Does Email Marketing Really Work?

posted by Bob Mills

A recent study by the Direct Marketing Association shows that email delivers the highest return on investment of all direct response media. Should you be using it for your business?

The answer is a hardy “you betcha,” according to a recent survey by the Direct Marketing Association. Not only is email alive and well, it also delivers the highest Return On Investment (ROI) of all direct response media, both online and offline, beating out direct mail, paid search and every other targeted channel.

Email campaigns deliver the highest ROI at 21-23%, as compared with telephone campaigns (19-20%), social media ads (15-17%), direct mail advertising (15-17%), mobile advertising (12-14%), paid search (9-10%) and Internet ads (6%).

Email’s high ROI is based in part on its low Cost-per-Acquisition (CPA) relative to other methods. That’s a fancy way of saying email marketing is cheaper, due to low creation and distribution costs. No printing, no postage, no telemarketing costs.

Not surprisingly, email is now the most widely used direct response channel. Most marketers use it for lead generation (44%) and direct sales (31%), while a smaller number employ it for driving retail traffic to bricks and mortar stores (9%) or other goals (16%).

Open, Click, Convert

While email campaigns generate the best ROI, response rates are relatively low compared to other channels. That’s because email response involves three separate steps on the part of the recipient. Step 1: open the email. Step 2: read the message and click on a link. Step 3: interact with information and automated processes on the marketer’s website to complete the conversion or sale. At any point along the way, they can change their mind and drop out of the conversion process, leaving behind an empty cart. So, getting them to “open and click” is key to getting a sale.

According to the DMA, the open rate for emails sent to “house lists” is about 20%, while the open rate for “prospect lists” is half that (10%). As averages go, that’s not bad for an unsolicited email campaign. But those are just averages and who’s satisfied with being just average?

A more detailed study conducted by IBM in 2015 looks at email open rates across a variety of industries. Not surprisingly, the study showed that some email campaigns perform much better than others. While the mean and median open rates for all industry categories falls within the 15-25% range, there’s a big gap between the top-performing campaigns and the poorest-performing ones. The difference is striking: open rates as low as 5.5% and as high as 56.7%. That’s a tenfold difference right out of the box – and pretty strong evidence that not all marketing campaigns are created equal.

Getting your customers and prospects to open your email is great, but will they click on a link to learn more or make a purchase? The answer is yes – if your message is compelling. But again, it varies across different industries and there’s a wide gap between the best and worst-performing campaigns.

The following chart shows the “click-to-open” rate (CTO) for a these same industry sectors. The CTO refers to the percentage of people who click through to your website once they’ve opened your email. The results range from a meager 0.2% for very boring campaigns to a high of 39.2% for top-performing ones.

All of this underscores the need for email marketers to do the job right, even if it costs a little more upfront to do it. Here are a few best practices that will get prospects to open, click and purchase.

Build a high quality mailing list

“Garbage in, garbage out”, as the saying goes. If you start with a bad list, you’ll get bad results. To begin with, your list should only include people who’ve agreed to receive your messages. This means people who “opt-in” via a subscription form on your website, as well as past and current customers – people you’ve done business with on a regular basis – for whom there is an implied consent to receive your email messages. Having a good list will also put you in compliance with current Canadian SPAM laws and keep you on the up-and-up with government regulators.

Make it worth their while to open and read your mail

Include valuable information or special offers to reward subscribers who open and read your message. Make sure your email has an appealing subject line. Your headlines and ad copy should be magnetic! Your offer should be valuable – like a significant discount on your normal price or the opportunity to participate in an event that’s interesting to them (not just you).

Start with a good design

Your email message should have an attractive design. It should be professionally designed, visually stimulating, easy to navigate and offer multiple opportunities for the recipient to click through to your website.

Use a professional email delivery service

You remember the old adage “Don’t try this at home”? Under no circumstances should you send email marketing messages using your in-house mail system. You need a professional email service provider. We use MailChimp. There are many others, including both free and paid services.

Optimize your website to convert those leads to sales

There’s not much point in driving traffic to your site if it’s not ready to deliver what you promised. If you’re offering information, it needs to be on the site. If you’re selling a product, your online store should work smoothly and efficiently. If you’re looking to enhance your organization’s image, your website shouldn’t look like it was built back in the Internet stone age.

Review your results, improve your campaign, then do it again

Optimize, optimize, optimize. If you get an email open rate of 10%, than fix the obvious problems and try for 15%. When you get to 15%, improve it again until you get 20%. Same thing with the click-to-open rate and the conversion rate. Everywhere you can improve the process will help you to get a higher investment return. A/B test different headlines, modify your promotional offers, and improve your website until you get it right.

Sources:
DMA Response Rate Survey (summary of results)
Silverpop/IBM