Where we used to look at open and click rates, today we are putting in place plans to measure email lifetime value. So what is going on?
I was reviewing results from a split creative test on a basket abandonment email recently (names removed to protect the successful) and it struck me how the methodology for measuring email results can, quite erroneously, determine how we use email marketing and develop marketing strategies.
So I thought I would combine the results here with my recommendations on how to measure email marketing.
The Past
Viewed from the vantage point of today, the past always looks more simple than today. And looking back on where email marketing has come from is no different.
There was a time (although it concerns me that some marketers are still trapped in a time warp of costly proportions) when opens and clicks were the currency that email was measured in.
Apply this to my scenario:
Clearly, reviewing this campaign based on past criteria (known today as 'old-school blinkered view on opens and clicks') would have led the marketer to choose Template B as the most successful and therefore the one to proceed with. But hold that thought.
There is a common agreement that email open rates are going to decline, if they are not already. Direct mail watched a constant decline of response rates from about 1998 onwards.
Email is going to suffer a similar gradual decline but not for reasons of disenchantment with the media, as was the case for direct mail, but instead because individuals, as they become more accepting of email in general, sign up to receive emails from more and more organisations and competition for attention in the inbox increases.
But this does not mean that income from email will fall…
Present
I would paint the current situation as a 3D world superceding the 2D. Most email marketers discount opens and clicks as merely a 2D measure in a revenue focussed 3D world.
The 3D slant is effectively attribution of income. You cannot assess a channel without direct results for that channel and cannot invest effectively without accurate historical results.
One could also develop this analysis to fully incorporate indirect media attribution analysis that provides marketers with not only the direct income results by channel but the overall effect of marketing investment one channel has on another… sometimes referred to as the 'Halo Effect'.
But that is not for now. Instead, look at the revenue results for the different templates.
Therefore, the choice of Template B as defined by the criteria of the past is seen to have cost this business 20% of all orders. The previous methodology ignored click to order conversion, far higher from Template A.
The focus today is very much on income and conversion rates underpinned with a growing focus of loyalty and eCRM managed through the email channel. It still amazes me when we meet with an organisation that does not have proper attribution.
Strategic planning also has one more key measure: Cost per order. Email is a growing channel with, in general, static direct costs.
As I argued in my previous blog, organisations should be searching for the tipping point at which these changes push email to the lowest CPO of all channels, below PPC and Affiliates, opening up the opportunity for disproportionate investment in email as the most cost effective channel.
The future
In short, what I am arguing here is if used correctly, email can be the CRM tool of the future and not simply a tool for generating income.
An opt-in list is a list of individuals who have said to you 'yes, send me stuff and talk to me'. Think about how valuable that is. Never before have marketers had consent to sell to people!
So, as email develops as a CRM tool, then so Lifetime Value (LTV) measures must rise as a primary measurement.
In the example below, taken from a live analysis, similar brands are compared to show that, on an annually calculated basis, the LTV of one brand's email marketing is clearly suboptimal and an opportunity of at least £1/2m presents itself.
Before you all comment on the limited nature of the LTV in the analysis above, this is, in my experience, where it starts, looking at the value of a customer on your database.
Once you start to do that, then the challenge is no longer to increase your open rates, it is to grow lifetime value.
That, as they say, is a whole new ball game.
Image credit: aussiegall via Flickr
Matthew Kelleher is commercial director as RedEye and a guest blogger for Econsultancy.
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