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Email ROI: To Make More, Send Less

It’s 2017 and the online revolution has long since trumpeted the call of victory. If you don’t have an online presence, your brand is either dead or dying.

To get someone to a website, organizations pile tons of cash into optimizing their SEO and try to stay relevant with current blogs, hashtags, and other buzzworthy events. Once they find your brand, though, the trick is to get them to come back and become fans. For this, brands have long looked to the trusty email subscription as a way to drop periodic mailings, and it’s no secret that a successful email marketing strategy drives revenue.

Now this is normally the kind of time when an email vendor will encourage you to send like crazy. More emails I say! Double your weekly newsletters immediately – nay triple them!

But I’m here to tell you the opposite, friends. I’m here to tell you that you can send less, and make more. Email is a numbers game, but you’re working the wrong numbers.

A Tale as Old as Time

The normal numbers game goes something like this: You start a newsletter and get 100,000 subscribers over time. You send out a weekly newsletter and get a 30% unique open percentage on average. That means that you get 30K opportunities to engage with your audience, reconnect them with your brand, and shoot for a conversion. Great! This helps with a modest boost to revenue, and your marketing team marvels at a job well done.

100k recipients * 1 send * 30% open rate = 30k opens with 100k emails

Then, someone gets an idea. What if we send again? You get your content team to dream up some new campaigns and begin to send them out to your list twice a week, every week to the same group of users.

What happens? For most senders, you will eventually start to see list burnout which means people start dropping off your list. You will see your complaint rate increase a bit, because some people can’t be bothered to click your unsubscribe link, or you made it too convoluted. You will also probably see your open rate start to drop, so your results look something like:

100k recipients * 2 sends * 25% open rate = 50k opens with 200k emails

So you increased, but you didn’t fully double your opens to 60k like you were hoping for. You experienced a diminishing return. Meanwhile, you had to pay for those emails, so your cost either doubled or came close to it. Your ROI just took a hit. Still, you got some new revenue opportunities so it wasn’t a bad thing, right?

Remember those unsubscribes?  Your list keeps shrinking with all those recipients dropping from your list, but naturally you will also have some new people signing up. Let’s assume that each month, 5k leave and 2k sign up, allowing for a 3k net monthly loss. You start seeing your list decrease month over month – 97k, 94k, 91k – and assuming all other values stay constant, so do your opens – 48.5k, 47k, 45.5k.

But email delivery is a numbers game. Want more output? Add more input!

This is usually when a brand gets pretty casual about what they consider a recipient “signing up”. Maybe you start adding in customers from previous purchases, without asking first. Or maybe start pre-checking the email opt-in box in your purchasing process. Both of these will increase your recipients, but they won’t increase your engaged recipients. It’s worth noting that some nations have even made this practice illegal to protect users from unwanted mail.

Let’s say you you are able to add 20k new recipients each month by introducing an auto-checked newsletter opt-in on your sign up or purchasing process. You start to see your list grow – 120k, 140k, 160k – but being unengaged recipients, your open rate starts to drop heavily and your spam complaints increase. And of course they would. If you received an uninvited newsletter, especially a frequent one, you didn’t explicitly ask for – you might complain too. At the minimum, you probably don’t rush to open it. The subscribers who wanted your message in the first place still happily receive it, while the majority of the new additions leave it alone or complain. The numbers look something like:

160k recipients * 2 send * 10% open rate = 32k opens from 320k emails

All that work and you’re right where you started with triple the sending costs.

Honestly, the real results are probably even lower. I have been hiding a value from our equation until now – inbox placement. Mailbox providers strive to provide an enriching experience, and to do so will attempt to show the most engaging content to their users. The best ones will rate incoming email based on reputation. To do this, a key metric they will evaluate is the level of engagement with your messages relative to the level of complaints you receive. This will be performed for the IPs and domains the email comes from, to tie the reputation to your brand.

Basically, if many people want your mail, and very few don’t, you will tend to experience a very high rate of messages reaching the inbox. If the reverse is true, you might see fewer messages to the inbox.

We can now add inbox placement into our formula, with middle-of-the-road values for the situations expressed, and compare where we started to where we ended up:

Originally:

100k recipients  1 send * 80% inbox placement * 30% open rate = 24k opens with 100k emails

After sending increase:

160k recipients * 2 sends * 30% inbox placement * 10% open rate = 9.6k opens with 320k emails

You are spending much more money to make much less. Ouch.

It does not make economic sense to simply increase the number of emails sent as the primary way to extract revenue with an email marketing strategy.

Instead, we are going to work smarter not harder.

A New Way

Your ultimate goal is not to send emails but rather to drive opens and engagements to secure revenue. Instead of increasing your emails sent, what if we actually reduced them? You had only an 80% inbox placement rate, and an improvement in that will have a direct impact on your opens. If you reduced some of the unengaged recipients in your list, your open rate will be higher assisting a placement rate increase.

80k * 1 send * 95% inbox placement * 40% opens = 30.4k opens with only 80k emails

You sent less and got more opens. This is a peek into the virtuous cycle of good list hygiene.

The modern way to operate an email marketing strategy is to send exclusively to people which are known to have a propensity to open your emails. Think about it – sending to anyone else is just waste. Because we don’t have precognition, you have to play the odds by sending only to people who have either opened or clicked in an email in the last few months or campaigns. That’s why your list dropped down to 80k.

You should also be conservative on who actually gets an email in the first place. You can prominently display the sign up, but you should require users to take a deliberate action like checking the signup box to get added in. This keeps only active and engaged users on your list from the beginning.

While your initial placement rate still might be poor from old practices, those that are seeing the message in the inbox are the engaged users which will open it and engage. This then increases your engagement to complaint ratio, which as we mentioned above will make the major mailbox providers pleased and more likely to place your mail in the inbox.

Key Takeaway

At the end of the day, an increase to placement rate will have a greater impact on increasing opens than a blind increase in messages sent. The best way to increase your placement rate is to work with a reputable sender who can help develop a strategy to target users, increasing opens and driving down complaints. There are no shortcuts or faking it, but doing it the right way will provide a solid bloc of opens to empower your brand’s digital engagement strategy.


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Whois: Matt Torrisi

Matt Torrisi is a Senior Solutions Engineer at Oracle Dyn Global Business Unit, a pioneer in managed DNS and a leader in cloud-based infrastructure that connects users with digital content and experiences across a global internet.