Largely due to its ability to deliver a high ROI, email has long been regarded as the domain of the direct response marketer. According to the Direct Marketing Association, email marketing is projected to generate an average ROI of $43.52 in 2009 -- more than twice as that delivered by search and other marketing channels.
Impressive as this might be, email marketing expert Chad White, research director at Smith-Harmon, estimates that the ROI might be much higher -- as much as $130. He attributes this number to the intangible effects of email marketing (such as offline purchases or sales driven by organic searches upon receipt of an email message) that cannot be tracked directly. White's findings align closely with the findings of direct marketing expert Stan Rapp, who estimates that the ROI from an email address is as high as $118.
However, beyond the world of the direct response marketer, email has seen increased adoption by brand advertisers. This is because brand marketers have shifted from a broadcasting-focused measurement approach to an engagement oriented one.
In its report "Marketing's key new metric: Engagement," analyst firm Forrester says, "As consumers' trust in traditional media diminishes, marketers need a new approach. Using engagement, you get a more holistic appreciation of your customers' actions, recognizing that value comes not just from transactions but also from actions people take to influence others. Once engagement takes hold of marketing, marketing messages will become conversations, and dollars will shift from media buying to customer understanding."
Spurred on by this adoption by brand and direct response marketers, email marketing continues to grow. The truth of the matter, though, is that any email marketing program is only as strong as its list. Deploying the most sophisticated email marketing program for a weak list filled with unqualified subscribers is akin to building the Taj Mahal on a swamp -- sooner than later, your program is destined to sink, impressive as it might be.
Select performance advertising models
There are three pricing models in the online advertising market that marketers can use to acquire the email addresses of consumers who are interested in their product or service. Advertisers can use CPM pricing models to purchase third-party lists or to run display banner campaigns where user information is captured off a landing page. However, CPM pricing models charge advertisers for impressions that might never convert, thus delivering poor returns on marketing dollars.
The demand for increased ROI explains why the 2008 IAB PWC Internet Advertising report shows a sharp decline for CPM pricing models (from 45 percent market share in 2007 to 37 percent in 2008). Performance advertising models such as cost-per-click (CPC) and cost-per-lead (CPL) advertising are growing at the expense of CPM. (Performance advertising grew from 45 percent in 2007 to 51 percent in 2008.)
"It's no secret that CPM pricing models perform poorly when it comes to delivering returns on marketing dollars," says Sam Parry, director of online membership at the Environmental Defense Fund. To maximize returns, it is essential that marketers opt for CPC and CPL pricing models as much as possible when deploying online advertising campaigns to build email lists.
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