If you receive more than your fair share of the estimated 247 billion e-mails that are sent everyday, you might find it hard to imagine that the days of e-mail are numbered. But consider this, of all those e-mails, over 200 billion are spam, a massive 81% of the total sent. Anti-spam legislation is only catching the tip of the iceberg, and spam filters are struggling to keep up. For marketers this is an increasing problem, with many valid e-mails getting blocked by these filters before they reach their customers.
But the sheer volume of spam alone won’t be enough to tip the balance against e-mail, as it’s a problem we have all been dealing with since the start of the e-mail industry.
The Law of Diminishing Returns
Lately, how many e-mails have you opened if they weren’t sent to you by friends or colleagues? Thought so. They started off being manageable, but over time you find yourself with more and more e-mails that aren’t relevant, interesting, or a true promise of what you thought you signed up for in the first place. So you ignore them, unless they are so irritating that they make you act and unsubscribe.
Over time this has created a headache for e-mail marketers. In New Zealand it is considered acceptable to record e-mail open rates of 20% (the % of e-mails that are opened from the total delivered to customers). Many countries would be envious of that statistic, having long since driven e-mail down to 5%, 2% or even 0.1% average.
So 80% don’t open, don’t respond. And the numbers are increasing over time. Smart marketers would have a history of measuring e-mail costs against some form of sales or return on investment measure. So what do you do when your e-mails are not generating the return they once did? If you are like most companies, you respond by sending out e-mails more often to help make up the numbers. As a result, open rates decline further.
But this predictable decline in efficiency isn’t enough to tip the balance either. As long as there is a payback, e-mail marketing would continue on this declining returns basis for some years to come.
The Case for e-Mail
To understand the inherent weakness of e-mail marketing, it is worth going back to having a look at why it existed in the first place.
Marketing via e-mail provided an ‘order of magnitude’ reduction in cost versus other means of direct customer communication, principally direct mail which incurred postage, printing and paper costs. Once you had a customer base of a certain size, generally 30,000, then e-mail become a cheaper medium. If your customer base was 300,000, then the savings were significant. More than cost alone, e-mail also allowed marketers to deliver their messages faster, with greater measurement metrics.
The Case for Social Media
In a case of history repeating itself, or perhaps more accurately an outcome of Moore’s law, Social Media provides an ‘order of magnitude’ reduction in cost versus e-mail.
To provide an example, let’s look at the current leader in social media, Facebook.
If you are a marketer, what does it cost to run a fan page on Facebook, with customer polls, direct customer dialogue, news updates, the ability to obtain customer feedback and dialogue, with direct links to your website for sales etc? Pretty much nothing, other than your own time or wage cost.
When you compare that to e-mail marketing, it’s not just about the cost saving versus sending an e-mail, ranging anywhere from 0.5 cents an email at the low end to 2 cents an e-mail at the top end. It’s also a saving in not having to maintain a database. Nor incurring microsite or website development costs, let alone hosting, servers and related costs.
Another reason why Facebook provides an opportunity for marketers is its sheer volume. The January 2010 comScore report on website traffic sees Facebook record the second biggest website performance in New Zealand for unique visitors. In numbers, that is 1.675 million unique visitors, who went to this site an average of 22.4 times in that month, making 37.5 million visits in total. To put it another way, it was almost bigger than two trademe’s put together.
There are of course some trade off’s when running a social media strategy, privacy being one. But when the cost reductions are so great, and the visibility gains so high, these barriers are unlikely to hold the medium back.
When will e-mail marketing end?
The Future Exploration Network think-tank has predicted that e-mail will become effectively obsolete in 2012, before the demise of newspaper deliveries, fax machines and video rental stores.
Don’t expect this to happen quite so quickly in New Zealand. But the advantages of social media are becoming so evident that even company websites will be at risk in the future. But that is a DLG blog post subject for another day…
Author: Darryn Melrose, M&C Saatchi
