Cannibalization in E-Mail Campaigns
Here's a quick question for those of you who are e-mail marketing experts. Can you articulate the incremental value of your e-mail campaigns?
Oh sure, you can easily articulate the open rates, click-thru rates, conversion rates, and demand per e-mail that you drive to your online channel.
But can you actually determine if the sales you are saying you drove actually happened because of the e-mail campaign, or would they have happened anyway, if no e-mail campaign occurred?
Here's something for you to try.
- Take a random sample of e-mail subscribers.
- Divide that sample in half.
- The first half receive all of your e-mail campaigns for a month.
- The other half receive no e-mail campaigns for a month.
| Received All | Did Not | |
| E-Mail Blasts | Receive E-Mail | |
| Customers | 100000 | 100000 |
| Total E-Mails Sent | 400000 | 0 |
| Open Rate | 25.0% | 0.0% |
| Click-Thru Rate | 35.0% | 0.0% |
| Conversion Rate | 3.0% | 0.0% |
| Average Order Size | $125.00 | $0.00 |
| E-Mail Demand | $131,250 | $0 |
| Non E-Mail Demand | $175,000 | $250,000 |
| Total Monthly Demand | $306,250 | $250,000 |
This is an analysis that must be done for all e-mail marketing programs.
This analysis suggests the following:
- When you send e-mail campaigns to this customer segment, you'll get $131,250 of e-mail demand, and $175,000 of non e-mail demand, for a total of $306,250.
- If you do not send any e-mail campaigns, customers increase their non e-mail demand from $175,000 to $250,000.
- Therefore, e-mail campaigns did not truly drive $131,250 of demand. Instead, e-mail campaigns actually drove $131,250 - ($250,000 - $175,000) = $56,250.
- Only $56,250 / $131,250 = 43% of the e-mail demand you are recording in your reporting is truly incremental. The remainder of the demand is being cannibalized from all of the other online orders you would generate.
Our industry needs to incorporate analytical discipline to e-mail marketing strategies. By taking a page out of the catalog analyst's tool-kit, we can better understand the true value of our e-mail marketing activities.
Labels: cannibalization, Database Marketing, e-mail
posted by Kevin @ 2:44 PM
2 Comments:
I agree with the approach, determining the true incrementality of email is worthwhile.
Email is a little different than other marketing vehicles, such as a catalog, due to its small cost. Nonetheless, it is still important to understand the revenue driven by email, perhaps not to justify the email's cost in the P&L, but to ensure you aren't overspending on a catalog or other vehicle.
Kevin - what about email's impact in relation to a catalog? Would you test the incremental impact of email over the catalog (traditional) or the catalog's incremental impact over email (argument being that we'll always keep sending emails, its inexpensive.)
I don't see any problem with testing the combination of e-mail and catalog. It's always a good idea to test combinations of media, to understand if they interact in a positive or negative manner.
E-mail is one of those tools that pundits like to tout as having high ROI. Occasionally, sending an e-mail drives no true incremental sales --- what it actually does is re-direct the customer to the merchandise featured in the e-mail. The customer clicks on the e-mail, goes to the site, and buys something.
Had the e-mail not been sent, the customer may have purchased anyway. So, testing e-mail isn't critical, when it comes to measuring ROI, since it is essentially free. However, e-mail is important to test, to understand if you can change customer behavior, and understand if that change results in a true increase in sales, or a re-allocation of sales from the customer's true intent to what the marketer wants the customer to do.
Post a Comment
Links to this post:
Create a Link
<< Home