I just received a complimentary copy of Cross Media Marketing 101 (for 2013) by James Michelson, president of JFM Concepts and VDP Web. Right upfront, I had to give James props for his dismantling of a favored email stat that has been making its rounds in the blogs, Webinars, and PowerPoint presentations. It’s from “Why Email Marketing Is King” in the Harvard Business Review. Most Digital Nirvana readers have probably seen it.
HBR cites response rates and average order values for direct mail + email, direct mail only, and email only that are on par. When you consider the extremely low cost to produce an email campaign, the report says, email turns out to be king — ROI that blows everything else away.
But listen to what James has to say about these numbers:
1. The stats are impossible without outside manipulation.
The respondents [to this study] were cherry picked from a much larger pool in order to get a 25% response rate. How do I know? Given one client’s data of 650,000 prospects with detailed sales and contact history, I can universally pick a slice and get a fantastic response with targeted offers and specific channels. With realistic constraints (such as not giving each respondent $100 gift card for simply visiting a link), the same cannot be said for 35,000 cold records. . . Not going to happen.
2. ROI has to be calculated using, not just the cost to implement the campaigns, but the costs to acquire the names.
How did the firm in question get that many opted-in email leads? . . . It is almost impossible to exponentially grow an email list from an email campaign, regardless how good the referral spiff is. For email to be king, something else, such as social media, direct mail, experiential events, paid search, point of sale, or a mix of many methods is required, and usually at substantial cost.
3. The report ignores other costs related to email, such as the cost of maintaining the database, accessing enterprise level email software (not cheap!), preparing collateral materials, and so on.
For the ROI calculations in the article to be of any use, the cost of gathering the email opt-ins must be calculated. . . Throw those figures into the mix and what happens to that massive ROI advantage claimed by email? Chance are the savings cited in the chart rapidly evaporate.
This analysis shows why it is so important to use the full costs of any marketing effort in calculating ROI for your clients’ campaigns (and your own) — and when evaluating the truth and accuracy of claims by reports such as these.