The Unsubscribe Factor

When evaluating e-mail campaign performance, we frequently fail to account for the lost downstream revenue associated with those who unsubscribe from our campaign.

Here's an example.

Assume your e-mail campaign has the following metrics:

• Open Rate = 25.0%
• Click-Through Rate = 35.0%
• Website Conversion Rate = 3.0%
• Average Order Size = $200
• Dollars Per E-Mail = 0.25 * 0.35 * 0.03 * 200 = $0.525. Each e-mail generated nearly fifty-three cents of revenue.

Overall, the marketer might feel happy about the results. The marketer may even report that there was a 0.3% unsubscribe rate.

An important next step is to discount performance by the long-term revenue lost due to those who unsubscribe from your list.

In our example, assume that the marketer sends 75 e-mail campaigns per year. Over the next twelve months, the marketer will lose 0.003 * 75 * $0.525 = $0.118, because these e-mail addresses no longer exist on the marketing file.

In other words, the incremental value of the campaign is $0.525 - $0.118 = $0.407.

Marketers will find that the "Unsubscribe Factor" can be between ten and thirty percent ... in other words, results need to be discounted by between ten and thirty percent, in order to properly evaluate the results.

E-Mail Opt-Out Rates, Measured Over Time

One of these days, it won't be so easy to grow an opt-in e-mail subscriber list.

Before that day arrives, produce a report that tells you how many e-mail addresses survive for three, six, nine and twelve months after the e-mail address is acquired.

Let's assume you have a weekly e-mail campaign, where each e-mail address receives one e-mail blast per week. Assume you acquired 10,000 new e-mail addresses on January 1, 2006.

After three months, 7,500 e-mail addresses are still valid (not invalid, did not unsubscribe).

After six months, 6,500 e-mail addresses are still valid.

After nine months, 5,800 e-mail addresses are still valid.

After twelve months, 5,500 e-mail addresses are still valid.

There are several neat little nuggets of information here.

In the first three months, you lost a quarter of your new subscribers, for one reason or another. While twenty-five percent represents a huge number, the number is masked by the individual campaign opt-out/invalid rate of just 2.1%. In other words, if you lose 2.1% of your list on each of the first thirteen campaigns, you lose a quarter of your list in just three months.

In months four through six, you lose 1 - (6,500 / 7,500) = 13.4% of your remaining list. This means the individual campaign opt-out/invalid rate is about 1.1%.

In months seven through nine, you lose 1 - (5,800 / 6,500) = 10.8% of your remaining list. This means the individual campaign opt-out/invalid rate is about 1.0%.

In months ten through twelve, you lose 1 - (5,500 / 5,800) = 5.2% of your remaining list. This means the individual campaign opt-out/invalid rate is about 0.4%.

On an annual basis, those tiny percentages yield a whopping 45% opt-out/invalid rate. This means you are turning over nearly half of your new subscribers, on an annual basis.

All too often, we look at individual e-mail campaigns, and pat ourselves on the back when we only lose a half-percent of our list. When projected across time, we see a more interesting story --- in this case, 45% of the list disappeared.

Our industry needs to do a much better job of analyzing digital media (e-mail, search, portals, affiliates) over time. We need to spend less time within specific campaigns. We need to step back, and look at the big picture.

How many of your new e-mail subscribers survive a year on your e-mail file?