Most email marketing programs that are being deployed are bringing in quite some revenue and that is great. The DMA UK and Alchemy Worx National Client Email report saw an average ROI of 21.48 for each pound spent on email marketing, although it probably should have been higher because they took a very conservative average in the highest, most profitable, ROI segment. But it is not all revenue, there is another side to the story of ROI. The side of costs. Although email marketing costs have always been a strong point (they are lower than alternatives like snail mail) in the long run they might be the downfall or the savior of creating higher ROI. Let me explain.
We need a new business model: Is it free?
Just the other day a new MTA (Mail Transfer Agent) called mailerQ was launched. That by itself is news. Every professional email software system uses an MTA to be able to send large volumes of emails, there are just a handful of commercial MTA flavors. Messagesystems, PowerMTA and Strongmail are the most well-known. But what makes this new MTA launch more interesting is because of their business model. It is free, admitted with some conditions, but it will allow you to run your own MTA for free up to 10K emails per minute. The big question is: “Why would they do that?”.
Well, I could give you one reason: Because change is needed
Remember when there was first talk about the freemium model for ESPs? You can find it offered often now, you are able to send 2000 emails free per month to get you started. One ESP for the small market made that a very, very popular model. And I dare to say that largely because of their pricing model and monkey jokes that they are now so widely used.
Other ESPs look for a different pricing model and charge you per record in your database, others per click. There are some that venture into a revenue share model, for instance in ESPs that specialize in abandoned shopping cart recovery. And even an ESP that offers a “pay for speed” service. The faster you want to send, the more it costs.
But is the type of cost structure the right question? I think Chris Marriot is right in his analysis about email marketing CPM. Selecting a new ESP has been about price more than it should. It should be about the best idea, software and services and not just price. Unless you believe that all ESPs and agencies are the same and easily interchangeable, but that definitely is not the case. But still it is a very nontransparent market and that makes it less easy to differentiate.
Given a choice between equal solutions every marketer is going to choose the cheaper one.
Why knowledge might be the saviour of email ROI
I believe that the free part should be in adding specific knowledge to the equation. And that is where the top of the market is headed. Based upon the real life problems marketers run into, the supplier should be able to help. You are seeing this right noe, the educate and thought leadership trend catching on. But it requires a mindset of shared responsibility and creating profits together by the ESP and the client.
Takeaway: In the end, the increase of the ROI would not come from the ESP working under the lowest price but from increased revenue.