October 2010

“… consumers are spending 28% less online time using e-mail, according to the measurement company [Nielsen].” Alex Palmer DMNews

“… Ben & Jerry’s is abandoning its e-mail marketing initiatives”

In a recent blog by Howard Fenton, senior consultant at NAPL, the ice cream company is going “to focus exclusively on social media advertising.” Ben & Jerry’s has apparently decided that there are better alternatives than email for building customer relationships. If true, the only use left for email marketing is as an acquisition tool.

But direct mail is more responsive, less expensive than email for acquisitions!

All the hype from email providers hides the fact that email is more or less a non-responsive medium. Their claims of being more responsive are based on comparing email’s click response with direct mail’s purchase response. On the cost side, they promote the idiocy of comparing the cost of distributing emails to the cost of distributing an equal number of direct mail pieces.

Email responsiveness, as with nearly all on-line advertising, is measured in clicks. A click on-line is when a consumer clicks on a link, opening a new web page containing more information. According to www.listpriceindex.com’s Top Email Offer Calculator, this happens 0.52% to 1.87% of the time for a Business to Business list. In comparison the traditional direct mail response rate is 1% to 3%. But the traditional direct mail response is a purchase response, or some other significant activity.

A click isn’t a purchase; clicks simply display new web pages with more information. There is an identical consumer action in direct mail… it’s called opening an envelope! Opening an envelope, or other direct mail piece, also displays a new page with more information. In fact opening a direct mail piece and clicking on a link are identical in fulfilling a consumer’s request for more information. Both deliver the requested information, email delivers it on a new screen page; direct mail delivers the information on a printed page.

Since on-line advertisers call the action of a consumer requesting more information a “click”, it’s also accurate to call opening a direct mail piece and instantly receiving more information a “click”. By establishing a common consumer action associated with both mediums, it’s possible to accurately compare common response rates and the costs associated with generating those responses.

The USPS has been conducting a survey called the Household Diary Study for over twenty years. A five year average (2004-2008) of the data shows that 82% of recipients of direct mail advertising read or scan this advertising. Reading or scanning the contents of a direct mail piece certainly qualifies as a click. Because of the Household Diary Study we know that direct mail’s click rate is 82%.

Comparison of response rates: direct mail 82%, email 0.52% to 1.87%.

Of all the costs associated with an email campaign, the only number used to calculate the cost of generating a click is the list cost, which includes distribution. To make a comparable click cost calculation, only the costs associated with direct mail’s in-mail cost should be used. In-mail costs are printing, manufacturing, list costs, list prep, fulfillment, mail prep, shipping and postage.

Email has a perceived functional advantage in its ability to deliver direct connections to the web. But by adding digital media such as an optical disc, thumb drive, web key, or simple QR code, direct mail is also able to provide direct links to the Internet. For a fair cost comparison with email, digitally linked direct mail must be used. The in-mail cost of a direct mail piece containing an optical disc can be as low as $1.00 per piece and will be used in the following cost comparisons.
To calculate the click cost of a mailing, the in-mail cost per piece is divided by the click rate. For disc based mail divide $1.00 by 82%, yielding a click cost of $1.22. For email divide the list rental cost by the click rate.

Listpriceindex.com has a chart tracking the cost of email lists. The current average cost for BtoB lists is $279/m; the average for consumer lists is $112. So to do the math divide the cost per email address by its click rate or $279/1,000/0.52% = $53.65 per click. An alternative option would be to let listpriceindex.com’s handy dandy click cost calculator do the math for you.

Cost-per-click comparison: direct mail $1.22, email from $14.92 to $53.65.

A case study provided by a reputable list broker (summer 2010), had a BtoC company purchasing 30,219 email addresses. Of these 985 were “opened”. The definition of an email “open” is that the graphics were downloaded by the consumer, making the email readable. The reason it’s unreasonable to compare the cost of distributing an equal number of email messages with an equal number of direct mail pieces is that the direct mail industry does not (typically) send blank or unreadable pieces to consumers!

With email, a marketer’s message is only delivered to those consumers that download the graphics. In this case study 29,234 marketing messages were left “blank” or unreadable by consumers. Using listpriceindex.com’s average list cost of $112/m for a BtoC list, the current cost for renting 30,219 email addresses would be $3,385.

With direct mail’s functional advantage of delivering 100% readable messages, this marketer only needed to mail 985 printed pieces to equal the same number of readable messages delivered through email. An accurate one-to-one cost of distribution comparison for delivering 985 readable messages results in a disc based direct mail cost of $985 compared to an email cost of $3,385.

Cost to distribute 985 readable messages: direct mail $985, email $3,385!

This case study generated 74 clicks or a click through rate of 0.25%. An email list cost of $3,385 divided by 74 clicks yields a cost per click of $45.74 per click. A direct mail piece containing optical media would generate the same number of clicks by entering 91 pieces (82% click rate) in to the mail stream. The total cost of generating 74 clicks using direct mail would be $91.00!

Cost to generate 74 clicks: direct mail $91, email $3,385!

In comparing email to direct mail, the important numbers to compare are the number of responses (clicks) generated and the cost of each response. When using these metrics, email underperforms…badly. Maybe that’s why Ben & Jerry’s is dumping email for the next hot thing. The fact is that when comparable responses and their costs are used, direct mail (with digital content) delivers greater functionality at a lower cost than on-line advertising.