A name and address with the matching email and permission to use it can be a very valuable commodity - much more valuable than a simple name and address. There are many reasons why this is so:

• It is far cheaper to send email communications than direct mail communications, so you save money on each communication.

• Since emails are so cheap and so fast, you can undertake many communications that you simply could not do at all with direct mail.

• Using emails, you can build close relationships that you could not do with direct mail or phone. As a result the email will add to the retention rate of certain customers, which adds directly to their lifetime value.

• Emails can be used in viral marketing. What this means is that you can get customers to write to each other, passing your message to other people that you don’t know.

• The speed of Emails permits you to send types of messages that could not be sent by any other medium. Airlines, for example, send weekly messages about the availability of unsold seats at rock bottom prices. These messages could not be sent by mail because of the time, or by phone because of the cost and the annoyance factor.

Let’s put all these factors together to estimate the value of an email name.

In this article, I would like to explore the basis for the first three valuations plus the newsletter. In a subsequent article I will explain how the other values are derived.

Message for message, email is cheaper to send. Suppose you send regular promotions four times per year to your customer base. Your response rate might look like this:

As you can see, the response rate to direct mail is higher than that of email. This will normally be true, although not always. The high cost of direct mail in comparison swamps the improved response rate giving the profit per name of email a 60% lift.

At a rate of four promotions per year, your emails are worth $1.28 per year or $0.48 more than a simple name and address.

There are many items that you simply cannot profitably promote by direct mail. One example is the Universal Music promotion of musical CDs, which sell for about $20 each. The profit to a company selling a $20 item directly is probably on the order of $8.00 per item. Here is the way the promotion could work out:

The direct mail is a loser so no one would attempt it. Each email name earns, on the other hand, a healthy $0.32 per year. This is found money that comes from having the emails.

Only certain companies have last minute specials. These include airlines, trains, hotels, rental cars, cruise lines, live theatre, sporting events and concerts: any company that sells something that disappears if not used. It also applies to retail stores that are having a special sale that comes to an end in a very few days. These things cannot be sent by regular mail because it is too slow. Here is what the value looks like:

A last minute special is pure profit. The seats are going empty. It costs very little to let people sit in them. Even at a very low response rate, the profits are substantial, and the annual value of a name is considerable.

Email newsletters have become very popular. They save a lot of money. They often get a good response rate. Newsletters result in increased retention, sales and loyalty. They are usually worth the effort if you can put something into them that your customers want to read.

The numbers for your company may differ from these, but the computation methods don’t. Everyone who is using direct marketing should do this kind of analysis to find out the value of their email names. Once you know this value, you should be working to capture customer email names, with permission to use them. The profits are substantial.