The True Cost Of E-Mail Marketing

By Jared Blank | Posted February 25, 2003
We have all heard the cries calling for the outlawing of spam, so we can stop this scourge from invading our privacy and our e-mail inboxes. Consumers won't stand for companies sending unsolicited offers, anti-spam advocates argue. Consumers care deeply about their privacy and feel violated when they find spam in their e-mail inboxes, they say. Spam must be stopped, they cry. We must convince the government to pass legislation to stop this immediately, these activists assert.

What if I told you that right now, as you're reading this, the government is plotting to enlist an army of uniformed men and women, led by a general, to fly planes, drive jeeps and walk all across every street in the country to deliver unsolicited messages right to your home! One of these soldiers of unsolicited offers will visit your house six days each week, stick his hand into a slot (that you provide!) and drop marketing messages right through your front door! Oh, and then at Christmas, you'll give this soldier a nice bonus.

What kind of marketer would take advantage of this type of system, where a virtual invasion of government employees visits every man and woman in the U.S. to dump unsolicited offers into their front hallways and dupe them into offering up a Christmas tip? Consumers would be outraged. These marketers would certainly be shunned, no?

Ah, there's the rub. Consumers don't really care about their privacy, especially online. Security, yes. Privacy, no.

So, does that mean that you should start spamming? If consumers are willing to put up with unsolicited offers in their homes, do they really mind unsolicited offers in their e-mail boxes? No, they don't. They delete what they're not interested in reading, and move on with their days. But, that doesn't mean you should start spamming. In fact, spam messages, and some legitimate campaigns, are killing e-mail's golden goose.

With any marketing campaign, companies do a cost/benefit analysis to ensure there will be a positive return on investment. Direct mailers, for example, have determined that the cost of occasional consumer annoyance is outweighed by the response they receive from consumers.

I was recently speaking with the head of electronic marketing for a travel company who asked whether the company would benefit from sending unsolicited messages. After all, it has a well-known and trusted brand name; certainly, consumers would respond to messages whether or not they had specifically opted in to receive them. Wouldn't a spam campaign have a positive ROI for this company? At first glance, it would appear so. This type of campaign would definitely result in a greater number of bookings, implying a positive ROI.

However, telemarketers thought they had done a similar cost/benefit analysis and concluded that their investment had a positive return. Sure, some consumers were a bit annoyed at calls during dinner, but enough agreed to purchase products that the analysis fell in favor of continuing to market via phone. Unfortunately for telemarketers, their analyses left out the possibility of a so-called "tragedy of the commons," where a practice that is beneficial when done by only one person is destructive when done by many. In other words, one telemarketer isn't a problem, thousands are.

E-mail marketers, both legitimate small businesses and spam purveyors, have suffered from the same short-sightedness that has now brought about the beginning of the end of telemarketing as we know it. Current anti-spam legislation, which will face serious challenges by free speech advocates, could lead the government to introduce a sweeping "do not e-mail" database. While this solution has its own set of issues, it may actually benefit legitimate marketers: only those who truly wish to receive messages will receive them.

That said, with average open rates around the 30 to 50 percent range, there is the possibility that the 50 to 70 percent of consumers who don't open your e-mails will happily join a "do not e-mail" database. This would force marketers to re-evaluate how they are using e-mail to reach customers and make them understand that the true cost of e-mail to their businesses is well above the raw cost of sending a message.

So what can marketers do? Sending fewer e-mails is one solution, though no marketer would agree to this, as those who don't agree to it would actually benefit in the short term. Rather, legitimate marketers must step up their calls for ISPs to improve their spam filtering processes. So-called "false positives" — where legitimate messages are placed in bulk folders — are a growing problem, while spam messages continue to show up in primary inboxes. Change will only come about if ISPs take the lead. Yahoo!, Hotmail, and AOL need to hold onto their e-mail customers because of the advertising revenue they generate. If they continue to allow spam to permeate their customers' mailboxes, the customers will leave. Having no customers means bringing in no revenue.

Now that's a cost/benefit analysis that any marketer can understand.

Adapted from ClickZ.com.

Jared Blank is a senior analyst at Jupiter Research where he covers e-mail marketing, writing extensively on best practices for companies in multiple industries. He also studies how consumers purchase leisure and business travel online, and how travel suppliers can use the Internet as part of their marketing strategies. Earlier, as a senior consultant at Deloitte Consulting, Jared worked with manufacturing and retail firms, focusing on supply chain management and strategic marketing. At the University of Michigan, as an associate editor in the public affairs office, he wrote speeches and articles for University publications. Jared holds an MBA in Marketing from Case Western Reserve University. (Jupiter Research is owned by our parent company, Jupitermedia).

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