Email marketing: The good, the bad and the ugly

Nobody would deny that emails remain an essential tool for marketers. They’re an effective way to share updates with customers who have previously opted in. The content can cover anything from new product announcements, special sales, and communicating your unique brand voice to sharing interesting articles and industry updates. Modern marketing email services allow you to segment your subscribed customer base, so with the help of integrations with ecommerce platforms, you can tailor your messages and promotions.

So yes, marketing emails are powerful — but a key message I want you to keep in mind is that, like all good things in life, they can be a double edged-sword. This becomes even more important as you transition from being a completely new business to an established brand with an existing customer base. In this article, I will demonstrate the pitfalls of choosing short-term gains over lifetime value by stretching marketing emails beyond what they can effectively accomplish. When you do this, you are probably neglecting the most important email marketing KPIs from a user-experience standpoint.

OK, now imagine you run a beauty brand, digitally native, which has already experienced some success in building its customer base through unique brand positioning. Let’s say you have built an enviable list of 50K email subscribers and that you currently send them a marketing email every two weeks, mostly about new products and promotions. On the cost side, based on the existing market of Email Service Providers (ESPs), you will be for paying approximately USD $400 a month, which amounts to around 0.5c per email.

The good: High-value, incremental traffic in a competitive environment

Let’s start with what you already know. In a more and more competitive marketing environment, emails do a great job of bringing repeat visitors to your website for a reasonable cost. In the following simulation, we will assume that this traffic is entirely incremental. Obviously, this is not exactly true, especially for recent subscribers — since they might already have entered their first order journey (it takes three to five visits on average for a visitor to make their first order) but for the sake of simplicity, let’s just assume so.

Time to get the old excel spreadsheet running and calculate the business impact you can expect your email marketing efforts to have. The average click rate of a marketing email is 2% according to Mailchimp. By sending 100k emails a month, you will bring 2000 incremental monthly visitors to your website. Sending an email is relatively cheap compared to physical marketing activities. If we use an average $8 revenue per visitor coming from emails, we find that these 2K visitors net in $16K in monthly incremental revenue. Pretty sweet — but any savvy businessperson knows that you need to consider both revenue and cost.

Let’s also look at your ROI as defined by the email marketing industry: incremental revenue divided by cost. Your cost is the $400 from your ESP subscription. You will be glad to hear that the ROI for your email marketing efforts lands at 40x. Sounds great. (Not so) coincidentally, this also turns out to be the industry ROI claimed by major ESPs. We would argue that a real ROI would only consider the profit retained but the numbers are still pretty good. It seems that driving repeat traffic from your returning visitors is an invaluable asset in a digital marketer’s toolbox.

The bad: Dilution of your brand name

Here we run into the first problem that you might not detect at first, but that can hinder your growth in the long run: the email marketing ROI does not account for the negative consequence of flooding your customers with emails.

Keep in mind that the email inbox of the average individual has 200 emails waiting to be read. And we hate to break it to you but most of them sitting there are … marketing emails. As a result, besides the 2% who opened your email, 98% of your subscribers chose to delete your email (or worse, send it to their spam folder).

You might think that it is fine and that marketing is a numbers game anyway. One thing you should not forget though is that you are talking to customers who liked your brand enough in the first place to subscribe to your emails. There was a high chance that these customers would have come back organically to your website, even if you didn’t email them.

Unconsciously, when one such precious customer cleans up her inbox and deletes a bunch of emails with your brand name on it, it has a negative impact on her perception of your brand. You work your ass off building unique materials for your brand but your email ends up being deleted in a swoosh, altogether with spammy emails of shady businesses that (unlike you) stole your customers’ contacts. This is guilt by association. And this negatively impacts your long-term retention metrics.

At the end of this article I’ll walk you through a user-experience-focused metric that bakes in this negative side effect in your calculated ROI.

The ugly: Erosion of your customer base

It gets worse than people deleting your unread email. Every time you email your subscribers, on average 0.3% of your recipients will unsubscribe from your list. In other, harsher, words, you annoyed your customer so much that he does not want to hear from you again. If we use the numbers from our imaginary beauty brand, this represents 300 high-value customers that would be lost on average every month. For every seven customers that you bring onto your website, you annoy the hell out of one customer that used to like you.

You might say this customer would have churned anyway. When viewed through a short-term, transactional lens, you might consider that bringing an extra seven visitors to your website is worth losing one customer. But over the course of a year of our beauty business, that’s 4K customers that took a strong “negative impact” action towards the brand partially because of over-communication. Even if half of them would have churned anyway, that is still 2K net lost customers per year.

In contrast, strong brands monitor these “high negative value actions” (HNVA) because they know that they cannot keep growing if they alienate their existing customer base. As your brand grows, you need to become more sophisticated about your marketing strategy. What worked at the beginning when you didn’t have a strong established customer base will not necessarily work once you’re established and 80% of your business comes from repeat customers.

The solution: Track the quality of your email marketing experience and diversify your communication channels

The potential problems we are highlighting here with email marketing over-communication are not often discussed. And the downside is rarely captured in the 40x ROI claim from the ESP industry. If we take the 2K lost customers from email marketing mentioned above, and multiply them by their lifetime value, you will find that this can easily reduce the initial 40x ROI down to 20x. And we have only been using the average click rate and churn rates from the email marketing industry. Worse performing brands could lead to a much lower, if not negative ROI.

Our first recommendation is that your brand starts tracking user-experience KPIs relevant to your marketing email. A good starting point is the ratio of “unsubscribe rate divided by click rate”. In our example, this would be 0.3% / 2% = 0.15. We found that best-performing brands have a ratio of less than 0.1. If you feel that your metrics are not good, besides improving the general quality of your email marketing content, consider sending fewer emails. Also consider better segmenting the recipients of your emails so that your most precious customers do not receive the same generic promotions as everyone else.

And if you think that these recommendations limit your marketing reach too much, you can do two things: (1) Capture more email leads by making sure that every new visitor on your website gets an impactful incentive to signup to your list (think spin-to-win contests, unique content offering, etc.). This can easily double your collection rate compared to standard signup forms. (2) Reach out to your customers through other channels, for example, when they are on your website and are more receptive to hearing about your brand. There are innovative ways for reaching out to your best customers with personalized content in non-intrusive ways.

That’s the good, the bad and the ugly of email marketing. While every business is unique, these problems are broadly universal. Maybe they’re already impacting your business, or perhaps they’re lurking on the horizon. Experiment with the UX KPIs to see if you can reverse or avoid the damage and try out some of my suggestions for expanding your marketing reach while preserving your brand’s integrity. Let me know how you go.