One of the first techniques many people associate with internet advertising is email marketing. Here we discuss issues of spam and compare the cost and effectiveness of email marketing campaigns and PPC campaigns.
Is email marketing different from spam?
- Spam or spamming, is the practice of sending large amount of unsolicited commercial email to consumers who have not consented to receiving this information
- The early Internet prohibited the use of the medium for commercial purposes. Marketers trying to establish themselves as genuine businesses in e-mail marketing have therefore had a difficult time, made no easier by spam operators who pose as legitimate internet advertisers.
- Businesses considering e-mail marketing campaigns should make sure they comply to the relevant privacy and spam acts. In Australia the Australian Communications and Media Authority is responsible for the administration of the Spam Act 2003, Australia’s anti-spam legislation. A review was undertaken in 2006 and deemed the Act effective and appropriate.
Legitimate email marketing
- Recent legal and media attention devoted to the illicit use of email marketing has given email advertising a bad name in recent years. There is no reason that thoughtful, legal use of this platform cannot be employed as a legitimate form of online advertising, but it's often not as cheap and effective as other forms of internet marketing.
- The term 'email marketing' (when used to describe legitimate activity) generally refers to 2 strategic practices:
- Sending e-mails to improve client relationships. Either to maintain current customers, or re-invite old customers back for repeat business
- Placing advertisements in e-mails which other organisations send to their customers who have signed up for a newsletter
- Email marketing is a bit like a digital version of the traditional paper mail-outs businesses have sent their clients for years. Without printing costs, emailed newsletters usually end up being cheaper than traditional pamphlets, but only become really cost effective for huge e-newsletters with 500 000 or more recipients.
- The crucial factors for email marketing campaigns, are the number of recipients who receive, read, & respond to a mail-out, and finally convert to sales
How much does it cost?
- A very basic, small-scale emailed newsletter package to approx 1000 users would cost roughly $1000 for an email marketing firm to write and set up, with an additional charge of usually about $200 for the actual 'mail out' stage
- From this one could expect a 'bounce rate' for about 10% of emails to be blocked or not delivered successfully, 'open rates' of approx 30% for recipients who actually view the message, and an optimistic 'click through rate' of 5% of those who opened the message (source: EmailLabs)
- This means:
| Budget |
Sent |
x Received (90%) |
x Opened (30%) |
x Clicks (5%) |
Actual Response rate |
Cost per Click |
| $1200 |
1000 |
900 |
270 |
13.5 |
1.35% |
$89 |
- So for a $1200 ad spend, a business which is statistically reaching 1000 users may end up with about 13.5 new visitors to its website
- The diffusion to an audience of 1000 sounds impressive, but the business is effectively paying approx $89 per click
- Bear in mind that this is for a very small mail-out, with optimistic ratios for how users will react to the enclosed content. We haven't even started to consider how many of those 13.5 new visitors will actually convert to customers - which is the ultimate aim of this advertising in the first place.
How does this compare with Pay Per Clicks Ads?
- For a basic initial outlay of around $1200, a business could potentially cover set up costs and $1200 worth of PPC
- PPC ads generally appear alongside search results when triggered by a relevant keyword search, and can also be displayed on various related content sites
- Advertisers receive an unlimited number of free impressions for an ad (great for branding), and are only charged for actual clicks
- If we imagine a market where the ads cost approx $4 per click (most markets are less than half this), and the same 'click through rate' of 5% (source: Overture Search Marketing), this would still result in:
| Budget |
Impressions (# of times ad is viewed) |
Clicks (5%) |
Actual Response rate |
Cost per Click |
| $1200 |
Unlimited |
300 |
5% |
$4 |
- To compare this directly to the same budget spent on email marketing:
| Ad Medium |
Budget |
Views of ad |
Clicks to Site |
Cost per Click |
Conversions (assumes 2%) |
Cost per Conversion |
Performance |
| Email |
$1200 |
270 |
13.5 |
$89 |
0.27 |
$4400 |
Less than 15 new site visitors |
| Search |
$1200 |
Unlimited |
300 |
$4 |
6 |
$200 |
2200% more leads |
Conclusion
- When conducted properly, email marketing can be a lucrative form of product promotion - but it's wildly enthusiastic claims about audience reach need to be tempered by an understanding of the actual costs and percentage of recipients that react to emails in the intended manner
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