe you inherited it from another division or a company you acquired) you may want to re-subscribe them through an opt-in campaign. Case studies have proven it’s the quality of the list, not the quantity that drives ROI. It’s possible to cut your email list in half and not affect your click-though and other activity rates. Plus you save 50% on your per-message fees, meaning an increase in ROI.


*Optimized Deliverability* – Make sure you know your deliverability rate. This isn’t just about taking the number of messages sent and removing hard bounces (which should never be more than about 1% on an active email list). Find out how many of your messages are getting through to the inbox. “Pivotal Veracity”:http://www.pivotalveracity.com/ says 20% of all permission email in 2005 ended up somewhere other than the inbox. By working with an email service provider that has industry-leading deliverability you can easily go from 80% deliverability to 96% or more, an increase of 20%. This is likely to increase your email ROI by the same amount. Get an independent deliverability email audit (“I.D.E.A.”:http://www.emaildeliveryaudit.com) to test your current email platform.
*Contact Recency & Frequency* – RFM (“Recency, Frequency, Monetary”:http://www.clickz.com/experts/crm/analyze_data/article.php/961901) is a quantitative marketing technique that falls in line with “80% of your business or profits come from 20% of your customers.” Communicating with your audience is also based on recency and frequency to monetize relationships. Email is the perfect tool as it allows you to send different messages to different people, including using different frequencies to those that want it. And you can quickly test what works best. RFM also works in outbound marketing. With email it makes sense to send more messages to those subscribers that are active with your brand; you target the people that are most likely to buy from you. Conversely, by sending fewer emails to those people that want less communication or that purchase less frequently, you can save money. “Outbound RFM” is about spending more on the valuable email addresses, communicating with them more often and more relevantly and optimizing relationships to drive ROI.
When you are trying to justify your overall email marketing budget, you can look to my friend David Baker at “Agency.com”:http://www.agency.com/ for a great formula to determine what each of your email addresses might be worth to you. In “Calculate The Value Of An E-mail Address”:http://publications.mediapost.com/index.cfm?fuseaction=Articles.showArticle&art_aid=39977 _(registration may be required)_ David provides a simple formula many email marketers can use effectively.
Determining the true ROI of email is not an exact science. However, with the metrics and integration available you can achieve better success through driving down cost through elimination of waste, increasing delivery rates of your emails and optimizing your communication plan to spend more on the valuable customers and prospects than you do on the less valuable.

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