What’s The Value Of An Email Address?

In response to a post about how to calculate the value of an email address, Benry comments that the value can’t be determined simply by looking at email marketing campaign results, because

We use email to market to people, but also to support communication or to enable sales staff to converse with [customers] in the manner best suited to their needs.”

Good point, Benry. But, no offense, it’s a good answer to a question that should never have been asked.

Asking “what’s the value of an email address?” is like a baker trying to figure out the ROI on flour. She can’t do that. She can compute an ROI on the finished product — the cake — but not on the individual components of the cake.

An email address is like flour — it’s raw material. If we’re going to compute the “return on customer” (SM rights to Peppers and Rogers), then we can’t compute a return on all the individual elements that go into “making” that customer. That’s what an email address is — something that (presumably) helps us create a loyal, profitable customer.

What it means: Marketing is wasting its time trying to quantify the value of an email address.

The “value” is in determining: 1) who the best customers and prospects were; 2) the best offer to make to them; and 3) the best way to reach them; and 4) their email address if email is the best way to reach them. Step #5 is execution (the firm still has to invest in running the campaign). If you didn’t invest in all five steps, there would be no “value” to that email address.

What should Marketing do?

1) Distinguish between cost and value. There is no inherent value or ROI of an email address (or a blog for that matter). The ROI comes from the utilization of the asset (in this case the email address). Which is not to say that marketers shouldn’t focus on the cost and quality of that email address. How much should the firm invest in acquiring email addresses? Which email addresses are higher quality than others? These are the questions marketers should address. But to answer them, marketers are going to have to….

2) Define who the firm’s best customers and prospects are. Plenty of marketing departments have customer segmentation approaches, but few really identify who, across the segments are the best customers (current and potential). And even among the firms that have done this, few have been able to drive those definitions down to the investment allocation level. When you show senior execs who the most valuable customers and prospects are — and that the best way to reach them is through email — then they’ll be more likely to invest in acquiring their email addresses.

3) Talk about opportunity costs. Running into senior execs’ offices with calculations on the value of an email address doesn’t improve Marketing’s reputation or its desire to be more strategic. Marketing needs to show that the relevant metric here isn’t ROI, but opportunity cost. What is the opportunity cost of not acquiring email addresses? What would we do with that money that could help produce a better return on our investment? This is how Marketing shifts the focus from the micro to the macro, and becomes more strategic to the firm.

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4 thoughts on “What’s The Value Of An Email Address?

  1. Following on with your discussion, the other piece, which you implied in your Return on Customer mention, is how marketing can affect the value of a customer. Too many marketing campaigns addressed to the same list over and over, executed too frequently, and without relevancy to the customer will actually decrease the value of those customers to your company. This occurs as the response rates to marketing campaigns decrease due to the irritation level achieved by poorly planned marketing. In addition, as more and more valuable customers opt-out, the value of the email list becomes smaller and smaller. (Can you tell I spent 5 years working for Peppers and Rogers?)

    Marketing can become more strategic to the firm by helping to orchestrate the overall customer strategy so that customer touches are coordinated and positively contribute to the bottom line.

  2. Good points Ron, I don’t think it should be asked, but it is getting asked. My goal in the post was to determine a) whether it is worth asking and b) whether there is a real way to calculate this value accurately. IMHO I don’t think there is a good answer (or reason) for either. Interestingly, Stephanie Miller from Return Path posted to the same list today noting that she is the “co-chair of the List Growth & Engagement Roundtable of the Email Experience Council” and that “to try to establish some baselines for how many email marketers actually do know the value of an email address. From her post:

    We conducted a survey late last year and found only two out of five
    marketers (41%) know the cost to acquire an email address, while 59% are
    either not sure (31%) or do not know (28%). Two thirds (60%) of
    marketers are able to determine a monetary value for their entire email
    database, while 40% can not. Not surprisingly, the most commonly used
    success metrics around the value of an email file are those that tend to
    be easy to track today – Deliverability to the Inbox (56%), Revenue
    Generated (52%), Open Rate (50%), Total Quantity of Email Addresses
    (48%), and Click Through Rate (47%). Significantly, 10%-30% of
    marketers surveyed are not using these metrics at all in determining the
    value of their email file.

    The full report is available from the eec website (link below) free for
    members and $39 for everyone else (you can read the exec summary free
    anytime at that link, too). As an eec committee chair, I have a 30% off
    discount code I would be happy to share with Roundtable members – just
    email me offl the list.

    The link to see all the research papers from the eec is:

    Clearly many more are asking a wasteful question.

  3. Thanks, Benry. I trust you realize that I wasn’t chastising YOU for asking the question. Some execs will ask the question because they don’t know the right question(s) to ask. It’s Marketing’s job to help define the right questions — NOT run around trying to quantify everything that everybody asks for.

    As for Stephanie’s list of metrics: They’re not a bad list of metrics to measure. You track those measures to help manage your email efforts. But we have to be careful not to simply equate “cost” and “operational” measures to “value”.

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