Email Marketing: Is it Cheap or Does It Have a High ROI?

How you and—more importantly—your boss answer that question easily predicts the future success of your email program.

Here’s Why…

On the spectrum of email marketing investment levels there are two upward curves where incremental returns increase. Toward the low end of the spectrum, there’s a small curve where brands can increase their email marketing ROI by minimizing their investments by:

  • Negotiating for the lowest possible CPM, largely by minimizing ESP functionality
  • Focusing on broadcasting unsophisticated emails to the largest possible audience, often emphasizing list size over list quality
  • Hiring inexperienced email marketing staff—and then minimizing educational costs such as attending conferences

Whether these tactics are used unconsciously or consciously, because of ever-present resource constraints or other structural reasons, they are the hallmark of an “email marketing is cheap” mentality.

Toward the high end of the email marketing investment spectrum, there’s a much, much larger curve where brands can increase their email marketing ROI by investing in tools and tactics that accelerate ROI, such as:

  • Seeking sophisticated ESP functionality that delivers greater returns
  • Focusing on subscriber journeys, segmentation, and personalization to deliver highly tailored experiences that generate high returns, minimize list churn, and maximize subscriber lifetime value
  • Hiring experienced email marketers and investing in their continued education, and bringing in outside experts to assist when needed

These tactics are indicative of an “email marketing’s ROI is high” line of thinking.

Almost three years ago to the day, I wrote about the Widening Email Performance Gap between Haves and Have-Nots. Since then, there’s every indication that this gap is firmly in place and that the Haves, who correctly believe that email marketing has a high return on investment, are increasing their competitive advantage over their peers who chronically under-invest in their email programs.

For Example…

In 2013, 87% of major retailers sent at least one welcome email, according to Salesforce Marketing Cloud research. When I did the same research in 2009, 76% of retailers were sending welcome emails. Considering the span of four years between the two studies, that’s slow adoption of a tactic that’s universally recognized as a best practice. Plus, now more than 25% of major retailers are sending welcome email series, providing an even sharper contrast between them and those that don’t send even one welcome email.

During the May 2013 to April 2014 time period, 83% of email from legitimate senders worldwide made it safely to the inbox without being blocked or junked, according to Return Path research. That number has improved only slightly from the first half of 2011 when 81% of emails made it to the inbox. While many brands still struggle with permission and engagement, others are analyzing performance by acquisition source, perfecting engagement-based segmentation, optimizing their reengagement strategies, and fine-tuning their preference centers and unsubscribe pages to minimize churn.

In the second quarter of 2013, 8% of B2C brands were sending birthday emails, according to Salesforce Marketing Cloud research. Last year, when I looked at birthday email usage again, so little had changed that I deemed the findings not worth publishing. And this is a triggered email that 75% of respondents to our State of Marketing survey said were “effective” or “very effective,” a rating that made it the second most effective triggered email available to marketers. The adoption of most triggered emails is surprisingly low considering the high returns.

In early February, 45% of major B2C brands were still using largely desktop-centric design for their promotional emails, according to Salesforce Marketing Cloud research. While that’s down from 78% in October 2013, during that same timeframe the percentage of brands using responsive email design has grown to 38% from 12%. It’s those with the most experience with responsive design that will likely be first to explore device-targeted design and rich content like email carousels.

The Point…

There’s a disconnect between what brands say are important and what they actually do in regards to their email programs. One the one hand, CMOs and other marketing leaders rate return on investment as their No. 2 marketing success metric behind revenue growth, according to our State of Marketing Leadership survey.

And on the other hand, adoption of mobile-friendly email optimization, triggered emails, and other sophisticated tactics is low and slow-growing, despite the fact that email marketing is either the highest-ROI channel or the second highest behind organic search, depending on whose research you look at. The Direct Marketing Association says email marketing returns $43 for every dollar invested in it. While that’s incredibly impressive, it’s even more impressive when you realize that figure averages in a lot of low-performing programs. I know brands that are generating email marketing ROIs of $80, which they’re achieving with aggressive, smart spending on technology and services.

I fully understand quarter-to-quarter performance pressures, the inertia of internal politics, and the challenge of making ROI-based budget decisions when you’ve also under-invested in ROI-measurement capabilities. However, it’s time to more definitively shift budget away from lower-performing channels to higher-performing ones, such as email marketing. It’s time to move beyond the day-to-day email marketing grind and spend much more time on strategic expansion.

It’s time to acknowledge that email marketing is no longer cheap. The performance gap between basic, entry-level tools and advanced, integrated email marketing platforms has grown too large. The ecosystem in which email operates has become too vast and interconnected. And, most importantly, subscriber expectations have risen too much, driven by the rich, satisfying experiences delivered by brands that have embraced email marketing as an investment vehicle to drive sales.

Cheap email marketing is dead. Long live high-ROI email marketing.

(I encourage you to share this column with your colleagues and with your boss and perhaps your boss’s boss. Their reaction will tell you a lot about the future of email marketing at your company.)

A shorter version of this post originally appeared on MediaPost's Email Insider blog. 

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