ECOA VS. SEM – “It’s David vs. Goliath”

For an online marketer, what could be better than being able to tell your boss that your keywords have propelled you to the No. 1 spot on Google? After all, keyword listings drive clicks, clicks drive registrations, and registrations drive sales. It’s no wonder that Google’s market capitalization is now nearly $200 billion. And search volume continues to grow faster – 17% according to a recent survey – than any other market channel except social media.

As in real estate, however, premium locations come at a steep price. The costs associated with driving search engine marketing (SEM) results continue to climb – Google has a near monopoly on the search engine market and, accordingly, the prices for high-value keywords continue to escalate as there’s no other game in town.

The Cost of Customer Email Registration Using SEM

So let’s do some simple math to determine the cost of gaining a customer registration through SEM, based on some conservative assumptions:

  1. Average Keyword (Pay-Per-Click) Cost = $1.00
  2. Conversion Rate (% of clicks that convert to email registrations) = 1 out of 10 (10%)
  3. Cost of Customer Email Registration = $10.00

Of course, you also need to consider your conversion rate from email registration to sale. Assuming this is 1 out of 5, your cost per sale through an SEM program would be $50! Feel free to insert your own numbers into the calculation above to find your cost of customer email registration and acquisition.

“David” Comes to the Rescue

Now let’s take a look at the “David” of customer retention/reacquisition services: ECOA (Email Change of Address). ECOA is not about trolling the streets (i.e. the Internet) like a street vendor looking for hungry customers. It’s about reconnecting with your former customers who already know and like your product and services.

Over 50 million people change their email addresses each year due to various life cycle changes. They switch jobs, change schools, move, and choose new ISPs and email providers all of the time. As a result, you can easily lose track of your best customers through no fault of your own. Can you really afford to wait for them to find you again?

The typical email list experiences 30% or more attrition annually. If you don’t think this is true for your email database, take a look at your inactives – most of these are the result of email being sent to inboxes nobody is reading anymore.

The Cost of Customer Email Registration Using ECOA

Let’s do some simple math again to determine the cost of gaining a customer registration through Email Change of Address (ECOA):

  1. Average ECOA Cost = $0.48 per guaranteed deliverable email address
  2. Conversion Rate (% of ECOA results that convert to email registrations) = 100%
  3. Cost of Customer Email Registration = $0.48 (about the cost of a stamp)

As you can see, since ECOA is a true pay-for-performance service, you don’t have to pay for the street gawkers so you don’t have to worry about the drop-off from clicks to registrations. Your forty-eight cent cost per ECOA update brings your former customer right back through your door.

Of course, you still need to convert this former customer into a current customer, but as any marketer knows, it’s a lot cheaper and easier to reactivate a former customer than it is to educate and sell a new onlooker who’s surfing the web looking for the best price.

“David vs. Goliath” – You Do the Math!

I’m not suggesting you abandon your SEM program altogether. It’s a critical part of your marketing mix, as every company needs to be acquiring new customers while cultivating their existing ones. Just remember, your customer database is one of your most valuable assets. Why give up on the people who are already familiar with the benefits of your products and services in favor of a stranger you have to pay to find, pray they click, educate to convert, and hope they eventually buy from you?

This doesn’t seem like rocket science to me or even …blackjack. $0.48 to reconnect with a former customer or donor versus $10.00 to gain the email address of a new onlooker? As someone who is always interested in taking the risk out of the game, I know where I’d place my bet.

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