What is the Cost for Different Phases of Outbound Marketing

A colleague recently sent me an email asking:

I'm trying to find out the cost/spend associated with different phases of outbound marketing campaigns. At a high level, I'm trying to understand the process as,

• Idea generation/ Message theme discussions (e.g. what is the campaign all about)
  
• Associated content generation (web site promotion, hard print material, email
  content generation...in summary, (creative + message) generation  )
  
• Outbound execution : actual delivery, publishing of hte message

Can you provide guidance as to,

1. If I missed any major step(s)
2. What % of total cost will be allocated to each of the above steps.....here if you can add the vertical (retail, hitech software, hi-tech mfg etc), it would help me more

Not that I'm an expert, but my response was as follows - see if you agree or better yet, can add in your 2 cents:

I think you have identified the key themes. I tend to think about outbound marketing in the following categories

Target

• Who will you contact? who is your audience? what is your access to that market? If you want to  go direct (email, direct mail, telemarketing), how are you going to obtain contact information
  -- homegrown lists, purchased lists?
• Is there a segmentation strategy applicable? If so, what are you costs/efforts to define/implement it?

Message

• Once you know who you will reach out to, you need to craft your message. This involves figuring out the creative for each media (email layout, direct mail layout, video or radio ad, etc.) and producing it
• Different elements of the message - creative content, offer, promotion, etc.

Execution

• How will the message get out? What are the different media channels? Are you going to work with an agency that can manage all channels, or do it yourself?
• How will you co-ordinate the different channels? e.g. someone who got an email offer ends up calling your telemarketing center, are they all in sync?
• How well are you able monitor your campaigns in progress and how quickly can you respond to feedback?

Optimization

This is more around anayltics, but a critical part (of course I'm biased :-) -- which is to look at the operational metrics of all campaigns and optimize mainly for 2 things - determine the most profitable/relevant segments and for each segment, figure out the optimal contact strategy

Cost-wise, execution will be the biggest chunk, probably 50-60% of overall cost, closely followed by "target" (acquisition of contact information or markets).  Rest is probably evenly divided.

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Email Marketing is about Engagement First, Revenue Second

For the last couple of months, I have been trying to get my head around the analytical nuances of email-centric marketing (as a part of my new gig with Responsys). At a first glance, there seems to be a plethora of metrics – some around deliverability, then open rates, click rates, conversion rates, etc, etc. Which ones of these are the true measures of success? To some extent, they all are – but I can’t help but look for a top-down hierarchy which looks at the bottom line first, and then delves into the various supporting factors.

The success of your email (or any other customer contact for that matter) depends on whether the email was successful in influencing a desired action on the recipient’s part -- Did they actually open the email? Did they actually click on any of the external links in the email? Did they actually perform the action that was the goal of the email – like making a purchase or signing up for a program? Measuring each one of these events and understanding how they are influenced by external factors are crucial to optimizing the success of your email campaigns.

A common misperception about emails is that they are more-or-less “free”. Compared to the cost of a direct mail piece or a telemarketing call, the physical cost of sending an email is definitely lower by several orders of magnitude. As a result, what is also common is that organizations get somewhat sloppy about measuring the cost and impact of their email campaigns, and they tend to measure email campaign effectiveness on a more general level.

Particularly important are the hidden costs of email campaigns. Since it is easier and cheaper to send several emails to a recipient, often “list fatigue” is realized much sooner in the email than in offline channels. This means people in the email lists opt out more quickly and the response rates decrease more sharply, indicating a more negative experience for the email recipients.

This breakdown in relationship manifests itself in the following email engagement metrics:

• Decreasing click-through rates and conversion rates
• Higher opt-out and spam-out rates

However, a common trap most email marketers fall in is to address the above issues by increasing the volume of emails. The thought pattern is something like this:

I am sending out 100,000 emails today, and I only get a 0.1% conversion rate. Since my target is to drive 10,000 new web sales by email this quarter, I must send out 10,000*100 / 0.1 = 10,000,000 emails this quarter. And because it costs me only a penny per email, I am basically spending $100,000. If the gross margin per sale is higher than $10, then I even have positive ROI.

While this calculation may be mathematically correct, the major flaw in this approach is that it evaluates email purely on short-term revenue potential, and does not consider the impact of email volume on the overall quality of customer engagement. In a way, it is very similar to the bad image telemarketing has gotten over the years because telemarketers have been entirely focused on making a large volume of calls without caring much how many people get infuriated in the process. The difference is that in the case of emails, people can easily unsubscribe with a click, tag you as a spammer, or simply hit delete any time they see an email from you. They can do a lot more damage to you in a much shorter amount of time.

So, it is essential to think of email as an engagement tool first, and revenue generator second. The primary goal of your email campaign should be engagement, which in turn drives value. It does not work the other way around.

In the coming days, I will post more of my thoughts around measuring engagement and its influencers. I will also like to hear from you – what are your thoughts around measuring engagement driven by email, and/or do you see the problem space differently? What should be the role of analytics in driving success of email campaigns?

The more I think about this, it seems that analyzing success of email campaigns is not just looking at one particular success outcome, or even looking at individual metrics like open rates or click rates -- the task seems more about developing some sort of "Email Engagement Index" (EEI -- do we really need another acronym?) that incorporates all the different manifestations of engagement that were influenced by the email (open, click, purchase, forum posts, calls to the call center, web site visit, etc.) with their appropriate "weights". Then we need to track the impact of our email campaigns with respect to this index. Else we run the danger of looking at this multi-dimensional issue in a more unary manner (such as looking at only revenue or open rate, one at a time), and thus, not realize the actual impact of the email campaign.

I'll have more on this soon, but thought I should at least get the dialog started.

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