Customer Retention Strategy – Cost of Increased E-mail Frequency

Kirill Popov and Stefan Pollard have written two articles (1 & 2) on the cost of increased e-mail frequency.

The articles argue that e-mail frequency is an important issue which can affect the bottom line of marketers both in short and long run. If e-mail frequency is low, marketers will face the cost of lost opportunity and if the frequency is too high, it could cost companies a lot in the long run.

Some of the costs associated with high e-mail frequency that are suggested are:

• Higher Unsubscribe Rate – this means that the mailing list will shrink. The un-subscribers need to be replaced if long run success is to be achieved.
• More Spam Reports – this not only cause the list to shrink, but also could have the company black listed which could affect future e-mail deliverability.
• Cost of Customer Acquisition – As we all know, it is usually more expensive to acquire a new customer than have a current customer do a repeat purchase.
• Lost Revenue – Loosing leads could translate to potential lost revenue as un-subscribers will not convert anymore.

The articles correctly suggest that the solution to the problem is relevancy and being proactive in optimizing messages, segmenting lists and taking customer’s life cycle in mind. They also suggest that the company should keep acquiring new customers to compensate for those who unsubscribed to ensure long term sustainability.

The articles imply that costs such as designing new creative and blasting e-mails are cost because of increased e-mail frequency. Even though this is true in the surface level and should be considered when calculating costs, we have to keep in mind that there is always a cost associated with conventional marketing initiatives. So, these costs can be considered as costs of generating more revenue which would occur regardless of the marketing channel.

The costs such as designing and testing new creative and blasting e-mails can be considered as overhead costs especially if a company conducts these activities in house or have them outsourced with a fixed rate agreement.

The articles suggest that spam complaints are going to double if the frequency doubles. Even though this might be true in some cases, so many factors such as brand name, proper use of from field, recency, latency and the level of customer fatigue might affect this ratio and should be considered when analyzing the results.

They assume that people who file a spam complain, are likely to be less valuable. However, they might be high revenue generators who are angry that their trusts in your company are being abused and being bombarded by so many irrelevant and untimely e-mails. So, it is important to do more due diligence when calculating potential lost revenue and coming up with a discounting or increasing factor.

They also assume that increase in unsubscribe rate is solely related to increased e-mail frequency. It fails to consider other factors such as content, subject line or from field.

The articles suggest calculating the lost subscribers based on a month of data. This approach might not take into consideration the seasonality factors and could give us inaccurate data. So, it is a good idea to either look at the data in a larger time frame or compare them with historical data from previous years.

The articles also fail to cover following issues:

• Usually repeat customers have a higher average transaction. So, even if a company does a good job in acquiring new customers, these new customers may not be as valuable as current customers.
• Another cost is the cost associated with losing the customers to competitors. If our customers are lured away and treated better by our competitors, not only have we lost those customers’ businesses but also we might have provided our competitors with valuable loyal customers.
• Another less tangible negative impact is that of the word of mouth campaign that disgruntled customers who feel being spammed might start. This impact might be hard to quantify but should be considered before increasing the e-mail frequency.
• Another issue that marketers should keep in mind is that “Click to Open Rate” and consequently conversion rate might drop after increasing frequency if new e-mails do not add value or offer new and relevant offers. So, it is important to use Web analytics metrics to measure the impact of increase in frequency on conversion rate.
• The articles also fail to address the objectives of the e-mail campaigns clearly. Reduction in revenue per e-mail might be justified by turn over. (e.g., when a company has cash flow problems or would like to get rid of inventory)
• List management is another topic that was not touched properly. Weather it is handled in house or through list brokers, marketers should make sure that they segment the list properly (by demographic, lifestyle, behavior, and RFM) and remove outdated, duplicate and unsubscribed e-mails from the list.

In short, e-mail marketing is a great marketing tool if it is being used properly. Marketers need to segment and optimize their lists, creative and blast frequency and implement TQM (Total Quality Management) to ensure the optimal Return on Investment.

Nima

Filed Under: e-Mail Marketing