The Real Cost of Sending Bad Email
Behavioral personalization is fundamentally shifting the landscape of customer communication. It’s giving marketers an unprecedented level of control over the levers that drive The Big 4: user acquisition, engagement, retention, and monetization.
One of the biggest beneficiaries of this new technology is email marketing. It’s not uncommon to see case studies reporting transformative results like100-150% increases in click thru, 10-20% decreases in churn, and 2X or 3X increases in average revenue per customer.
So what’s the real cost of sending bad email?
How much harm can it do? After all, many of us have been sending irrelevant and poorly timed emails for years, and have learned to accept relatively dismal performance as the norm. Sending an email costs fractions of a penny while developing and implementing behavioral personalization is much more pricey — right?
To use a battlefield analogy, sending a bad email is not a “whoops we missed” scenario that only costs you the price of the bullet. In reality, missing the shot is has a ricochet effect that can damage or destroy two critical things: your customer relationships and your bottom line. We need to start seeing failed customer communications as negative not neutral events.
Communication gone bad.
Failed communication has a negative impact on your organization because:
1. Negative Brand Perception = Decrease in Revenue
Negative experiences decrease the value of your brand. The amount of time and money a consumer will spend on your brand is correlated to the emotional value they ascribe to it.
2. Lowered Expectations = Increased Churn
One irrelevant email sets a lower expectation for the next, creating a downward spiral of decreasing engagement, which ultimately can lead to churn.
3. Irrelevant Content = Decreased Engagement
You get a finite amount of your customer’s mental bandwidth to try and engage with them. Wasting it with irrelevant content reduces your mind share and ultimately takes away from your bottom line.
4. Failed Communication = Increased Customer Acquisition Cost & inability to activate signups into repeat buyers
Those pennies spent failing to acquire new customers add up, and if you aren’t learning from your mistakes, you end up throwing good money after bad.
Customers don’t grow on trees!
Let’s say you have 1M email subscribers, 15% of which are “repeat buyers” spending $70 annually. Let’s also assume that the average cost to acquire and annually service a “repeat buyer” through paid and organic channels is $15. Your Average Customer Value (ACV) is $55 for the first year. That’s your return on investment from one customer.
The short-term consequence of a bad email is that it creates a lack of interest. A customer won’t disown you because you sent one irrelevant communication, but it decreases the relevance of your brand. Now, imagine that you send 5 emails over the course of a month, and 4 of them are not relevant or timely to the user causing the user to unsubscribe. Accepted standards indicate that a good unsubscribe rate is less than 0.5%, so let’s say 0.25% of total unsubscribes were attributed to this vicious cycle, after the course of the year, you have churned over 29,591 subscribers, of which 4,438 (15%) were “repeat buyers”. Here’s the cost:
- You spent $66,679 to acquire those 4,438 users.
- Over the course of 12 months, with an attributable 0.25% churn each month, you just lost an additional $112,497 in “recurring” revenue.
And that’s not including the cost of acquiring and then failing to activate the 25,152 users not classified as “repeat buyers”. Simple back of napkin calculations shows that the cost to acquire could be around $20,000 and opportunity cost of not activating them could be in excess of $1,000,000.
You’ve lost hundreds of thousands of dollars (at least $179,077) of investment and revenue. You’ve also lost access to a key channel through which you could have fostered strong relationships. Customers have lots of options online, and we know that there will be other brands waiting to claim the consumer mindshare you’ve forfeited.
Sending good email is easier or more affordable than ever before
As the technology matures, behavioral personalization is more accessible and affordable. You no longer need to hire machine learning PhDs to write algorithms, developers to integrate your different databases, or specially trained analysts to run reports… there are companies that do it for you.
We don’t need to accept poor email performance anymore. Today, marketers have access to incredibly powerful behavioral analytics that come in off-the-shelf, plug-and-play packages. The power to deliver better customer experiences and transform your performance is within reach.
How have you started to personalize your customer communications? Have you seen any immediate improvements? Share your story in the comments below.