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. 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.