What is the value of an email address in your marketing database?
We were discussing this over a beer last night. There are various figures thrown out in the popular marketing literature ranging from $10 - $50. I do recollect seeing an academic article a couple of years ago (from Japan?), but can't fine it now.
Has anyone actually done email address valuation on their own customer database? Anyone know of solid articles that have researched this?
TIA
Jim
Answers (14)
Carlos H.
CEO - The Annuitas Group - Executive Director of Marketing Automation Institute
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Jim:
I am not sure you could define this value as the real value would come from how the e-mail address is used. I have worked for an with companies who have numerous e-mail addresses but do not use them in an integrated closed-loop fashion in their lead generation so hence the database value is pretty low. In addition, a good number of companies use the e-mail in a one and done fashion and only respond to those contacts who are ready to buy in the next 0-6 months. What should be done is using those e-mail addresses to nurture and manage them and increase in value i.e. revenue producing customers.
The immediate valuation would come in on the number of e-mail addresses in your database and those that are actually valid, but overall even the best e-mail database if not used correctly in lead generation and management will produce very little value.
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Thursday B.
Content Consultant at Hyper Modern LLC
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Jim,
Another consideration is that an email address can so easily made entirely worthless. An address can be an old school or work address that is no longer active. An address can also be useless if it belongs to someone who never checks their email.
There are many marketing situations where lists of email addresses are sold for less than pennies per address, because there is no guarantee that an address is still in use.
Thursday
William L.
Head of Apogee Results Marketing, Online Marketing Entrepreneur
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Hi Jim:
Unfortunately, the high-level, accurate, and generally unhelpful answer is "it depends." It depends on how much margin you are configured to make from that customer. In other words, what is the value of your first sale, how reasonable is it to expect additional sales, and what do you do to remonetize that email outside of the products and services you sell.
For example, we have an Internet Retailer 500 client in the golfing industry. It's a b2c client that spends six figures monthly on PPC, and for them, identifying a golfer is worth $3-5, even if they don't get a purchase on that first sale.
We also have VC-backed b2b clients that are looking for leads, and are selling seven-figure products with sales cycles of over a year. For them, they are willing to spend $20 to get an email address.
As a general rule, b2b emails are worth more than b2c. But it can vary -- another client of ours gathers leads online, (mainly through search engine marketing / optimization) of pregnant women. Given the hundreds of other people who want to market to our client's database, each set of contact info is very valuable to them.
I fear I'm rambling ... hope this has been helpful.
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John K.
eBusiness & Interactive Marketing Strategic Leader - Marketing Technologist
It really depends on a number of factors such as your average conversion rates. I have found that it varies from business to business and from industry to industry. We have found that our value has gone up from the $2-3 range to apporximately $6 now.
Håkan B.
Technical lead at SPP
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Jim,
great question. So I would use a technique from economics to answer it, good old alternative cost approach. Say that you have X customers and want to communicate with them once a month. You consider two channels, direct mail and e-mail. (disregarding expected differences in responses, opt-out scenarios etc). Now the running cost for sending a communication via direct mail might be around 1 euro per mail all inclusive. The corresponding cost of an e-mail would be close to 0 euro. Assuming that you can use addresses for one year that would give a value of your e-mail adress equal to 12 euro a piece.
So with this approach the value would be quite high.
Best regards Håkan Borg
David K.
Business leader at the intersection of technology, media, and marketing
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Hi Jim. LONG time no see!
In publishing where a list is among the most valuable assets, we frequently put a value on a list (postal and/or email), e.g., for business valuation,
Variables in the value of an email name, in weighted order:
1. Relationship -- Is the name from a one-time inquirer, a subscriber or member with a known interest?
2. Conversion value based on known interest, e.g., "known AJAX developer" = $995 conversion for programming workbench or widget library vs. "Pizza Hut customer" = $12.49 conversion for medium pepperoni, etc.
3. Opt-in status -- Do you have a valid opt-in for direct email communication and third-party communication?
4. Age of the name -- Is the email address still valid? e.g., list aging is a critical issue in publishing.
Regards,
Dave
Jim:
The answer is not a simple one, rather than "it depends" on numerous factors especially the following:
1) Conversion Rate
2) Average Transaction Per Customer Amount
This would be different for each and every business and industry.
I agree with William.
I tell my clients to simplify this challenge, get a simple answer, and then spend time refining the answer.
At the most simplistic level:
Step 1: What is the dollar per e-mail you generate when you send an e-mail campaign? Let's assume it is $0.20.
Step 2: How many e-mail campaigns do you send per year? Let's assume 50. You now have 50 * $0.20 = $10.00 sales.
Step 3: What percentage of e-mail addresses are still valid, still subscribed, after one year? Let's assume 50%. This yields 50 * $0.20 * 0.50 = $5.00.
Therefore, the average e-mail address is worth $5.00 sales per year.
Now that you have that figure, go out and evangelize it. And while you're evangelizing it, do all the work that everybody else is pointing out, so that you can refine your estimate.
My opinion is that it is better to spend ninety seconds to get an estimate that is 75% correct, than to say the real answer depends. Do the research, but evangelize the quick and dirty answer that takes ninety seconds to calculate.
Hi Jim,
Great question indeed! As a matter of fact, it's at the core of my business as my company builds list and monetize millions of email addresses around the world for our clients.
There are basically 2 approaches that can be used to answer :
1) What are the prices that people are ready to pay for an email? Well I can tell you it ranges anywhere from 0,50$ to 5$. And as marketers are smart, they buy addresses less than the value they get out of them. So I guess that the real value should be in the range of 1$ to 7$
2) Take Kevin's model above -very accurate and so simple!- and add the value of 3rd party monetization. Yes, an email can be properly monetized outside of your own offers! We bring our partners between 0,4$ to 1,5$ a year per email. And this is pure NET MARGIN, whereas Kevin was talking about Sales, not margin (unless I misunderstood) And calculate a lifetimevalue, because an email lasts more than 1 year.
So you get to a real value of about 10$ for the good emails
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Tamara G.
Email Marketing Consultant, Trainer, Speaker & Author
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Hi Jim,
David Baker wrote an article about this a while back. It's called "How Much Is An Email Address Worth To Your Business?". I thought you might find it useful :)
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Venkatesh R.
Consultant, independent researcher, blogger (http://ribbonfarm.com), author of "Tempo" (http://tempobook.com)
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Venkatesh R. suggests this expert on this topic:
Brian P.
Mobile, Media & Technology Digital Content Marketing Strategist
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The value of an email address in integrated direct marketing campaigns (telephone, email, webcastts, etc.) is directly tied to the synergy resulting from the combination of all touch points. In other words, a simple email, call, call campaign to qualify and profile leads vs. a more sophisticated strategic campaign boosting opt-ins to double figures, raises the value of the the email address. The ASP (average sales price) is also a factor; for example, marketing campaigns targeting C3-level decision-makers, say IT, whose eventual purchase is in the millions.
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Brian P. also suggests this expert on this topic:
The value of the email address can be measured in a few ways:
1. Conversion rate i.e. if the objective of the campaign is to convert them to buy a product so the conversion rate would be the measure of value
2. Word of mouth: If the objective of the campaign is to increase awareness then the number of forwards you get for your newsletters could be the measure of success.
3. Quality: The delivery rate i.e. delivery/sent emails gives you the measure of the quality of your database
Knowing the cost of the database could also help you measure the ROI.
Just to chime in for another reference point, I work in the B2B circles for a publisher, and although we explicitly don't sell/rent our lists of names, I've seen list prices for senior executives in excess of $500 CPM -- for a one-time usage. Figuring a low conversion rate (even to get an opt-in to the advertiser's house list), you could expect over $10 a name. Carrying that through to a sale/conversion basis, you'd expect that the end price would exceed $1,000 an address.
Like W. Leake said, the B2B names are typically worth more because of focused purchasing power, and D. Kalman's variables all apply. I'd only support H. Borg's model if it accounted for the inherent variations in how people respond to various methods of communication; direct mail is a different experience altogether than receiving an email. A large part of this may be figured into the natural cost of the address, but I don't think they are simply swappable, not to mention the differences present in usage of the list(s).
