StrongMail and SurveyMonkey recently released their Marketing Trends Survey. The survey of 1,002 executives across industries revealed that 89% plan to maintain or increase aggregate marketing spend and 56% plan to increase their email marketing budget. The question that popped into my head was, how are executives deciding to increase allocation to the email channel? We suspect the answer is that in the pursuit of short-term revenue growth they are ignoring a significant, but hidden cost of over-emailing: the opportunity cost of opt-outs.
What is your annualized email opt-out rate?
It always surprises us how few retailers have this metric readily available. According to MailChimp's Email Marketing Benchmarks, retail opt-out rates average 0.214%. Using 0.20% to be conservative and a hypothetical retailer with 1,000,000 email addresses, lets look at the annualized opt-out rates for various email frequencies:
1,000,000 email addresses
0.20% email opt-out rate
Pretty stunning! The low rate of per email opt-outs, the industry standard metric, actually hides the fact that customer opt-out rates are going through the roof. Ironically, the more emails you send every week, the more your per email opt-out rate goes down. Not so for the more important customer opt-out rate. Many retailers will find, if they examine annual customer opt-out rates, that 20% to 50% or more of their active email file is opting out.
How do you grow your email channel when half of your file opts out each year? Unlike customers who simply delete your emails, where at least you have a chance to reactivate them with a great message in the future, the email channel is gone forever for these customers. We're not including customers who mark your emails as "spam" or "junk" in their email clients, which would make these figures even worse. We also aren't considering the negative effect of excessive emails on open and order rates for those who don't opt-out.
What is your annualized cost of opt-outs?
A solid way to show the opportunity cost of opt-outs is to estimate annual email channel sales for active email customers. Below, we've calculated Average 12-Month Email Sales and Annual Lost Contribution based on a 4-per-week email treatment scenario. Average 12-Month Email Sales is the sales each active email customer generates through the email channel in one year (208 emails per year x $.072 per email = $15):
The true cost of opt-outs (using a file size of 1,000,000)
This scenario demonstrates the clear opportunity in reducing customer opt-out rates. For example, if you can reduce your opt-out rate by 10%, a modest reduction of about 4 points (42% to 38%), you will improve sales by $624,000 and contribution by $343,200. A 20% reduction would result in a sales gain of $1,260,000, and a contribution gain of $693,000. This is not a far-fetched accomplishment, rather a modest and obtainable feat. This means bringing your opt-out rates down from 42% to about 34%.
Calculate your lost revenue
Contact us to calculate how reducing opt-outs will increase sales.