The Value of an Email Name
by Arthur Middleton Hughes

 

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 donít 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.

Letís put all these factors together to estimate the value of an email name.

 

Direct
Mail

Email
Value

Regular Promotion

$0.80

$1.28

Low Cost Item Promotion

NA

$0.32

Last Minute Special

NA

$2.48

Retention Messages

$2.40

$3.68
Follow Up Messages $1.20 $9.12
Viral Marketing NA $0.24
Newsletter $1.20 $2.24
Total Annual Value $5.60 $19.36

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.

Regular Promotions.

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:

Regular Promotion
Mail eMail
Sent 200,000 200,000
Cost Each $0.50 $0.04
Promotion Cost $100,000 $8,000
Response Rate 3.0% 1.0%
Responses 6,000 2,000
Profit per response $20.00 $20.00
Profits $120,000 $40,000
Net Profits $20,000 $32,000
8 Promos per year $160,000 $256,000
Annual Profit per name $0.80 $1.28

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.

Low Cost Item Promotion

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:

Low Cost Item Promotion
Mail eMail
Sent 200,000 200,000
Cost Each $0.50 $0.04
Promotion Cost $100,000 $8,000
Response Rate 3.0% 1.0%
Responses 6,000 2,000
Profit per response $8.00 $8.00
Profits $48,000 $16,000
Net Profits -$52,000 $8,000
8 Promos per year NA $64,000
Annual profit per name NA $0.32

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.

Last Minute Special

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:

Last Minute Special
Mail eMail
Sent NA 200,000
Cost Each NA $0.04
Promotion Cost NA $8,000
Response Rate NA 0.5%
Responses NA 1,000
Profit per response NA $70.00
Profits NA $70,000
Net Profits NA $62,000
Profit per name NA $0.31
50 Promos per year NA $2.48

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.

Newsletters

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.

 

Newsletters
Mail eMail
Sent 200,000 200,000
Cost Each $0.50 $0.04
Promotion Cost $100,000 $8,000
Response Rate 2.00% 1.50%
Responses 4,000 3,000
Average Sale $100.00 $100.00
Profit per sale $40.00 $40.00
Profit from newsletter $160,000 $120,000
Net Profit $60,000 $112,000
12 per year $240,000 $448,000
Annual Profit per name $1.20 $2.24

The numbers for your company may differ from these, but the computation methods donít. 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.

 


Arthur Middleton Hughes is Vice President of The Database Marketing Institute. Ltd. (Arthur.hughes@dbmarketing.com) which provides strategic advice on relationship marketing. Arthur is also Senior Strategist at e-Dialog.com (ahughes@e-Dialog.com) which provides precision e-mail marketing services for major corporations worldwide. Arthur is the author of Strategic Database Marketing 3rd ed. (McGraw Hill 2006). You may reach Arthur at (954) 767-4558 .


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