Measuring the value of an email address

By Henry Hyder-Smith, Adestra Managing Director

Jupiter Research reports that 71% of e-mail marketers don’t associate a value to their e-mail addresses.

Email addresses have a shelf life, and once bounced they are of limited value. This means there is a limited ‘lifetime’.

In their ‘active’ lifetime, you should tweak your plans to collect more of the valuable email addresses, measured by:

• Revenue: Perhaps the most obvious, but ensure you track customer lifetime value. Different business models can generate revenues in different ways- direct sales and clicks on advertisements or perhaps.

• Cost of Servicing: What are the costs of serving these contacts- do they prefer to order through your web site rather than through your call centre meaning a lower cost of sale?

• Advocates: Do they recommend your services to any friends or colleagues helping to build your database?

• Testing: Do they reply to emails and interact with your marketing messages allowing feedback and testing.

The maths

The theory suggests you should determine how important the above factors are for you. Allocate a relative value for each name (may be easier to do this by source of the list) and then factor in the cost of acquiring the name in the first place. This will give you a relative figure to compare how valuable names are for your organisation. Finally, introduce the estimated ‘shelf-life’ of these email addresses (based on previous history) as this will greatly influence the overall value.

Case Study: A leading eCommerce player

In practice, the model can be much simpler. For example, this un-named Adestra client broadcasts a regular email newsletter to 25,000 contacts. On average, they receive the following key performance indicators:

The average sale value from the email campaign is £32.68 (determined by total value by total orders for the last 3 editions of the email newsletter). This means the following:

• For their 25,000 contacts that they have on their database, they deliver email to 24,550 (98.2%)

• Of those delivered, 184 convert into sales (0.75%), each spending an average of £32.68.

• This makes total revenue of £6,013.12 of revenue each 'average' campaign.

• This means that each email address they hold is worth £0.24p (£6,013.12 divided by 25,000).

Thus, if the cost of acquiring an extra email address is less than £0.24 per email, then this is a sensible acquisition route.

Implications

When buying or renting large lists I’d recommend obtaining a small quantity to allow a pilot before committing to the full list–to road-test the names against the above factors. This also allows you to analyse the ‘hygiene’ level of the list and, if appropriate, either negotiate extra addresses or a guarantee on quality.

This also shows that by improving the 'deliverability' rate of your list by using a reputable email service provide (like Adestra!) to broadcast your email communications you can increase the value of each of your email address dramatically. In the example above, if the deliverability rate was reduced from 98.2% to 93.1% then the total revenue returned is only £5,686.32 a reduction of 5.4%.

More information on Adestra's email marketing services

Adestra provide welcome tactical advice and input on our client's email marketing program. For more information about how we can work together with you to improve your email marketing, please contact us to discuss your email marketing

Adestras Message Focus

Adestra have a proven track record in providing email marketing tools, technology, strategy and support for a number of large corporate players.

From product delivery for large publishers through to tactical direct response promotions for travel providers, all clients always benefit from the shared best practice and knowledge our team have gained working within email marketing since 2000.

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