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5 Things Your CFO Wants to Know About the E-mail Marketing Budget

March 6, 2009 By John MacPhee
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As the chief financial officer for several companies throughout my career — in good times and bad — I can tell you with utmost certainty that many CFOs are struggling with how to advise their fellow executives in today's economic climate. We only know two things for sure. First, every company is making tough decisions on where to cut expenses; in fact, your CFO is probably agonizing over such decisions as you read this article. Second, no budget item is off-limits, including your e-mail marketing budget.

What follows are five questions you can expect your CFO to ask about each of your marketing programs. While no one can guarantee that your e-mail marketing budget will go untouched, I can promise you that with the answers to these questions in hand, your CFO will be able to make a fair and informed decision.

1. Does it drive revenue? According to the Direct Marketing Association, e-mail generates an average of $45.03 for every dollar spent. However, CFOs don't care what the DMA says — they only care what the average return is for their companies' marketing programs. Help your CFO recognize e-mail for what it is: a highly effective sales channel rather than a marketing line item.

2. Is it cost-effective? Calculate the average cost per order for e-mail, and compare it against other channels — notably banner advertisements, paid search and affiliate programs. On average, e-mail’s cost per order is less than a tenth of what it is for banner advertising. The CFO will clearly see how cost-effective a revenue generator e-mail really is.

3. Does it support your business model? E-mail is a valuable asset when it comes to enhancing the performance of other channels. If applicable, determine how your e-mail programs influence your company’s offline sales — it could be as much as four times its influence on online sales. Help your CFO see that e-mail can and should be central to your overall marketing strategy, with its ability to drive critical customer loyalty and viral marketing programs, as well as enhance direct mail and advertising.

4. How soon can we expect to see results? Your CFO will want to identify the revenue-generating marketing programs that are most nimble, can change direction easily, and that react quickly to market forces and opportunities — all for a low cost. Explain to your CFO that e-mail programs can be executed quickly and still offer the quality design and highly targeted content that customers are looking for.

5. What’s the ROI? Traditional marketing channels such as television and print advertising often require substantial investments with little or no means of truly measuring results. Your e-mail programs are different. You can produce simple but very compelling metrics (i.e., real data) that will tell the CFO exactly how each e-mail sent converts to sales and provide an accurate measurement of a campaign’s ROI.

With the answers to these questions, your CFO will understand how valuable e-mail can be, now more than ever. In fact, if you’ve done your job, it’s not unreasonable to think that your CFO will want to put more dollars into e-mail, even as cuts are being made in other areas.

John MacPhee is the chief financial officer of e-Dialog, a Lexington, Mass.-based e-mail marketing services provider. Reach John at jmacphee@e-dialog.com.


 

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Most Recent Comments:
Steve Jones - Posted on March 06, 2009
There is no question that e-mail is an effective channel of acquisition. The question is whether you are measuring the true "incremental" production of the campaign. As you mention, you can measure what an e-mail produces. The problem with almost every company that has come to me for help in measuring their channel effectiveness is that they don't understand the integrated impact of all channels and merely look at the orders generated from an e-mail in a "silo". What is the true "incremental" performance that an e-mail is adding if it is taken out of the marketing mix? The answer will vary by company and product but on average, the e-mail is responsible for 25-50% of what it actually produces. When you perform the ROI on this, in most cases it still turns out to be effective, but much less than what companies give it credit for.
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Archived Comments:
Steve Jones - Posted on March 06, 2009
There is no question that e-mail is an effective channel of acquisition. The question is whether you are measuring the true "incremental" production of the campaign. As you mention, you can measure what an e-mail produces. The problem with almost every company that has come to me for help in measuring their channel effectiveness is that they don't understand the integrated impact of all channels and merely look at the orders generated from an e-mail in a "silo". What is the true "incremental" performance that an e-mail is adding if it is taken out of the marketing mix? The answer will vary by company and product but on average, the e-mail is responsible for 25-50% of what it actually produces. When you perform the ROI on this, in most cases it still turns out to be effective, but much less than what companies give it credit for.