Client Insights: Calculating the Value of an Email Address

Your roving reporter had an opportunity to sit down (over email, of course) with several of our clients and ask a series of questions of interest to our readers. This is the first in our series of “Client Insights,” which we hope will provide you with answers to some of your most vexing issues.

Our panelists this month are:

Jessica Fraser Sotelo, Manager, Online Marketing, World Wildlife Fund

Julie Bridge, Director of Internet Marketing, Indiana Botanic Gardens, Inc.

Steve Dumas, Ecommerce Marketing Manager, Ballard Designs

Knowing the value of an email address is critical for determining the ROI (Return on Investment) for most online marketing campaigns, from customer acquisition to customer retention to re-engagement. This month, we explore how three successful organizations approach this seemingly simple yet rather vexing question.

FP (FreshPerspectives): Jessica, how do you calculate the value of an email address for World Wildlife Fund?

Jessica: One way an organization can measure the value of an email address is to take total annual online revenue and divide it by the total number of email addresses on file. The resulting number equals the annual value per email address.

FP: Julie, how does Indiana Botanic Gardens determine the value of an email address?

Julie: We look at the average value of a visit from a particular email segment and also measure the average sales by email, according to an RFM (recency/frequency/monetary value) model. We see a higher value, of course, for recent or multichannel buyers. We’ve also started segmenting on product purchases by category and are investigating the lifetime value of customers by category so that we can tailor our marketing programs appropriately.

FP: And Steve, how does Ballard Designs calculate the value of an email address to your business?

Steve: We divide total revenue generated by the previous year’s email program by the total number of email addresses on file. We use it to forecast base revenue for the next year. We also calculate the “Lifetime Value” of customers with opted-in email address and compare this to the Lifetime Value of customers without email addresses.

FP: What do you mean by Lifetime Value (LTV)?

Steve: I can’t share the specifics of our LTV calculation with you but the calculation is used to determine the revenue/profit potential of each customer based on their past purchase history, projected purchases, and the length of time we expect them to remain as customers. As expected, we have found that customers with an opted in email address have a higher LTV than those who don’t.

FP: As you can see from the above responses, there are multiple ways for companies to determine the value of an email address to them. Which method works best for you can depend on many factors and is heavily dependent on your sales model as well as the sophistication and accuracy of your attribution models. For example, is there any way for you to track whether an email received on Thursday triggered a trip to your store and a sale on Saturday? We’ll leave that question for a future column. Thanks so much to all of you for sharing your insights on this important subject.

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