Crack the Email Prospecting Code

Email marketing has become a vital tool for direct marketers. But if you want to expand your email reach by renting and emailing a permission-based email list, you need to understand the complete measurement process to maximize profitability. If you don’t thoughtfully run the numbers, especially when renting a list of unproven email addresses, your dream of profits can be quickly dashed.

Email marketing has become a vital tool for direct marketers. But if you want to expand your email reach by renting and emailing a permission-based email list, you need to understand the complete measurement process to maximize profitability. If you don’t thoughtfully run the numbers, especially when renting a list of unproven email addresses, your dream of profits can be quickly dashed.

A traditional direct marketer recognizes why running the numbers is essential, but new entrants into DM often don’t have the foundational knowledge of how to run the numbers. Their expectations are that when they send out tens of thousands—even millions—of emails, it’s going to automatically be profitable. Even with relatively inexpensive email lists, making a profit sending email to a rented list is far from assured.

But you can get to the profit side when you understand that long-term value from repeat future purchases turns the loss from the first purchase into future profit. By understanding the long-term value of a customer, you know how much you can spend (or invest) to acquire a new customer.

It’s vital to understand how to calculate allowable marketing costs and how to create a long-term value model (learn more in my Four-Part Series on Marketing Costs here at Target Marketing by following the links). An allowable marketing cost is simply the remaining portion of a sales dollar after cost of goods, fulfillment, overhead and profit objectives are allocated to their respective budget line items.

Increasing (or reducing) your allowable marketing cost will depend on how you view long-term value. That is, how many times, and at what average order, would you expect a newly acquired customer to purchase from you over a given period of time into the future (perhaps it is six months, maybe even a year).

The table accompanying this blog gives a couple of scenarios for B-to-C and B-to-B examples. In the B-to-C scenarios, we assume the allowable marketing cost to acquire a new customer to be $50. Based on the assumption that the email costs $70 per thousand for a permission-based email, and a clickthrough (based on emails delivered) of 0.8 percent, or 8 clicks, then 1.4 of those clicks (or 18 percent) must convert to sales. Or, if the click-through rate is 0.5 percent of emails delivered, then the conversion must be 28 percent. B-to-B examples are shown because the cost of lists and allowable marketing costs are usually higher than B-to-C.

When you identify the conversion percentage required to break-even, you have a benchmark. Then apply a test of reasonableness to determine if you should move forward with your test. A B-to-C conversion of 18 percent or 28 percent may be achievable, but it could be quite optimistic.

Also, remember there are several variables that will go into the email prospecting effort that impact your results. The quality of the list, from line, subject line, messaging, landing page creative, offer and more all factor into the overall performance of the email marketing effort.

When you get someone to your landing page, it’s smart to invite the individual to opt-in to your email list. Give them something free and of value so they will feel comfortable giving you their email address. Then you can email future offers to them without the cost of email prospecting.

If you decide to use email prospecting, remember these points:

  1. You probably won’t make money in email prospecting (if you do, you’re the exception).
  2. The email list you rent needs to be pre-qualified and, of course, CAN SPAM compliant.
  3. Email tends to work better the more times you email someone. Open rates tend to improve with appropriate frequency.
  4. Don’t forget: your most important objective might not be to sell something in the first effort, but rather, to build an opt-in email list that you can call your own.

B-to-C Scenario 1

B-to-C Scenario 2

B-to-B Scenario 1

B-to-B Scenario 2

Permission-Based Email Quantity

1,000

1,000

1,000

1,000

Cost Per Thousand

$70.00

$70.00

$120.00

$120.00

Allowable Marketing Cost/Buyer

$50.00

$50.00

$250.00

$250.00

Open Rate

8%

5%

8%

5%

Click-Through Rate/Delivered Emails

0.80%

0.50%

0.80%

0.50%

Number of Opens

80

50

80

50

Number of Click-Thrus to Landing Page

8

5

8

5

No. Conversions Required

1.4

1.4

0.5

0.5

% Conversion Required

18%

28%

6%

10%

Author: Gary Hennerberg

Reinventing Direct is for the direct marketer seeking guidance in the evolving world of online marketing. Gary Hennerberg is a mind code marketing strategist, based on the template from his new book, "Crack the Customer Mind Code." He is recognized as a leading direct marketing consultant and copywriter. He weaves in how to identify a unique selling proposition to position, or reposition, products and services using online and offline marketing approaches, and copywriting sales techniques. He is sought-after for his integration of direct mail, catalogs, email marketing, websites, content marketing, search marketing, retargeting and more. His identification of USPs and copywriting for clients has resulted in sales increases of 15 percent, 35 percent, and even as high as 60 percent. Today he integrates both online and offline media strategies, and proven copywriting techniques, to get clients results. Email him or follow Gary on LinkedIn. Co-authoring this blog is Perry Alexander of ACM Initiatives. Follow Perry on LinkedIn.

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