Budgeting For Email Marketing: How To Invest In The “Killer App”

Last week at the ExactTarget Connections Conference, I had that the opportunity to meet Forrester analyst Shar vanBoskirk. Like most in our industry, I was interested in her point of view on a question I often ponder, so I approached after her presentation and asked for it: “If email consistently has the highest conversion rate […]

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Last week at the ExactTarget Connections Conference, I had that the opportunity to meet Forrester analyst Shar vanBoskirk. Like most in our industry, I was interested in her point of view on a question I often ponder, so I approached after her presentation and asked for it:

“If email consistently has the highest conversion rate of all channels (search, social, etc.) why does it consistently receive the least amount of budget?”

We see this with our clients, and it’s something that Forrester Research reported on in their US Interactive Marketing Forecast, 2011 to 2016 that was recently featured in the State of Retailing Online 2013: Marketing & Merchandising.

Forrester US Interactive Spend - 2011-2016

Her opinion: Because email is so inexpensive, executives will pay less attention to it. That also often results in a less sophisticated associate being responsible for it. If something has a more significant budget assigned to it, then it will necessarily garner more attention and have higher level associates and larger teams dedicated to it, because they’re needed to manage a more expensive property.

It’s something of an obvious answer: email gets a small budget because it doesn’t need a large budget to be effective in some sense.

You can’t argue with this. If you’re spending a lot of money on something (paid search, for example), then executives are naturally more concerned with its performance. But what if executives managed on return on marketing investment (ROMI), rather than primarily on expense? How effective could it be as a higher profile budget item?

According to Monetate’s eCommerce Q1 report (pdf) of this year, email generates the same amount of page views as search — but it has a higher add-to-cart rate and higher conversion rate. Additionally, email generates four times the conversion rate of social.

Monetate eCommerce Q1 Report

This makes sense because email subscribers have already entered into a relationship with the brand by providing their email address, whereas with search or social, they may have been referred to your site to experience your brand for the very first time. Why wouldn’t you focus on the channel that is most likely to convert, is the cheapest to invest in and generates near-real-time results?

I think the reason that email marketing receives less attention — and, in turn, budget — is because executives think, “Email? Check. We’re already doing that.” Email is viewed as a yes-or-no tactic. The thought process doesn’t include, “How can we get more from our email program?”

The only question asked that comes even close to this is, “How can we get more email addresses?” This is often followed (unfortunately) by, “Can we buy a list?” That question is a relic from direct mail — often still considered email’s closest analog — where that question is perfectly acceptable.

Jay Baer, speaker, author, and president of Convince & Convert, also sees this miss in marketing prioritization. In the Monetate eCommerce Quarterly Q1 report, he states:

“…because it’s by no means the new kid on the marketing block and hasn’t had many particularly impactful technology jumps in recent years, I fear (and see) many companies are running their email programs essentially on autopilot. This is a huge missed opportunity, because email is responsible for generating twice as much direct traffic as social media, and fully four times the conversion rate. Forrester Research says that U.S. companies are spending significantly more dollars on email. And way more money is being spent on search than on email. Maybe that’s misaligned, and companies should be paying more attention to email…

Obviously, it costs more money to update the website with new enhancements than to create email campaigns. But with a comparatively modest investment, email is a far more productive option.

(Of course, marketing tactics do not exist in vacuums; some go hand-in-hand. For example, if the email is optimized for mobile and it links to a non-mobile-friendly landing page, then you should invest in updating the website to continue the customer experience. This may be primarily a mobile-related cost, but the email conversion rate greatly benefits.)

Investing $100,000 in email can result in a far better payoff than investing $100,000 in search or social. Why? Because by investing in your email programs, you’re investing in the customer relationship. You’re investing in the likelihood that someone who started a relationship with you (agreed to a first date) will continue (agree to a second date, and a third).

Analytics show that your prospect will be excited about you, and will spend more time with you than with someone else, eventually moving to a bigger commitment like making a purchase (agreeing to be exclusive) and then sharing a review (telling their friends about you). Spending this budget in a mass advertising context is less targeted and, therefore, less profitable.

If I were a digital marketer planning my 2014 budget, I’d put more money toward email. It may come out of left field, especially if it is not new money and you are taking that budget from another channel. But in both the short and long-term, the payoff is in capitalized returns because email is a progressive investment. As you plan your budgets for 2014, ask yourself, “Why am I not investing even more in email?”

Investing more in email doesn’t mean simply sending more email. It means migrating to a robust email service provider (if necessary). It means completing data integrations with your ESP to allow for more meaningful segmentation. It means optimizing existing and creating new triggered programs.

It means ensuring your analytics are configured so you can effectively analyze and optimize your campaigns. It means creating data models of your best subscribers/customers and then acquiring more of those in the right places. It means syncing your ecommerce recommendations with your email programs to offer the same personalized experience in both channels.

I believe that the smart, long money is in email. Certainly not to the exclusion of all of the other channels, but until their ROMI improves, the numbers make the case for email. Shar was absolutely right that it doesn’t have a big budget because it doesn’t need one to be effective. But in marketing, “effective” isn’t effective enough; we want a killer app. And you have one — you just need to fund it.

Opinions expressed in this article are those of the guest author and not necessarily MarTech. Staff authors are listed here.

About the author

Cara Olson
Cara Olson is Director of Digital Direct/eCRM at DEG, a full-service digital consultancy based in Kansas City. Leveraging her 14 years of experience and thought leadership in digital direct marketing, she and her team lead email and SMS strategy, integrations, and campaign execution for flagship brands like Crocs, Helzberg Diamonds, MathWorks, Cabela's, Life is Good, and TITLE Boxing. In her spare time she runs half marathons, cheers on her beloved Royals, and drinks copious amounts of coffee while trying to exhaust her eight year-old daughter, five year-old boy, and one year-old golden retriever.

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