What's the difference in revenues between 50,000 and 100,000 email names? Hint: Substract, add a zero and a dollar sign. But to create a reliable metric takes just a little more work. Competitive markets vary, along with the number of deals offered to the e-mail list, so a method of specifically calculating the value of e-mail in any individual market is needed.
We took this methodology from a recent webinar by Second Street Media, providers of YouPick'em and Deadline Deals. The e-mail names here are, specifically, lists that promote group deals.
Point of information: While some companies do not require an opt-in to send their group deals out, sending to opt-ins only is best practice (it avoids being black-listed for one). So investing in marketing - or using valuable online real estate, means knowing how much new emails actually generate. The formula below is intended for use in establishing these priorities.
1. Decide on a sample time period for deals
This could be a week, a month or a year (longer is usually more accurate, since it includes both exceptionally large and small deals, and will be more convincing to sticklers and CFO types on the managment team).
Example: A recent week with five deals.
2. Make a list of deals in excel format, with total net dollars to the media partner and number of email names that received the deal (whether they purchased or not).
Add the revenues, and add the emails. Divide dollars by number of email names. This will give you the average dollars@deal@email name.
3. Multiple this number by the number of deals in a year. This is the average value of an e-mail over a one year period. If the number of deals in a year is 220, that equation in the above example is 220 x .06 =$13.2:
So how much to invest in acquiring a new email?
SecondStreet suggests that since 80% of group deal revenue comes from e-mail, best practice is to invest up to the break-even on the new names, in this case a budget of $13.2 per e-mail acquisition, or $1320 for 100 organic opt-ins (that is, people who have signed up specifically to recieve deal e-mails).
However, that number depends on the need for incremental profits versus long term growth objectives. If a media company is seriously cash strapped, trading short term cash against longer term growth may be a factor. The starting point for these strategic discussions, however, is to have these numbers at hand.
Our take: Every local media company should be running contests and setting aggressive long term objectives, such as a percentage of the email for people in its DMA, and short term goals for growing e-mail. The more aggressive the goals, the better positionned your company will be in the years ahead.
Many thanks to Second Street Media for providing exceptional resources for creating and building deal revenue.