Last month, I questioned whether we as an industry had reached the end of the evolution of email marketing. By this, I mean a point in time where everything that could be done with email had been done, and that going forward we would just see a continuation of the same tactics. I received a lot of comments about the article, including a very well-reasoned rebuttal from Jordie van Rijn. I plan to revisit the topic in the near future, but this month I wanted to turn to an activity that makes incumbent ESPs nervous, other ESPs hopeful, and client-side procurement people as giddy as little school girls before their first dance. To what do I refer? The email RFP!
I last wrote about the subject in a column back in March 2007. A lot has changed in the industry since I originally addressed the subject. But the column is still worth reading if you are about to enter into an RFP (as is this one!). Here's one quote from the article that proved more prescient than I ever imagined:
"I love procurement people. Really! But when they are running your selection process, this tells me two things right away about your company. First, no one in marketing thinks email is important enough to get deeply involved. And second, the decision will come down to who is the lowest cost provider."
Let's be honest. Since sometime around 2007, there has been a race to the bottom in regards to email sending CPMs. Rates that were unthinkable to the major ESPs back then are now table stakes in RFPs for high-volume senders. The blame for this can be spread among many different players: ESPs that were willing to buy volume at below factory cost, emerging ESPs with lower cost structures (and less functionality), and procurement teams that used a lower CPM to validate their choice in ESP selection.
Regardless of who is to blame, the relentless downward pressure on CPMs is quickly approaching the inevitable floor, after which prices will stabilize among the major ESPs. After all, I can't envision a world where an ESP actually pays the marketer to send its emails. So assuming that is the case, the bottom is somewhere north of a $0.00 CPM and the under $0.50 CPM large volume senders are able to squeeze out of ESPs today.
On a side note, upfront television CPMs are estimated to see an 8 percent to 10 percent hike over CPM rates set during the upfront a year ago. Why? Because quality comes at a price, and both the cable networks and the Big 4 are producing a better product. (If you've watched "Justified" on FX or "Modern Family" on ABC then you know what I'm talking about.) What will be the cost in technical innovation at major ESPs with margins being so squeezed? I don't know, but it probably is a contributing factor in my topic from last month's column.
But I digress. The point of this screed is not to dwell on the race to the bottom. My point is that once the favorite procurement question of "Who has the lowest CPM?" is answered with "all of them," the other elements of the RFP then become much more important. (I would say they always should have been, but we all know that isn't the case.) And when this happens, there will be no more short cuts in the decision as to which ESP to partner with. And the marketing folks at clients are going to have to once again step into the key decision-making role. After all, once the technical requirements have been met (and there's always more than one vendor that will be able to do so), it will come down to a battle of ideas between the vendors pitching your business.
That's right -- ideas. What data and what sources of data will be most valuable in your campaigns? What campaigns should you automate, and what should the trigger be? Do you currently have the right creative treatment to maximize your response? How can your email campaigns help improve the performance of other channels? How do you improve your ability to recognize email subscribers in other channels? I can tell you that most of the major ESPs have a lot of people who are thinking about these issues and are ready to help you address them. But all ideas are not created equally, as the AMC series "The Pitch" demonstrates on a weekly basis. In fact, that series should be required viewing for anyone about to issue an RFP.
It seems like more than 50 years ago, but there was a time in the advertising business when there was a standard payment method -- the 15 percent commission. Everything the agencies bought or produced on behalf of their clients was slapped with that 15 percent commission, and that's how agencies made their money. So it was not about which agency would charge the least; it was all about who had the best ideas. That's all changed, and now it's as much about ideas as it is about the rates charged for the people who work on the account. But in the land of the ESP RFP, we are going back to the future -- back to a place where cost isn't really part of the equation.
Is this a bad thing? Not at all! I think it's the greatest thing to happen to the ESP RFP since the early days of email marketing. But as I said earlier, it's going to make the RFP process a lot harder and require a lot more effort on behalf of the client to really understand the differences in approach that the companies pitching its business are proposing. But maybe we can finally kill the tool demo! I've never understand why a client that would be full-service cares to see how the tool worked. That's like asking an advertising agency to show how they would make a TV commercial!
To my friends in procurement, you job here is almost finished. You've pushed CPMs lower than I ever thought they would go. To my friends in marketing on the client side, your job here is just beginning. But in the long run, you're going to get better partners and better results. And maybe, just maybe, this won't be the end of email marketing!
Chris Marriott is a data-driven digital marketing consultant.
On Twitter? Follow iMedia Connection at @iMediaTweet.
"Email symbol wrapped 100 dollar banknote" image via Shutterstock.